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Table 10.3 Table 10.3 Table 10.3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 10.3.The profit-maximising/loss-minimising output level and price are A) Q = 0 (firm should not produce) B) Q = 3; P = $18 C) Q = 4; P = $17 D) Q = 5; P = $16 Table 10.3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 10.3.The profit-maximising/loss-minimising output level and price are


A) Q = 0 (firm should not produce)
B) Q = 3; P = $18
C) Q = 4; P = $17
D) Q = 5; P = $16

E) All of the above
F) A) and D)

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If a firm can produce a product at a lower average cost than its competitors, it stands a better chance of earning economic profit.

A) True
B) False

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Figure 10.12 Figure 10.12 -Refer to Figure 10.12.The firm represented in the diagram A) makes zero economic profit. B) makes zero accounting profit. C) should exit the industry. D) should expand its output to take advantage of economies of scale. -Refer to Figure 10.12.The firm represented in the diagram


A) makes zero economic profit.
B) makes zero accounting profit.
C) should exit the industry.
D) should expand its output to take advantage of economies of scale.

E) A) and B)
F) None of the above

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If firms in a monopolistically competitive market are earning economic profits, which of the following scenarios best reflects the change a representative firm experiences as the market adjusts to its long-run equilibrium?


A) Demand decreases and becomes less elastic.
B) Demand decreases and becomes more elastic.
C) Demand increases and becomes less elastic.
D) Demand increases and becomes more elastic.

E) B) and C)
F) A) and D)

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Unlike a perfectly competitive firm, for a monopolistically competitive firm


A) price ≠ marginal cost for all output levels.
B) price ≠ marginal revenue for all output levels.
C) price ≠ average revenue for all output levels.
D) marginal revenue = marginal cost at the profit-maximising output.

E) All of the above
F) A) and D)

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Figure 10.16 Figure 10.16 -Refer to Figure 10.16 to answer the following questions. a.What is the profit-maximising output level? b.What is the profit-maximising price? c.What is the average total cost at the profit-maximising output level? d.What area represents the firm's profit? e.At which output level are economies of scale exhausted? f.Does this graph most likely represent the long run or the short run? Why? __________________________________________________________________________________________________________________________________________________________________________________________ -Refer to Figure 10.16 to answer the following questions. a.What is the profit-maximising output level? b.What is the profit-maximising price? c.What is the average total cost at the profit-maximising output level? d.What area represents the firm's profit? e.At which output level are economies of scale exhausted? f.Does this graph most likely represent the long run or the short run? Why? __________________________________________________________________________________________________________________________________________________________________________________________

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a.The profit maximising level of output ...

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If marginal revenue is negative, then the revenue lost from receiving a lower price on all the units that could have been sold at the original price is smaller than the additional revenue from selling one more unit of the good.

A) True
B) False

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Draw a graph that shows the impact on a firm's profit when it increases spending on advertising and the increased advertising has no effect on the demand for a firm's product. __________________________________________________________________________________________________________________________________________________________________________________________

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If price exceeds average variable cost but is less than average total cost, a firm


A) should further differentiate its product.
B) should stay in business for a while longer until its fixed costs expire.
C) is making some profit but less than maximum profit.
D) should shut down.

E) A) and B)
F) All of the above

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Which of the following would not occur as a result of a monopolistically competitive firm suffering a short-run economic loss?


A) The firm could exit the industry in the long run.
B) If the firm does not exit the industry in the long run, its demand curve will shift to the left.
C) If the firm does not exit the industry in the long run, its demand curve will shift to the right.
D) If the firm remains in the industry in the long run, it will break even.

E) A) and B)
F) A) and C)

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The marginal revenue of a monopolistically competitive firm


A) cannot be negative because the price the firm charges will always be greater than zero.
B) can be negative if the firm charges a high price.
C) can be negative if the firm charges a low price.
D) will equal average revenue.

E) None of the above
F) All of the above

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What is the difference between the terms 'marketing' and 'advertising'? __________________________________________________________________________________________________________________________________________________________________________________________

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Marketing consists of all the activities...

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In long-run equilibrium, compared to a perfectly competitive market, a monopolistically competitive industry produces a ________ level of output and charges a ________ price.


A) higher; lower
B) lower; lower
C) lower; higher
D) higher; higher

E) None of the above
F) A) and B)

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In monopolistic competition, if a firm produces a highly desirable product relative to its competitors, the firm will be able to raise its price without losing any customers.

A) True
B) False

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In the long run, what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits?


A) The demand curve will shift to the left and became more elastic.
B) The demand curve will shift to the left and became less elastic.
C) The demand curve will shift to the right and became more elastic.
D) The demand curve will shift to the right and became less elastic.

E) None of the above
F) C) and D)

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In the long-run equilibrium, both the perfectly competitive firm and the monopolistically competitive firm produce the output at which MR = MC and charge a price equal to the average total cost of production.

A) True
B) False

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Both the perfectly competitive firm and the monopolistically competitive firm produce at the output where marginal revenue equals marginal cost (MR = MC)but only the perfectly competitive firm achieves allocative efficiency.Explain why this is the case. __________________________________________________________________________________________________________________________________________________________________________________________

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Unlike the perfectly competitive firm, t...

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One of your classmates asserts that advertising, marketing research, and brand management are redundant expenditures because a firm can obtain the same information by simply looking at what customers are already buying.Which of the following is not a response you might offer her?


A) Conducting market research is a good way for firms to keep abreast of changing consumer tastes and preferences.
B) Advertising and brand management allow a firm to create an entry barrier which will insulate the firm from competition and from undertaking further product innovations.
C) Marketing research could allow a firm to identify new market opportunities and at least, in the short run, a firm can make a profit supplying products to this market segment.
D) If a firm successfully manages its brand, customers become less price sensitive as they perceive fewer substitutes for the firm's brand.

E) B) and D)
F) B) and C)

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Figure 10.17 Figure 10.17 -Refer to Figure 10.17.Suppose the firm is currently producing Q<sub>f</sub> units.What happens if it increases its output to Q<sub>g</sub><sub> </sub>units? A) Its average cost of production will fall and its profit will rise. B) It will be taking advantage of economies of scale and will be able to lower the price of its product. C) It will move from a zero profit situation to a profit situation D) It will move from a zero profit situation to a loss situation -Refer to Figure 10.17.Suppose the firm is currently producing Qf units.What happens if it increases its output to Qg units?


A) Its average cost of production will fall and its profit will rise.
B) It will be taking advantage of economies of scale and will be able to lower the price of its product.
C) It will move from a zero profit situation to a profit situation
D) It will move from a zero profit situation to a loss situation

E) A) and B)
F) A) and D)

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A monopolistically competitive market is described as one in which there are


A) a few firms producing an identical product.
B) a large number of firms selling similar, but not identical, products.
C) a few firms producing differentiated products.
D) one large firm and many small firms producing identical products.

E) All of the above
F) None of the above

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