60) The restaurant, legal assistance, and clothing industries are each illustrations of B) homogeneous oligopoly. D)...
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60) The restaurant, legal assistance, and clothing industries are each illustrations of B) homogeneous oligopoly. D) pure monopoly. A) monopolistic competition. C) countervailing power. 61) Monopolistically competitive firms A) incur persistent losses in both the short run and long run. B) persistently realize economic profits in both the short run and long run. C) may realize either profits or losses in the short run but realize normal profits in the long run. D) realize normal profits in the short run but losses in the long run. 62) If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes, A) the likelihood of realizing economic profits in the long run would be enhanced. B) individual firms would now be operating at outputs where their average total costs would be higher. C) the likelihood of collusive pricing would increase. D) the industry would more closely approximate pure competition. 63) Economic analysis of a monopolistically competitive industry is more complicated than 63) that of pure competition because A) of product differentiation and consequent product promotion activities. B) the number of firms in the industry is larger. C) monopolistically competitive firms cannot realize an economic profit in the long D) monopolistically competitive producers use strategic pricing strategies to combat rivals. run. 64) A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from A) product differentiation. B) high entry barriers. C) the likelihood of collusion. D) mutual interdependence in decision making. 65) A monopolistically competitive industry combines elements of both competition and monopoly. The competition element results from A) mutual interdependence in decision making. B) the likelihood of collusion. C) low entry barriers. D) product differentiation. 61) 21 64) 65) 66) A significant difference between a monopolistically competitive firm and a purely competitive firm is that the A) former does not seek to maximize profits. B) latter recognizes that price must be reduced to sell more output. C) former's demand curve is perfectly inelastic. D) former sells similar, although not identical, products. 67) A significant difference between a monopolistically competitive firm and a purely competitive firm is that the A) latter differentiates its product. B) latter's demand curve is perfectly elastic. C) latter recognizes that price must be reduced to sell more output. D) former has fewer barriers to entry into the industry. 68) A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from A) a perfectly elastic demand curve, and the monopolistic element from low entry barriers. B) a relatively large number of firms, and the monopolistic element from product differentiation. C) product differentiation, and the monopolistic element from high entry barriers. D) a highly inelastic demand curve, and the monopolistic element from advertising and product promotion. 69) Monopolistically competitive and purely competitive industries are similar in that A) both are assured of short-run economic profits. B) both produce differentiated products. C) there are few, if any, barriers to entry. D) the demand curves facing individual firms are perfectly elastic in both industries. 70) The monopolistic competition model assumes that A) firms will engage in nonprice competition. B) allocative efficiency will be achieved. C) productive efficiency will be achieved. D) firms will realize economic profits in the long run. 71) Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a monopolistic competitor? A) Ford Motor Company C) Pittsburgh Plate Glass 22 B) Subway Sandwiches D) Microsoft 6 68) 70) 71) ▶ A 72) A monopolistically competitive firm's marginal revenue curve A) is downsloping and coincides with the demand curve. B) does not exist because the firm is a "price maker." C) is downsloping and lies below the demand curve. D) coincides with the demand curve and is parallel to the horizontal axis. 73) In the short run, a profit-maximizing monopolistically competitive firm sets it price A) equal to marginal cost. B) equal to marginal revenue. D) above marginal cost. C) below marginal cost. 74) In the long run, a profit-maximizing monopolistically competitive firm sets it price A) above marginal cost. B) equal to marginal revenue. D) equal to marginal cost. C) below marginal cost. 76) In the long run, the price charged by the monopolistically competitive firm attempting to maximize profits A) may be either equal to ATC, less than ATC, or more than ATC. B) must be less than ATC. 75) 75) In the short run, the price charged by a monopolistically competitive firm attempting to maximize profits A) must be equal to ATC. B) may be either equal to ATC, less than ATC, or more than ATC. C) must be less than ATC. D) must be more than ATC. C) will be equal to ATC. D) must be more than ATC. 77) The monopolistically competitive seller maximizes profit by producing at the point where A) price equals marginal revenue. B) marginal revenue equals marginal cost. C) total revenue is at a maximum. D) average costs are at a minimum. 78) In the long run, the price charged by a monopolistically competitive firm seeking to maximize profit will be less than both MC and ATC. A) C) exceed MC but equal ATC. 23 72) B) exceed both MC and ATC. D) exceed ATC but equal MC. 73) 74) 76) 77) 78) ▬▬▬ + 79) Which of the following is correct for a monopolistically competitive firm in long-run equilibrium? A) MC = ATC. C) P = MC. 80) In the long run, economic theory predicts that a monopolistically competitive firm will A) realize all economies of scale. C) equate price and marginal cost. 82) 81) Excess capacity refers to the A) fact that entry barriers artificially reduce the number of firms in an industry. B) differential between price and marginal costs that characterizes monopolistically competitive firms. C) fact that most monopolistically competitive firms encounter diseconomies of scale. D) amount by which actual production falls short of the minimum ATC output. $19 16 30 13 10 0 B) P exceeds minimum ATC. D) MC exceeds MR. 100 B) earn an economic profit. D) have excess production capacity. MC 160180 210 Quantity 24 MR ATC D Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. This firm's profit-maximizing price will be A) $13. B) $19. C) $16. D) $10. 79) 80) 81) 60) The restaurant, legal assistance, and clothing industries are each illustrations of B) homogeneous oligopoly. D) pure monopoly. A) monopolistic competition. C) countervailing power. 61) Monopolistically competitive firms A) incur persistent losses in both the short run and long run. B) persistently realize economic profits in both the short run and long run. C) may realize either profits or losses in the short run but realize normal profits in the long run. D) realize normal profits in the short run but losses in the long run. 62) If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes, A) the likelihood of realizing economic profits in the long run would be enhanced. B) individual firms would now be operating at outputs where their average total costs would be higher. C) the likelihood of collusive pricing would increase. D) the industry would more closely approximate pure competition. 63) Economic analysis of a monopolistically competitive industry is more complicated than 63) that of pure competition because A) of product differentiation and consequent product promotion activities. B) the number of firms in the industry is larger. C) monopolistically competitive firms cannot realize an economic profit in the long D) monopolistically competitive producers use strategic pricing strategies to combat rivals. run. 64) A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from A) product differentiation. B) high entry barriers. C) the likelihood of collusion. D) mutual interdependence in decision making. 65) A monopolistically competitive industry combines elements of both competition and monopoly. The competition element results from A) mutual interdependence in decision making. B) the likelihood of collusion. C) low entry barriers. D) product differentiation. 61) 21 64) 65) 66) A significant difference between a monopolistically competitive firm and a purely competitive firm is that the A) former does not seek to maximize profits. B) latter recognizes that price must be reduced to sell more output. C) former's demand curve is perfectly inelastic. D) former sells similar, although not identical, products. 67) A significant difference between a monopolistically competitive firm and a purely competitive firm is that the A) latter differentiates its product. B) latter's demand curve is perfectly elastic. C) latter recognizes that price must be reduced to sell more output. D) former has fewer barriers to entry into the industry. 68) A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from A) a perfectly elastic demand curve, and the monopolistic element from low entry barriers. B) a relatively large number of firms, and the monopolistic element from product differentiation. C) product differentiation, and the monopolistic element from high entry barriers. D) a highly inelastic demand curve, and the monopolistic element from advertising and product promotion. 69) Monopolistically competitive and purely competitive industries are similar in that A) both are assured of short-run economic profits. B) both produce differentiated products. C) there are few, if any, barriers to entry. D) the demand curves facing individual firms are perfectly elastic in both industries. 70) The monopolistic competition model assumes that A) firms will engage in nonprice competition. B) allocative efficiency will be achieved. C) productive efficiency will be achieved. D) firms will realize economic profits in the long run. 71) Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a monopolistic competitor? A) Ford Motor Company C) Pittsburgh Plate Glass 22 B) Subway Sandwiches D) Microsoft 6 68) 70) 71) ▶ A 72) A monopolistically competitive firm's marginal revenue curve A) is downsloping and coincides with the demand curve. B) does not exist because the firm is a "price maker." C) is downsloping and lies below the demand curve. D) coincides with the demand curve and is parallel to the horizontal axis. 73) In the short run, a profit-maximizing monopolistically competitive firm sets it price A) equal to marginal cost. B) equal to marginal revenue. D) above marginal cost. C) below marginal cost. 74) In the long run, a profit-maximizing monopolistically competitive firm sets it price A) above marginal cost. B) equal to marginal revenue. D) equal to marginal cost. C) below marginal cost. 76) In the long run, the price charged by the monopolistically competitive firm attempting to maximize profits A) may be either equal to ATC, less than ATC, or more than ATC. B) must be less than ATC. 75) 75) In the short run, the price charged by a monopolistically competitive firm attempting to maximize profits A) must be equal to ATC. B) may be either equal to ATC, less than ATC, or more than ATC. C) must be less than ATC. D) must be more than ATC. C) will be equal to ATC. D) must be more than ATC. 77) The monopolistically competitive seller maximizes profit by producing at the point where A) price equals marginal revenue. B) marginal revenue equals marginal cost. C) total revenue is at a maximum. D) average costs are at a minimum. 78) In the long run, the price charged by a monopolistically competitive firm seeking to maximize profit will be less than both MC and ATC. A) C) exceed MC but equal ATC. 23 72) B) exceed both MC and ATC. D) exceed ATC but equal MC. 73) 74) 76) 77) 78) ▬▬▬ + 79) Which of the following is correct for a monopolistically competitive firm in long-run equilibrium? A) MC = ATC. C) P = MC. 80) In the long run, economic theory predicts that a monopolistically competitive firm will A) realize all economies of scale. C) equate price and marginal cost. 82) 81) Excess capacity refers to the A) fact that entry barriers artificially reduce the number of firms in an industry. B) differential between price and marginal costs that characterizes monopolistically competitive firms. C) fact that most monopolistically competitive firms encounter diseconomies of scale. D) amount by which actual production falls short of the minimum ATC output. $19 16 30 13 10 0 B) P exceeds minimum ATC. D) MC exceeds MR. 100 B) earn an economic profit. D) have excess production capacity. MC 160180 210 Quantity 24 MR ATC D Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. This firm's profit-maximizing price will be A) $13. B) $19. C) $16. D) $10. 79) 80) 81)
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Macroeconomics Principles and Applications
ISBN: 978-1133265238
5th edition
Authors: Robert e. hall, marc Lieberman
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