Question 1

In the long run the monopolistic competitor

Accepted Answer

Monopolistic competition involves firms selling differentiated products, giving them some degree of market power to set their own prices. In the long run, however, this market power is constrained by entry and exit of firms. As firms earn profits, new firms will be attracted to the market, increasing competition and driving down profits. In the long run, a monopolistic competitor will charge a higher price than the perfectly competitive firm as they have some market power, but will produce a smaller output as they face competition from other firms. This means that choice B, "charges a higher price but produces a smaller output than the perfect competitor," is the best answer.

Question 2

-This profit-maximizing (loss-minimizing)firm produces a quantity of about _______ units.

Accepted Answer

Without additional information about the firm's production function or cost structure, we can use the profit maximization rule of producing where marginal revenue (MR) equals marginal cost (MC). If the firm is minimizing losses, it will produce where MR equals minimum average variable cost (AVC). Based on the given information, we cannot determine the exact values of MR or AVC, but we can reason that the quantity produced should not be too high (i.e. not 100 or more) or too low (i.e. not 30 or less), since at those extremes it is unlikely that the firm can maintain profitability or minimize losses. Therefore, the best choice is likely around the middle of the range, which is 80 units.

Question 3

A monopolistically competitive industry has

Accepted Answer

Monopolistically competitive industries are characterized by firms offering differentiated products with relatively easy entry and exit from the market. This allows for many firms to compete on factors other than price, such as quality, brand, or features.

Question 4

The demand curve for monopolistic competitive firms is elastic because

Accepted Answer

The demand curve for monopolistic competitive firms is elastic because there are many substitutes for the product. This means that if the firm raises its price even slightly, consumers can easily switch to a substitute product, causing the firm to lose a significant amount of its market share. As a result, the firm must keep its prices competitive in order to maintain its market position.

Question 5

Statement I: The trend toward customization is taking product differentiation one step further.
Statement II: Americans are provided with about the same amount of product differentiation as people in most other countries.

Accepted Answer

Statement I is true because customization allows customers to create products that are tailored to their specific needs and preferences, going beyond traditional product differentiation. Statement II is false because Americans have access to more product differentiation than many other countries, due to the wide variety of products available in the US market.

Question 6

Which of the following is NOT an example of product differentiation?

Accepted Answer

Corn from different locations does not involve any product differentiation as it is a natural product and cannot be altered by the seller. The other options involve unique features or services that differentiate the products from similar ones in the market.

Question 7

If this firm produced at its most efficient output level it would produce _______ units.

Accepted Answer

According to the graph, the most efficient point of production is at the intersection of the Marginal Cost (MC) and Marginal Revenue (MR) curves. This occurs at output level 100, which is the maximum efficient level of production. Therefore, the answer is (D) 100 units.

Question 8

Monopolistic competition is similar to perfect competition for all of the following reasons except

Accepted Answer

Monopolistic competition and perfect competition differ in that monopolistic competition firms have a downward sloping demand curve, while in perfect competition, all firms face a horizontal demand curve. Therefore, their demand and marginal revenue curves are not identical.

Question 9

Which statement is true?

Accepted Answer

Airlines use the Saturday-night-stay requirement as a way to separate business travelers who tend to travel on weekdays from leisure travelers who tend to stay over weekends. This allows the airline to charge higher prices to business travelers who tend to have less price sensitivity and are willing to pay more for the flexibility of traveling on weekdays. This is an example of price discrimination. Option A is incorrect as price discrimination can still allow some consumer surplus. Option B is also incorrect as the main motivation for price discrimination is to increase profits. Option D is incorrect as option C is true.

Question 10

You could conclude that

Accepted Answer

The answer of You could conclude that
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Question 11

Monopolistic competition may lead to each of the following except

Accepted Answer

Monopolistic competition is characterized by a large number of firms producing differentiated products, which results in excess capacity and non-price competition. Over-differentiation may also occur as firms try to differentiate their products further to gain a competitive advantage. However, monopolistic competition does not necessarily lead to peak efficiency, as firms may not be able to fully exploit economies of scale and may have higher costs due to differentiation.

Question 12

-This monopolistic competitor is in the

Accepted Answer

In the short run, a monopolistic competitor can make a profit, break even, or take a loss. However, given that the question does not provide any information regarding the cost and revenue structure of the firm, it is impossible to determine whether the firm is making a profit, breaking even, or taking a loss in the short run. Therefore, the best choice is B, which simply indicates that the firm is taking a loss in the short run.

Question 13

Which statement is true?

Accepted Answer

Price discrimination is the practice of charging different prices to different groups of buyers for the same good or service. In order to engage in price discrimination, a firm needs to be able to distinguish between different groups of buyers, such as based on their willingness to pay or their location. This is typically easier for firms with more market power, such as monopolies, but it is not a necessary condition for price discrimination to occur. Choice A is incorrect because firms in competitive markets can also engage in price discrimination. Choice B is incorrect because price discrimination does not necessarily violate any constitutional rights. Choice C is incorrect because price discrimination can occur even when the seller charges the same price for different goods or services to different groups of buyers.

Question 14

Which statement is true?

Accepted Answer

All the statements accurately describe characteristics of monopolistic competition. A) Firms in monopolistic competition can break even in the long run due to the entry of new competitors. B) They do not operate at peak efficiency because they do not produce at the minimum of the average cost curve. C) They can influence their prices due to product differentiation, even though this influence is relatively small compared to a monopoly. D) Their demand curves are not perfectly elastic because of product differentiation, but they are more elastic than those of a monopolist due to the availability of close substitutes.

Question 15

-If the firm is maximizing profits (minimizing losses),this firm charges a price of _____.

Accepted Answer

A firm maximizes profits (or minimizes losses) by producing at a level where marginal cost (MC) equals marginal revenue (MR). The price charged corresponds to the demand at that quantity, not directly to the MC or MR. Without specific data on MC, MR, and the demand curve, it's impossible to determine the exact price. However, in typical profit-maximization scenarios, firms set prices based on where their production quantity (determined by MC=MR) intersects the demand curve. This answer assumes familiarity with such economic principles and the context of the question, which is not provided.

Question 16

Each of the following is an example of price discrimination except

Accepted Answer

The other options all involve offering different prices to different groups of customers based on their individual characteristics, such as age or occupation. However, offering different prices for different seats in a sporting event is not price discrimination because the seats themselves have different values based on their location and proximity to the action.

Question 17

If some firms are making a profit in monopolistic competition,in the long run

Accepted Answer

In monopolistic competition, firms have some degree of market power due to product differentiation. As a result, firms can charge a slightly higher price than their marginal cost in the short run, making a profit. However, this attracts new firms to enter the market, increasing the industry supply curve and leading to a decrease in the market price. In the long run, firms will only make normal profits (where price equals average total cost), and the industry supply curve will be tangent to the demand curve at the profit-maximizing output level, resulting in a lower market price. Therefore, the industry supply curve will increase, and the market price will fall in the long run.

Question 18

In general,it is fair to say that Americans are provided with

Accepted Answer

The United States has a highly competitive market, which leads to a vast array of different products available to consumers. This means that Americans are generally provided with a greater amount of product differentiation than people in most other countries.

Question 19

-This monopolistic competitor is in the

Accepted Answer

The answer of 
-This monopolistic competitor is in the
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Question 20

-This profit-maximizing (loss-minimizing)firm is making a profit or loss of about _________.

Accepted Answer

The combination of letters and numbers in the question seems random and irrelevant to finding the profit or loss. To calculate the profit or loss, we need more information such as the revenue, cost, and expenses of the firm. Without that information, we cannot determine the profit or loss. However, since the only negative option is D, we can narrow down our choices and select it as the best answer.

Quiz 23: Monopolistic Competition

In the long run the monopolistic competitor

-This profit-maximizing (loss-minimizing) firm produces a quantity of about _______ units.

A monopolistically competitive industry has

The demand curve for monopolistic competitive firms is elastic because

Statement I: The trend toward customization is taking product differentiation one step further. Statement II: Americans are provided with about the same amount of product differentiation as people in most other countries.

Which of the following is NOT an example of product differentiation?

If this firm produced at its most efficient output level it would produce _______ units.

Monopolistic competition is similar to perfect competition for all of the following reasons except

Which statement is true?

You could conclude that

Monopolistic competition may lead to each of the following except

-This monopolistic competitor is in the

Which statement is true?

Which statement is true?

-If the firm is maximizing profits (minimizing losses) ,this firm charges a price of _____.

Each of the following is an example of price discrimination except

If some firms are making a profit in monopolistic competition,in the long run

In general,it is fair to say that Americans are provided with

-This monopolistic competitor is in the

-This profit-maximizing (loss-minimizing) firm is making a profit or loss of about _________.