Ngân hàng đề thi câu hỏi trắc nghiệm kinh tế vi mô chương 16 (principle of economics mankiw 2018)

Toàn bộ những gì bạn cần để qua môn kinh tế học, tài liệu này tập hợp những câu hỏi trắc nghiệm mới nhất của kinh tế vi mô năm 2018. Về nội dung tài liệu, với các khái niệm phổ biến và khái quát nhất về kinh tế vi mô cũng như những giải thích về các cơ chế hoạt động của nền kinh tế, bộ giáo trình bao gồm 23 phần cung cấp cho người đọc các kiến thức khá toàn diện và chuyên sâu về các nguyên lý kinh tế học như các lý thuyết cổ điển, các lý thuyết về phát triển: nền kinh tế trong dài hạn, các lý thuyết về vòng tròn kinh tế: nền kinh tế trong ngắn hạn, các yếu tố vi mô ẩn sau kinh tế vĩ mô, các tranh luận về chính sách vĩ mô… Tất cả đều được giải thích và đánh giá bởi một vị giáo sư kinh tế hàng đầu trên thế giới. Các khái niệm trong sách được định nghĩa rất rõ ràng, dễ nắm bắt, dễ hiểu, có tóm tắt các chương tạo điều kiện tốt nhất cho việc ôn tập

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Monopolistic Competition

TRUE/FALSE

1 The "competition" in monopolistically competitive markets is most likely a result of having many sellers in themarket

LOC: Monopolistic competition TOP: Monopolistic competition

MSC: Interpretive

2 The "monopoly" in monopolistically competitive markets is most likely a result of firms having some pricing power due to product differentiation

MSC: Interpretive

3 Monopolistic competition is characterized by many buyers and sellers, product differentiation, and free entry

MSC: Definitional

4 Monopolistic competition is characterized by many buyers and sellers, product differentiation, and barriers to entry

MSC: Definitional

5 A monopolistically competitive market is characterized by barriers to entry

MSC: Interpretive

6 Monopolistic competition is the only market structure that features many sellers

LOC: Monopolistic competition TOP: Markets MSC: Interpretive

7 Product differentiation always leads to some measure of market power

LOC: Monopolistic competition TOP: Demand curve

MSC: Interpretive

8 Oligopoly is characterized by a few sellers offering similar products, whereas monopolistic competition is characterized by many sellers offering differentiated products

MSC: Definitional

9 Monopolistic competition is characterized by a few sellers offering similar products, whereas oligopoly is characterized by many sellers offering differentiated products

MSC: Definitional

10 Oligopoly and monopolistic competition are examples of a market structure called imperfect competition

MSC: Definitional

1078

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11 Monopolistic competition and monopoly are examples of a market structure called imperfect competition.

MSC: Definitional

12 A markup of price over marginal cost is inconsistent with free entry and zero profit

LOC: Monopolistic competition TOP: Profit maximization

MSC: Interpretive

13 Monopolistically competitive firms, like monopoly firms, maximize their profits by charging a price that exceeds marginal cost

MSC: Interpretive

14 A profit-maximizing firm in a monopolistically competitive market charges a price equal to marginal cost

MSC: Interpretive

15 A profit-maximizing firm in a monopolistically competitive market always operates on the downward-sloping portion of its marginal cost curve

MSC: Analytical

16 For a profit-maximizing firm in a monopolistically competitive market, when price is equal to average total cost, price must lie above marginal cost

MSC: Analytical

17 A profit-maximizing firm in a monopolistically competitive market can earn positive, negative, or zero profits

in the short run

LOC: Monopolistic competition TOP: Short-run equilibrium

MSC: Interpretive

18 A firm in a monopolistically competitive market can earn both short-run and long-run profits

LOC: Monopolistic competition TOP: Short-run equilibrium | Long-run equilibrium

MSC: Interpretive

19 A firm in a monopolistically competitive market can earn short-run profits but not long-run profits

MSC: Interpretive

20 In the long run, monopolistically competitive firms produce where demand equals marginal cost

LOC: Monopolistic competition TOP: Long-run equilibrium

MSC: Analytical

21 When a firm in a monopolistically competitive market earns zero economic profit, its product price must equalmarginal cost

MSC: Interpretive

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22 In the long run, monopolistically competitive firms produce where demand equals average total cost.

MSC: Analytical

23 In a monopolistically competitive market, the number of firms adjusts until economic profits are driven to zero

MSC: Interpretive

24 When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium, marginal cost must lie below average total cost

MSC: Analytical

25 In a monopolistically competitive market, the demand curves faced by incumbent firms are unaffected by the entry of new firms into the market

LOC: Monopolistic competition TOP: Demand curve | Long-run equilibrium

MSC: Interpretive

26 A firm in a monopolistically competitive market is usually indifferent to an additional customer walking through the door, since a sale to that customer will not increase the firm's profit

MSC: Interpretive

27 The term excess capacity refers to the fact that a firm operates on the upward-sloping portion of its total-cost curve

LOC: Monopolistic competition TOP: Excess capacity

MSC: Interpretive

28 The term excess capacity refers to the fact that a firm produces a lower quantity than it would if it operated at the efficient scale

MSC: Interpretive

29 Excess capacity characterizes firms in monopolistically competitive markets, even in situations of long-run equilibrium

MSC: Interpretive

30 When a firm operates with excess capacity, it must be in a monopolistically competitive market

MSC: Interpretive

31 A firm that would experience higher average total cost by increasing production is operating with excess capacity

MSC: Interpretive

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32 When a firm operates at efficient scale, it is producing at the minimum point on its average total cost curve.

LOC: Monopolistic competition TOP: Efficient scale

MSC: Definitional

33 Defenders of advertising argue that firms use advertising as a signal of quality, even if the advertising delivers little helpful information about the product

LOC: Monopolistic competition TOP: Advertising MSC: Applicative

34 Critics of advertising argue that advertising leads to less elastic demand for products and a larger markup of price over marginal cost

LOC: Monopolistic competition TOP: Advertising MSC: Interpretive

35 The claim that advertising reduces the elasticity of demand is likely to be made by a defender of advertising

36 Critics of advertising argue that firms use advertising to manipulate consumers’ tastes

LOC: Monopolistic competition TOP: Advertising MSC: Applicative

37 When advertising is used to relay information about price, each firm is able to enhance market power

38 Policymakers have generally come to accept the view that advertising enhances the efficiency of markets

39 Economists are unanimous in their belief that advertising is socially inefficient

LOC: Monopolistic competition TOP: Advertising MSC: Definitional

40 When McDonald’s opens a store in Dhaka, Bangladesh, it has a strong incentive to enforce product quality consistent with stores in the United States

41 The Mikati Philippines Hard Rock Cafe has the exact same menu as the Hard Rock Cafe in New York This is

an example of a brand name enhancing market efficiency for U.S tourists visiting the Philippines

42 Empirical evidence suggests that advertising usually leads to an increase in the price for advertised products

43 Economists who argue that advertising enhances market efficiency suggest that celebrity advertising signals inferior product quality

44 Advertising during the Super Bowl is an example of information about quality contained primarily in the existence and expense of the advertising

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45 Brand names are rarely used to convey information about product quality.

46 The government of Italy will not allow any Hard Rock Cafe restaurants to open in Italy Defenders of the efficiency of brand-name markets would argue that this has hindered restaurant market efficiency in Italy

47 The debate over whether advertising serves a valuable purpose in society is definitively answered by economists who study the tastes and preferences of individuals

48 If advertising decreases the elasticity of demand for specific brand names of hard liquor, we would expect firms to be able to charge a larger markup over marginal cost

49 There is general disagreement among economists about the role of advertising, but there is widespread agreement about the role of brand names on market efficiency

50 The government may not be able to improve the inefficiencies of a monopolistically competitive market

MSC: Interpretive

51 Firms in monopolistically competitive markets and monopolies can earn long-run profits due to barriers to entry

MSC: Interpretive

52 Free entry eliminates long-run profits for firms in competitive and monopolistic industries

MSC: Interpretive

SHORT ANSWER

1 List five goods that are likely sold in a monopolistically competitive market

ANS:

Books, CDs, movies, computer games, and piano lessons are some examples

TOP: Monopolistic competition MSC: Interpretive

2 Why does a typical monopolistically competitive firm face a downward-sloping demand curve?

ANS:

Because its product is different from those offered by other firms

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3 In many college towns, private independent bookstores typically locate on the periphery of the college campus However, in some college towns, the university has used political power to restrict private bookstoresnear campus through community zoning laws Use your knowledge of markets to predict the price and quality

of service differences in the market for college textbooks under the two different market regimes

ANS:

In monopoly markets, price will be higher and the quality of service will be lower than in monopolistically

competitive markets

TOP: Monopolistic competition MSC: Analytical

4 Use a graph to demonstrate why a profit-maximizing monopolistically competitive firm must operate at excesscapacity Explain why a perfectly competitive firm is not subject to the same constraint

ANS:

Competitive firms do not face downward-sloping demand The graph shows the firm choosing a level of production

in which the intersection of marginal revenue and marginal cost occurs at an output level where average total cost is decreasing This profit-maximizing output level is less than the efficient scale (minimum of average total cost), and therefore the firm is said to be operating with excess capacity

TOP: Excess capacity MSC: Analytical

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5 In a small college town, four microbreweries have opened in the last two years Demonstrate the effect of new market entrants on demand for existing firms (microbreweries) that already served this market Assume that the local community now places a moratorium on new liquor licenses for microbreweries How will this moratorium affect the long-run profitability of incumbent firms?

ANS:

The arrival of a new entrant should be graphically depicted by a leftward shift in the demand curves faced by all incumbent firms If firms are able to make economic profits, these will be able to be maintained in the long run if new entrants are not allowed (which would essentially be a barrier to entry, meaning the market would no longer be characterized as monopolistically competitive)

TOP: Long-run equilibrium MSC: Analytical

6 What is meant by the term "excess capacity" as it relates to monopolistically competitive firms?

ANS:

Monopolistically competitive firms produce a level of output lower than the efficient scale of output and are therefore said to have excess capacity

TOP: Excess capacity MSC: Interpretive

7 Entry of firms in a monopolistically competitive industry is characterized by two externalities List them and briefly describe how consumers and existing firms are influenced by them

ANS:

Business-stealing effect: incumbent firms are affected through the loss of sales; consumers are affected by lower

price

Product-variety effect: incumbent firms face a market with more substitutes; consumers have more product variety

from which to choose

TOP: Externalities MSC: Interpretive

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8 Evaluate the following statement in the context of business-stealing and product-variety externalities: "We have too many student apartments in this town already Statistics show that vacancy rates average 15 percent during any given semester."

ANS:

Business-stealing effect: if new entrants into the market can be profitable, then average vacancy rates are likely to

rise above 15 percent

Product-variety effect: if new entrants to the market are able to identify niche markets which are profitable (i.e.,

offer club rooms, pools, athletic facilities, etc.), then product variety will increase, and average vacancy rates are likely to rise above 15 percent

TOP: Externalities MSC: Interpretive

9 Assume the role of a critic of advertising Describe the characteristics of advertising that reduce the

effectiveness of markets and decrease the social welfare of society

ANS:

Advertising manipulates people's tastes and is psychological rather than informational As a result, advertising creates a desire for a product that might not otherwise exist Advertising may also impede competition by

convincing consumers that products that are identical have significant differences

TOP: Advertising MSC: Interpretive

10 Assume the role of a defender of advertising Describe the characteristics of advertising that enhance the effectiveness of markets and increase the social welfare of society

ANS:

Advertising provides information to consumers and thus allows consumers to make more informed (and therefore better) choices Advertising fosters competition by making consumers more aware of prices and product

characteristics in a market

11 Evaluate the following statement: "Advertisements that use celebrity endorsements are devoid of any value and do not enhance the efficient functioning of markets."

ANS:

Some people argue that celebrity endorsements are a signal of quality due to the high cost of the advertisement If

so, then these advertisements relay information about product quality and enhance the effective functioning of markets

12 Professional organizations (for example, the American Medical Association and the American Bar

Association) have been active advocates for regulation to restrict the right of professionals to advertise Describe what economic incentives might exist for existing professionals to restrict advertising

ANS:

If advertising increases information about prices and services, then providers of professional services will be required to compete with each other on the basis of price and service As such, existing professionals will be subject

to more competitive pressure in the markets they service, and individual profits are likely to fall

TOP: Advertising MSC: Analytical

13 Discuss how brand names may enhance the efficiency of markets in a less developed country

ANS:

Recognizable brand names signal quality products In the tourist- and business-services market, this signal can be critical at the early stages of development to ensure visitors have a quality experience when other information is unavailable or unreliable

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14 As developing countries make a transition to market-based economies, one of the first major capital

investments is in "Western-quality" hotels Explain why brand-name hotel accommodations are a critical step

in attracting foreign investment

ANS:

Brand-name hotels are a critical first step to economic development because their recognized signal of quality reduces the barriers of facilitating foreign visitors (and their money)

15 In markets where the government imposes an excise tax on unit sales, it also has a tendency to dabble with restrictions on advertising (for example, cigarettes and hard liquor) Do potential (or actual) restrictions on advertising in these markets serve the interest of a government that is interested in maximizing its tax revenue from the sale of these products? Explain your answer

ANS:

In the case of the examples given, demand is quite inelastic, so restrictions on advertising are not likely to have a large impact on total sales but may have an impact on the distribution of sales across brand names As such, government revenue is largely unaffected if the tax is on unit sales

Sec 00 - Monopolistic Competition

MULTIPLE CHOICE

1 Which of the following is a characteristic of monopolistic competition?

a ownership of a key resource by a single firm

b free entry

c identical product

d patents

MSC: Applicative

3 Which of the following statements is not correct?

a Monopolistic competition is similar to monopoly because in each market structure the firm can

charge a price above marginal costs

b Monopolistic competition is similar to perfect competition because both market structures are

characterized by free entry

c Monopolistic competition is similar to oligopoly because both market structures are characterized

by barriers to entry

d Monopolistic competition is similar to perfect competition because both market structures are

characterized by many sellers

MSC: Analytical

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4 Which of the following statements is not correct?

a Monopolistic competition is different from monopoly because monopolistic competition is

characterized by free entry, whereas monopoly is characterized by barriers to entry

b Both monopolistic competition and oligopoly fall in between the more extreme market structures ofcompetition and monopoly

c Monopolistic competition is different from oligopoly because each seller in monopolistic

competition is small relative to the market, whereas each seller can affect the actions of other

sellers in an oligopoly

d Both monopolistic competition and perfect competition are characterized by product differentiation

MSC: Definitional

6 A monopolistically competitive market has characteristics that are similar to

a a monopoly only

b a competitive firm only

c both a monopoly and a competitive firm

d neither a monopoly nor a competitive firm

LOC: Monopolistic competition TOP: Imperfect competition

MSC: Interpretive

2 The typical firm in the U S economy

a has some degree of market power

b sells its product for a price that is equal to the marginal cost of producing the last unit

c is perfectly competitive

d is a monopoly

MSC: Interpretive

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3 Which of the following pairs illustrates the two extreme examples of market structures?

a competition and oligopoly

b competition and monopoly

c monopoly and monopolistic competition

d oligopoly and monopolistic competition

d monopolistically competitive markets

MSC: Definitional

5 The two types of imperfectly competitive markets are

a markets with differentiated products and monopoly

b markets with differentiated products and oligopoly

c oligopoly and monopoly

d monopolistic competition and oligopoly

MSC: Interpretive

6 The two types of imperfectly competitive markets are

a monopoly and monopolistic competition

b monopoly and oligopoly

c monopolistic competition and oligopoly

d monopolistic competition and cartels

MSC: Definitional

7 In a market that is characterized by imperfect competition,

a firms are price takers

b there are always a large number of firms

c there are at least a few firms that compete with one another

d the actions of one firm in the market never have any impact on the other firms' profits

MSC: Interpretive

8 Firms in industries that have competitors but do not face so much competition that they are price takers are operating in either a(n)

a oligopoly or perfectly competitive market

b oligopoly or monopoly market

c oligopoly or monopolistically competitive market

d monopoly or monopolistically competitive market

MSC: Interpretive

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9 Imperfectly competitive firms are characterized by

a horizontal demand curves

b standardized products

c a large number of small firms

d price making ability

MSC: Interpretive

10 An oligopoly

a has a concentration ratio of less than 50 percent

b is a price taker

c is a type of imperfectly competitive market

d has many firms rather than just one firm or a few firms

LOC: Monopolistic competition TOP: Oligopoly MSC: Interpretive

11 An oligopoly is a market in which

a there are only a few sellers, each offering a product similar or identical to the products offered by

other firms in the market

b firms are price takers

c the actions of one seller in the market have no impact on the other sellers' profits

d there are many price-taking firms, each offering a product similar or identical to the products

offered by other firms in the market

LOC: Monopolistic competition TOP: Oligopoly MSC: Definitional

12 One characteristic of an oligopoly market structure is:

a firms in the industry are typically characterized by very diverse product lines

b firms in the industry have some degree of market power

c products typically sell at a price equal to their marginal cost of production

d the actions of one seller have no impact on the profitability of other sellers

13 A market structure with only a few sellers, each offering similar or identical products, is known as

a oligopoly

b monopoly

c monopolistic competition

d perfect competition

LOC: Monopolistic competition TOP: Oligopoly MSC: Definitional

14 The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

a perfectly competitive market

b monopolistically competitive market

c oligopoly

d monopoly

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15 Crude oil is primarily supplied to the world market by a few Middle Eastern countries Such a market is an example of a(n)

(i) imperfectly competitive market

(ii) monopoly market

(iii) oligopoly market

a (i) and (ii) only

b (ii) and (iii) only

c (i) and (iii) only

d (iii) only

16 A concentration ratio

a measures the percentage of total output supplied by the four largest firms in the industry

b reflects the level of competition in an industry

c is related to the control that each firm has over price

d All of the above are correct

LOC: Monopolistic competition TOP: Concentration ratio

MSC: Applicative

17 A concentration ratio

a measures the percentage of total sales of the top firm in the industry

b reflects the level of competition in an industry

c is inversely related to the price charged by the top firm in the industry

MSC: Applicative

18 The higher the concentration ratio, the

a more control an individual firm has to set prices

b more competitive the industry

c less competitive the industry

d Both a and c are correct

MSC: Interpretive

19 The lower the concentration ratio, the

a more control an individual firm has to set prices

b more competitive the industry

c less competitive the industry

MSC: Applicative

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Table 16-1

The following table shows the percentage of output supplied by the top eight firms in four different industries

MSC: Applicative

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26 Refer to Table 16-1 Which industry is the least competitive?

a Industry A

b Industry B

c Industry C

d Industry D

MSC: Applicative

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31 Refer to Table 16-2 What is the concentration ratio for Industry C?

a about 23%

b about 34%

c about 43%

d about 52%

MSC: Applicative

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37 One key difference between an oligopoly market and a competitive market is that oligopolistic firms

a are price takers while competitive firms are not

b can affect the profit of other firms in the market by the choices they make while firms in

competitive markets do not affect each other by the choices they make

c sell completely unrelated products while competitive firms do not

d sell their product at a price equal to marginal cost while competitive firms do not

LOC: Monopolistic competition TOP: Monopolistic competition | Oligopoly

MSC: Interpretive

38 One way in which monopolistic competition differs from oligopoly is that

a there are no barriers to entry in oligopolies

b in oligopoly markets there are only a few sellers

c all firms in an oligopoly eventually earn zero economic profits

d strategic interactions between firms are rare in oligopolies

LOC: Monopolistic competition TOP: Monopolistic competition | Oligopoly

MSC: Interpretive

39 Which of the following is an example of a monopolistically competitive industry?

a computer operating systems

b tennis balls

c movies

d cable television

MSC: Applicative

40 Which of the following is an example of a monopolistically competitive industry?

a computer operating systems

b tennis balls

c restaurants in New York City

d cable television

MSC: Applicative

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43 Examples of monopolistically competitive markets include the markets for

a restaurants and furniture

b wheat and corn

c postage stamps and wooden pencils

MSC: Applicative

45 A monopolistically competitive industry is characterized by

a many firms selling products that are similar but not identical

b many firms selling identical products

c a few firms selling products that are similar but not identical

d a few firms selling highly different products

MSC: Definitional

46 A monopolistically competitive industry is characterized by

a many firms, differentiated products, and barriers to entry

b many firms, differentiated products, and free entry

c a few firms, identical products, and free entry

d a few firms, differentiated products, and barriers to entry

MSC: Definitional

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49 Which of the following is not a characteristic of monopolistic competition?

a a large number of sellers

b firms are price takers

c free entry into the market

d a differentiated product

MSC: Definitional

50 Monopolistic competition is characterized by which of the following attributes?

(i) free entry

(ii) product differentiation

(iii) many sellers

a (i) and (iii) only

b (i) and (ii) only

c (ii) and (iii) only

d (i), (ii), and (iii)

MSC: Definitional

51 In a monopolistically competitive market,

a there are only a few sellers

b each firm takes the price of its product as given

c firms can enter or exit the market without restrictions

d each firm produces a product that is essentially identical to the products of other firms in the

market

MSC: Definitional

52 A monopolistically competitive market

a has some features of monopoly and some features of competition

b has one large, dominant firm and many other smaller firms

c is difficult to enter

d occurs whenever firms earn zero economic profit

MSC: Definitional

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54 If firms in a particular market sell identical products, then the market is

(i) perfectly competitive

(ii) monopolistically competitive

(iii) an oligopoly

a (i) or (ii) only

b (ii) or (iii) only

c (i) or (iii) only

d (i) only

LOC: Monopolistic competition TOP: Perfect competition

MSC: Interpretive

55 When an industry has many firms, the industry is

a an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the

firms sell identical products

b an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products

c monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive

if the firms sell identical products

d perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive

if the firms sell identical products

LOC: Monopolistic competition TOP: Monopolistic competition | Perfect competition

MSC: Interpretive

56 If there are many firms participating in a market, the market is either

a an oligopoly or monopolistically competitive

b perfectly competitive or monopolistically competitive

c an oligopoly or perfectly competitive

d an oligopoly or a cartel

MSC: Interpretive

57 Which of the following statements is correct?

a Monopolistic competition is similar to monopoly because both market structures are characterized

by patents

b Monopolistic competition is similar to perfect competition because both market structures are

characterized by each seller being small compared to the market

c Monopolistic competition is similar to oligopoly because both market structures are characterized

by free entry

d Monopolistic competition is similar to perfect competition because both market structures are

characterized by excess capacity

MSC: Analytical

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58 In which of the following market structures is(are) there a large number of sellers?

(i) monopolistic competition

(ii) perfect competition

(iii) oligopoly

a (i) and (ii) only

b (ii) and (iii) only

c (ii) only

d (i), (ii), and (iii)

MSC: Definitional

59 Monopolistic competition differs from perfect competition because in monopolistically competitive markets

a there are barriers to entry

b all firms can eventually earn economic profits

c each of the sellers offers a somewhat different product

d strategic interactions between firms are important

MSC: Interpretive

60 Monopolistically competitive markets differ from perfectly competitive markets due to

(i) the number of sellers

(ii) the barriers to entry

(iii) the product differentiation among the sellers

a (i) only

b (iii) only

c (i) and (iii) only

d (ii) and (iii) only

MSC: Interpretive

61 In both perfect competition and monopolistic competition, each firm

a has some monopoly power

b sells a product that is at least slightly different from those of other firms

c faces a downward-sloping demand curve

d has many competitors

MSC: Definitional

62 Which of the following conditions distinguishes monopolistic competition from perfect

competition?

a the number of sellers in the market

b the freedom of entry and exit by firms in the market

c the size of firms in the market

d product differentiation

MSC: Interpretive

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63 A similarity between monopoly and monopolistic competition is that in both market structures

a strategic interactions among sellers are important

b there are a small number of sellers

c sellers are price makers rather than price takers

d there are only a few buyers but many sellers

LOC: Monopolistic competition TOP: Monopolistic competition | Monopoly

MSC: Interpretive

64 Which of the following statements is correct?

a Cigarettes are likely to be produced in a monopolistically competitive industry

b Novels are likely to be produced in a monopoly industry

c Movies are likely to be produced in a monopolistically competitive industry

d Milk is likely to be produced in an oligopoly industry

MSC: Interpretive

65 Which of the following statements is not correct?

a Novels are likely to be produced in a monopolistically competitive industry

b Cable television is likely to be produced in a monopoly industry

c Milk is likely to be produced in a monopolistically competitive industry

d Cigarettes are likely to be produced in an oligopoly industry

MSC: Interpretive

Sec02 - Monopolistic Competition - Competition with Differentiated Products

MULTIPLE CHOICE

1 A downward-sloping demand curve

a is a feature of all monopolistically competitive firms

b means that the firm in question will never experience a zero profit

c causes marginal revenue to exceed price

d prohibits firms from earning positive economic profits in the long run

MSC: Interpretive

2 Each firm in a monopolistically competitive firm faces a downward-sloping demand curve because

a there are many other sellers in the market

b there are very few other sellers in the market

c the firm's product is different from those offered by other firms in the market

d that firm faces the threat of entry into the market by new firms

MSC: Interpretive

3 For a monopolistically competitive firm,

a marginal revenue and price are the same

b average revenue and price are the same

c at the profit-maximizing quantity of output, price equals marginal cost

d at the profit-maximizing quantity of output, price equals the minimum of average total cost

MSC: Interpretive

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4 For a monopolistically competitive firm, at the profit-maximizing quantity of output,

a price exceeds marginal cost

b marginal revenue exceeds marginal cost

c marginal cost exceeds average revenue

d price equals marginal revenue

MSC: Interpretive

6 A firm in a monopolistically competitive market faces a

a downward-sloping demand curve because the firm’s product is different from those offered by other firms

b downward-sloping demand curve because there are only a few firms in the market

c horizontal demand curve because there are many firms in the market

d horizontal demand curve because firms can enter the market without restriction

LOC: Monopolistic competition TOP: Monopolistic competition | Demand curveMSC: Interpretive

7 In the short run, a firm in a monopolistically competitive market operates much like a

a firm in a perfectly competitive market

b firm in an oligopoly

c monopolist

d monopsonist

MSC: Interpretive

8 Each firm in a monopolistically competitive market

a earns both short-run and long-run profits

b faces a downward-sloping demand curve

c cannot earn economic profit in the short run

d sets price equal to marginal cost

9 In a monopolistically competitive industry, firms set price

a equal to marginal cost since each firm is a price taker

b below marginal cost since each firm is a price taker

c above marginal cost since each firm is a price setter

d always a fraction of marginal cost since each firm is a price setter

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10 A profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectlycompetitive market because the firm in the monopolistically competitive market

a is characterized by market-share maximization

b has no barriers to entry

c faces a downward-sloping demand curve for its product

d faces a horizontal demand curve at the market clearing price

LOC: Monopolistic competition TOP: Monopolistic competition | Demand curve

MSC: Interpretive

11 A monopolistically competitive firm chooses

a the quantity of output to produce, but the market determines price

b the price, but competition in the market determines the quantity

c price, but output is determined by a cartel production quota

d the quantity of output to produce and the price at which it will sell its output

MSC: Interpretive

12 Product differentiation in monopolistically competitive markets ensures that, for profit-maximizing firms,

a marginal revenue will equal average total cost

b price will exceed marginal cost

c marginal cost will exceed average revenue

d average variable cost will be declining

MSC: Definitional

14 A firm in a monopolistically competitive market is similar to a monopoly in the sense that

(i) they both face downward-sloping demand curves

(ii) they both charge a price that exceeds marginal cost

(iii) free entry and exit determines the long-run equilibrium

a (i) only

b (ii) only

c (i) and (ii) only

d (i), (ii), and (iii) only

MSC: Interpretive

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15 A monopolistically competitive firm's choice of output level is virtually identical to the choice madeby

a a perfectly competitive firm

b a duopolist

c a monopolist

d an oligopolist

MSC: Interpretive

16 To maximize its profit, a monopolistically competitive firm

a takes the price as given and chooses its quantity, just as a competitive firm does

b takes the price as given and chooses its quantity, just as a colluding oligopolist does

c chooses its quantity and price, just as a competitive firm does

d chooses its quantity and price, just as a monopoly does

MSC: Interpretive

17 Because monopolistically competitive firms produce differentiated products, each firm

a faces a demand curve that is horizontal

b faces a demand curve that is vertical

c has no control over product price

d has some control over product price

MSC: Interpretive

18 A monopolistically competitive firm chooses its

a price and quantity just as a monopoly does

b quantity but faces a horizontal demand curve just as a competitive firm does

c price but can sell any quantity at the market price just as an oligopoly does

d price and quantity based on the decisions of the other firms in the industry just as an oligopoly

does

LOC: Monopolistic competition TOP: Profit maximization | Demand curve

MSC: Interpretive

19 When a monopolistically competitive firm raises its price,

a quantity demanded falls to zero

b quantity demanded declines but not to zero

c the market supply curve shifts outward

d quantity demanded remains constant

MSC: Analytical

20 A monopolistically competitive firm chooses the quantity to produce where

a price equals marginal cost

b demand equals marginal cost

c marginal revenue equals marginal cost

MSC: Interpretive

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21 The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which

a marginal revenue is equal to marginal cost

b average total cost is equal to marginal revenue

c average total cost is equal to price

d average revenue exceeds average total cost

MSC: Interpretive

22 A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

a average revenue exceeds marginal revenue

b marginal revenue exceeds average revenue

c average revenue is equal to marginal revenue

d revenue is always maximized along with profit

MSC: Interpretive

a average revenue exceeds marginal revenue

b marginal revenue equals marginal cost

c price exceeds marginal cost

MSC: Interpretive

a marginal cost exceeds marginal revenue

b average revenue equals marginal cost

c price exceeds marginal cost

MSC: Interpretive

25 To maximize its profit, a monopolistically competitive firm chooses its level of output by looking for the level of output at which

a price equals marginal cost

b marginal revenue equals marginal cost

c average total cost is minimized

MSC: Interpretive

Trang 27

26 A monopolistically competitive firm faces the following demand schedule for its product:

MSC: Applicative

Trang 28

29 A monopolistically competitive firm is currently producing 10 units of output At this level of outputthe firm is charging a price equal to $10, has marginal revenue equal to $6, has marginal cost equal

to $6, and has average total cost equal to $12 From this information we can infer that

a the firm is currently maximizing its profit

b the profits of the firm are negative

c firms are likely to leave this market in the long run

d perfect competition and monopolistic competition

MSC: Interpretive

31 In the short run, a firm operating in a monopolistically competitive market can earn

a positive economic profits

b economic losses

c zero economic profits

d All of the above are possible

MSC: Interpretive

32 In the short run, a firm operating in a monopolistically competitive market

a produces an output level where marginal revenue equals average total cost

b maximizes revenues as well as profits

c can earn zero economic profits

d sets price equal to marginal cost

MSC: Interpretive

33 In the short run, a firm operating in a monopolistically competitive market

a produces an output level where marginal revenue equals average total cost

b sets price equal to demand where marginal revenue equals marginal cost

c must earn zero economic profits

d maximizes revenues as well as profits

MSC: Interpretive

34 When a profit-maximizing firm in a monopolistically competitive market charges a price higher thanmarginal cost,

a the firm must be earning a positive economic profit

b the firm may be incurring economic losses

c there is a deadweight loss to society, but it is exactly offset by the benefit of excess capacity

d new firms will enter the market in the long run

MSC: Analytical

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35 Which of the following conditions is characteristic of a monopolistically competitive firm in run equilibrium?

short-a P = AR

b MR = MC

c P > MC

d Any of the above could be correct

MSC: Analytical

39 For a profit-maximizing monopolistically competitive firm, price exceeds marginal cost in

a the short run but not in the long run

b the long run but not in the short run

c both the short run and the long run

d neither the short run nor the long run

MSC: Interpretive

40 For a profit-maximizing monopolistically competitive firm, marginal revenue equals marginal cost

in

MSC: Interpretive

Trang 30

41 A firm operating in a monopolistically competitive market can earn economic profits in

MSC: Interpretive

42 When a market is monopolistically competitive, the typical firm in the market is likely to experiencea

a positive profit in the short run and in the long run

b positive or negative profit in the short run and a zero profit in the long run

c zero profit in the short run and a positive or negative profit in the long run

d zero profit in the short run and in the long run

MSC: Analytical

43 When a market is monopolistically competitive, the typical firm in the market can earn

a losses in the short run and profits in the long run

b profits in the short run and the long run

c losses in the short run and zero profit in the long run

d zero profit in the short run and losses in the long run

MSC: Analytical

44 An important difference between the situation faced by a profit-maximizing monopolistically competitive firm in the short run and the situation faced by that same firm in the long run is that in the short run,

a price may exceed marginal revenue, but in the long run, price equals marginal revenue

b price may exceed marginal cost, but in the long run, price equals marginal cost

c price may exceed average total cost, but in the long run, price equals average total cost

d there are many firms in the market, but in the long run, there are only a few firms in the market

MSC: Interpretive

Trang 31

Figure 16-1 The figure is drawn for a monopolistically competitive firm

MSC: Applicative

47 Refer to Figure 16-1 Suppose that average total cost is $18 when Q=12 What is the

profit-maximizing price and resulting profit?

a P=$12, profit=$0

b P=$18, profit=$72

c P=$18, profit=$24

d P=$18, profit=$0

MSC: Applicative

48 Refer to Figure 16-1 If the average total cost is $15 at the profit-maximizing quantity, then the

firm’s maximum profit is

a $18

b $24

c $36

d $45

MSC: Applicative

Trang 32

49 Refer to Figure 16-1 If the average variable cost is $12 at the profit-maximizing quantity, and if

the firm’s fixed costs amount to $30, then the firm’s maximum profit is

a $-30

b $22

c $36

d $42

MSC: Applicative

50 Refer to Figure 16-1 If the average variable cost is $13 at the profit-maximizing quantity, and if

the firm’s profit is $20 at that quantity, then its fixed costs amount to

a $12

b $22

c $40

d $60

MSC: Applicative

51 Refer to Figure 16-1 Suppose ATC = $18 when Q = 12 Then the

a firm is in a long-run equilibrium when it produces 12 units of output

b firm is in a long-run equilibrium when it produces 16 units of output

c best the firm can do is sustain a loss of $24

d best the firm can do is earn a profit of $48

MSC: Applicative

52 Refer to Figure 16-1 Suppose you were to add the ATC curve to the diagram to show the firm in a

situation of long-run equilibrium You would draw the ATC curve

a with its minimum at the point (Q = 12, P = $18)

b with its minimum at the point (Q = 12, P = $12)

c tangent to the demand curve at the point (Q = 12, P = $18)

d tangent to the demand curve at the point (Q = 16, P = $16)

MSC: Applicative

Trang 33

Figure 16-2

This figure depicts a situation in a monopolistically competitive market

53 Refer to Figure 16-2 What price will the monopolistically competitive firm charge in this market?

a $60

b $70

c $75

d $80

MSC: Analytical

55 Refer to Figure 16-2 How much consumer surplus will be derived from the purchase of this

product at the monopolistically competitive price?

a $200

b $312.50

c $400

d $800

MSC: Analytical

Trang 34

56 Refer to Figure 16-2 How much profit will the monopolistically competitive firm earn in this

situation?

a a $10 profit

b a $200 profit

c a $400 profit

d No profit, since monopolistically competitive firms never earn economic profit

MSC: Analytical

Figure 16-3

MC ATC

58 Refer to Figure 16-3 The firm in this figure is monopolistically competitive It illustrates

a the shut-down case

b a long-run economic profit

c a short-run economic profit

d a short-run loss

MSC: Interpretive

59 Refer to Figure 16-3 At the profit-maximizing, or loss-minimizing, output level, the firm in this

figure has total costs of approximately

a $2,000

b $3,000

c $4,000

d $5,000

MSC: Applicative

Trang 35

60 Refer to Figure 16-3 Assume the firm in the figure is currently producing 8 units of output and

charging $400 The firm

a will increase its profits if it raises its price and reduces its production level

b will increase its profits if it lowers its price and expands its production level

c is maximizing profits

d will increase its profits if it raises its prices and expands its production level

MSC: Analytical

61 Refer to Figure 16-3 The maximum total short-run economic profit for the monopolistically

competitive firm in this figure is

a $1,000

b $2,000

c $3,000

d $5,000

MSC: Applicative

Figure 16-4

62 Refer to Figure 16-4 Which of the graphs depicts a short-run equilibrium that will encourage the

entry of other firms into a monopolistically competitive industry?

a panel a

b panel b

c panel c

d panel d

MSC: Interpretive

Trang 36

63 Refer to Figure 16-4 Which of the graphs depicts a short-run equilibrium that will encourage the

exit of some firms from a monopolistically competitive industry?

a panel a

b panel b

c panel c

d panel d

MSC: Interpretive

64 Refer to Figure 16-4 Which of the graphs depicts a short-run equilibrium that will not encourage

either the entry or exit of firms in a monopolistically competitive industry?

a panel a

b panel b

c panel c

d panel d

MSC: Interpretive

65 Refer to Figure 16-4 Panel a shows a profit-maximizing monopolistically competitive firm that is

a earning zero economic profit

b likely to exit the market in the long run

c producing its efficient scale of output

d not maximizing its profit

MSC: Interpretive

66 Refer to Figure 16-4 Which of the panels depicts a firm in a monopolistically competitive market

earning positive economic profits?

a panel a

b panel b

c panel c

d panel d

c producing its efficient scale of output

d earning a positive economic profit

MSC: Interpretive

68 Refer to Figure 16-4 Which of the panels shown could illustrate the short-run situation for a

monopolistically competitive firm?

a panel a

b panel b

c panel c

MSC: Interpretive

Trang 37

Figure 16-5

69 Refer to Figure 16-5 Which of the graphs shown would be consistent with a firm in a

monopolistically competitive market that is earning a positive profit?

a panel a

b panel b

c panel c

d panel d

MSC: Interpretive

70 Refer to Figure 16-5 Which of the graphs shown would be consistent with a firm in a

monopolistically competitive market that is doing its best but still losing money?

a panel a

b panel b

c panel c

d panel d

d None of the above is correct

MSC: Interpretive

Trang 38

Figure 16-6

72 Refer to Figure 16-6 Which of the graphs depicts the situation for a profit-maximizing firm in a

monopolistically competitive market?

a panel a

b panel b

c panel c

d panel d

MSC: Interpretive

73 Refer to Figure 16-6 Suppose a firm is operating in the situation depicted in panel a Which of the

following statements is correct?

a The firm is earning positive short-run profits

b The firm is earning negative short-run profits

c The firm is earning zero short-run profits

d We cannot determine profits because we do not know the firm’s average total costs

MSC: Interpretive

74 Refer to Figure 16-6 If a firm in a monopolistically competitive market was producing the level of

output depicted as Qd in panel (d), it would

a not be maximizing its profit

b be minimizing its losses

c be losing market share to other firms in the market

d be operating at excess capacity

MSC: Analytical

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