Question

1l. If a monopolistically competitive firm is incurring losses, then at the profit-max a price is above the average total cost curve. b. price is below the average total cost curve c. price is equal to marginal revenue. d. price is less than marginal revenue. e. average total cost equals marginal cost. Both competitive and monopolistically competitive firms a. can maximize profit by raising price. b. cannot control or set their own price c. can maximize profit by producing to the point where marginal cost equals marginal 12. revenue. d. can enforce price arrangements vigorously in court. sell products that are identical. e. 13. Which of the following is true for a profit-maximizing firm operating in a competitive market, monopolistic competition, and monopoly? a. Firms earn positive economic profits in the long run. Firms earn zero economic profits in the long run. Profits are maximized when marginal cost equals marginal revenue. d. c. Price equals marginal revenue. Entry into the industry is impossible. e. 14. Profit-maximizing, monopolistically competitive firms a. consider the actions of their competitors when determining price. b. c. consider the actions only of the price leader in their market when determining price consider only marginal cost and marginal revenue, which determine the level of output- and the level of output determines price. consider only average total cost and average variable cost, which determine the level of d. output and the level of output determines price. take their price from the industry price, as do perfectly competitive firms. e. Entry of new firms will continue in a monopolistically competitive industry until 15. d. e. economic profit equals 0 (zero). marginal cost equals 0 (zero). a. economic profit is negative. b. marginal revenue equals 0 (zero). marginal revenue equals marginal cost c. The entry of new firms into a monopolistically competitive industry causes the a. b. 16. market demand curve to shift right. market demand curve to shift left. existing firms' demand curve to shift right. c. d. existing firms' demand curve to shift left market supply curve to shift left. e. The difference between price and marginal cost is a. marginal revenue. b. per-unit profit. c. average total revenue. d. markup e. nothing in the long run; they must be the same. 17. Both perfectly competitive and monopolistically competitive industries ave many firms, in fact so many 18. that, in the long run a. only one firm can survive in the industry, leading to mon b. costs must increase due to diseconomies of scale. c. costs must decrease due to economies of scale. d. economic profit is "competed away:" e. economic profit can continue. 19. Monopolistic competition is inefficient because a. firms earn positive economic profits. b. the firms' marginal costs and marginal revenues c. price is not equal to the minimum average total cost are not equal d. entry is difficult. e. the price is equal to the minimum average total cost. 20. One source of economic inefficiency from monopolistic competition markup b. less variety for consumers. c. more variety for consumers. d. higher costs because firms can enter the industry e. l a. ower marginal costs, but higher average costs than with perfect competition. 21. Markup would generally be highest under a. a monopoly b. a cartel c. an oligopoly. monopolistic competition. a competitive market. d. e. When would advertising be least effective for an individual firm? a. b. c. d. e. 22. in a perfectly competitive industry in a monopolistically competitive industry in an oligopolistic industry in a monopoly industry Never; advertising is equally effective in all industries. Siyed, an economics student, believes that a beer sold by one particular shack on the beach is completely different from an identical beer produced by the same factory and sold by the luxury hotel adjacent to the shack. Siyed most likely thinks that a. the luxury hotel and the shack are in a perfectly competitive industry. b. the luxury hotel is a monopoly seller of the beer c. the luxury hotel and the shack are in a monopolistically competitive industry. d. the shack is in a perfectly competitive industry, but the luxury hotel is in an oligopoly 23. industry while beer is homogeneous, the product is differentiated among the sellers. e. Brand labels and packaging can convey status or quality, even if there is little to no physical difference in two competing products. If we are to assume that consumers are rational decision makers, this indicates that brand labels and packaging create additional a. envy b. loyalty c. wealth 24. for a buyer d. value e. substitutes In the context of market structures, franchising fees represent which aspect for monopolistic competition? a. number of sellers b. product differentiation c. barriers to entry 25. d. product substitutes e. marginal cost

Answer 1

11. Option b
(As firm is incurring losses so this means P < ATC)

12. Option c
(For both competitive and monopolistically competitive firms, profit is maximized when MR = MC.)

13. Option c
(Profit is maximized in all these markets when MR = MC.)

14. Option c
(A monopolistically competitive firm takes into account MR and MC when determining its output level.)

(Note: Post 4 MCQs at a time.)