Question 1

Which of these is a downside of monopolistic competition and oligopolies?
A) market power
B) higher trade barriers
C) higher transportation costs
D) higher input prices

Accepted Answer

Market power is a downside of monopolistic competition and oligopolies because it allows firms to set prices above marginal costs, potentially leading to inefficiencies and higher prices for consumers.

Question 2

Which characteristic does monopolistic competition NOT have in common with perfect competition?
A) Products of individual firms are differentiated.
B) Entry and exit are easy.
C) Individual firms earn normal profit in the long run.
D) Each firm has an insignificantly small market share.

Accepted Answer

Monopolistic competition is characterized by product differentiation, which is not a feature of perfect competition. In perfect competition, all firms produce identical or homogenous products.

Question 3

All of these are characteristic of monopolistic competition EXCEPT
A) easy entry and exit.
B) barriers to entry.
C) product differentiation.
D) price maker.

Accepted Answer

Monopolistic competition is characterized by easy entry and exit, product differentiation, and firms being price makers. Barriers to entry are more characteristic of oligopolies or monopolies, not monopolistic competition.

Question 4

Which firm produces in an industry with the characteristics of monopolistic competition?
A) Pepsi
B) Chevrolet
C) GM
D) Burger King

Accepted Answer

Burger King operates in the fast-food industry, which is characterized by monopolistic competition due to many firms, product differentiation, and relatively easy entry and exit.

Question 5

A monopolistically competitive firm will produce output as long as the marginal revenue is
A) less than price.
B) less than marginal costs.
C) above price.
D) above marginal costs.

Accepted Answer

In a monopolistically competitive market, firms will continue to produce output as long as the marginal revenue (MR) is above the marginal costs (MC). This is because producing additional units is profitable as long as the revenue from selling those units exceeds the cost of producing them.

Question 6

Monopolistic competition is like perfect competition in that they both
A) have numerous competitors.
B) put labels on their products.
C) erect barriers to entry.
D) make zero economic profit in the short run.

Accepted Answer

Monopolistic competition and perfect competition both feature markets with numerous competitors, allowing for a wide variety of choices for consumers. Unlike monopolies or oligopolies, these market structures do not have significant barriers to entry, allowing for more firms to enter and compete.

Question 7

It is easy to enter into and exit from which of these industrial structures?
A) monopoly
B) natural monopoly
C) oligopoly
D) monopolistic competition

Accepted Answer

Monopolistic competition is characterized by many firms, differentiated products, and free entry and exit. This makes it easier for new firms to enter the market and for existing firms to exit compared to the other structures listed.

Question 8

The key characteristic of monopolistic competition is
A) mutual interdependence among firms.
B) ease of entry into the market.
C) product differentiation.
D) long-run economic profits.

Accepted Answer

Monopolistic competition is characterized by many firms selling similar but not identical products, which is known as product differentiation.

Question 9

Which characteristic is NOT typical of monopolistic competition?
A) easy entry into the market
B) one seller
C) product differentiation
D) easy exit from the market

Accepted Answer

Monopolistic competition is characterized by many sellers, product differentiation, and relatively free entry and exit. The presence of "one seller" describes a monopoly, not monopolistic competition.

Question 10

In the reusable water bottle industry, these are all attempts at product differentiation EXCEPT
A) product redesign.
B) running a buy one, get one 50% off sale.
C) using sustainably sourced inputs.
D) collaborating with a popular artist to create a limited-edition print.

Accepted Answer

Running a buy one, get one 50% off sale is a pricing strategy, not a form of product differentiation. Product differentiation involves changes or variations in the product itself, such as design, sustainability, or unique collaborations, to make it stand out in the market.

Question 11

Large cities typically have many grocery stores, and most sell similar products of various brands and quality. The grocery store market in a big city can be BEST classified as
A) a competitive market.
B) an oligopoly.
C) a monopoly.
D) monopolistic competition.

Accepted Answer

The answer of Large cities typically have many grocery stores,...

Question 12

Product differentiation can be achieved through all of these EXCEPT
A) clever labeling.
B) improved location.
C) advertising.
D) price reduction.

Accepted Answer

Product differentiation involves making a product appear distinct from similar products in the market through unique features, design, branding, quality, or functionality. Price reduction, however, is a pricing strategy, not a method of differentiation.

Question 13

A lot of advertising dollars are shifting away from conventional media and moving to
A) the radio.
B) newspapers.
C) the Internet.
D) magazines.

Accepted Answer

The Internet has become a primary platform for advertising due to its widespread use and the ability to target specific audiences effectively, leading to a significant shift in advertising dollars away from traditional media.

Question 14

When the producer of Doritos tortilla chips spends money for television commercials, it intends to shift the
A) demand curve to the right and make demand more elastic.
B) supply curve to the right and make supply more elastic.
C) demand curve to the right and make demand less elastic.
D) supply curve to the right and make supply less elastic.

Accepted Answer

The producer's goal in spending money on television commercials is to increase consumer demand for Doritos tortilla chips, which shifts the demand curve to the right. Additionally, by enhancing brand loyalty and making the product seem more unique or desirable, the commercials can make demand less elastic, as consumers may become less sensitive to price changes.

Question 15

Which of these is NOT an example of product differentiation?
A) price discrimination
B) packaging
C) business location
D) customer service

Accepted Answer

Price discrimination is not an example of product differentiation. Product differentiation involves altering the characteristics of a product to make it distinct from those of competitors, such as through packaging, location, or customer service. Price discrimination, however, refers to charging different prices to different customers for the same product or service, which does not involve changing the product's characteristics.

Question 16

In the coffee shop industry, product differentiation is reflected by all these practices EXCEPT
A) enhancement of ambiance and customer experience.
B) fair-trade sourcing of coffee beans.
C) implementing order-ahead service using a mobile app.
D) creating frequent buyer programs.

Accepted Answer

The answer of In the coffee shop industry, product differentiation...

Question 17

Product differentiation
A) adds product information without increasing product cost.
B) contributes to production efficiency.
C) reduces price elasticity of demand.
D) reduces product price.

Accepted Answer

Product differentiation makes a product more attractive by contrasting its unique qualities with other competing products. This can lead to consumers being less sensitive to price changes (reducing price elasticity of demand) because they perceive the product as unique or superior.

Question 18

Which of these products is likely to be the MOST differentiated?
A) cotton sold to a fabric maker
B) fabric sold to a garment maker
C) garments sold to a garment distributor
D) garments sold to a retail customer

Accepted Answer

Garments sold to a retail customer are likely to be the most differentiated because at this stage, products have gone through the most customization and branding, making them unique to consumers. This differentiation is less pronounced in raw materials like cotton or intermediate products like fabric.

Question 19

Which of these will NOT help a monopolistically competitive firm generate brand loyalty?
A) copycat packaging
B) advertising
C) superior service
D) better location

Accepted Answer

Copycat packaging does not help generate brand loyalty as it does not distinguish the firm's products from competitors but rather makes them more similar, failing to create a unique brand identity or value proposition for consumers.

Question 20

What are the two types of advertising?
A) tit-for-tat and big hammer
B) big hammer and informational
C) informational and persuasive
D) persuasive and copycat

Accepted Answer

Informational and persuasive are the two primary types of advertising. Informational advertising aims to inform the audience about the product or service, highlighting features, benefits, and facts. Persuasive advertising seeks to influence the audience's emotions, preferences, and behavior to convince them to purchase or support a product or service.

Quiz 10: Monopolistic Competition, Oligopoly, and Game Theory

Which of these is a downside of monopolistic competition and oligopolies?

Which characteristic does monopolistic competition NOT have in common with perfect competition?

All of these are characteristic of monopolistic competition EXCEPT

Which firm produces in an industry with the characteristics of monopolistic competition?

A monopolistically competitive firm will produce output as long as the marginal revenue is

Monopolistic competition is like perfect competition in that they both

It is easy to enter into and exit from which of these industrial structures?

The key characteristic of monopolistic competition is

Which characteristic is NOT typical of monopolistic competition?

In the reusable water bottle industry, these are all attempts at product differentiation EXCEPT

Large cities typically have many grocery stores, and most sell similar products of various brands and quality. The grocery store market in a big city can be BEST classified as

Product differentiation can be achieved through all of these EXCEPT

A lot of advertising dollars are shifting away from conventional media and moving to

When the producer of Doritos tortilla chips spends money for television commercials, it intends to shift the

Which of these is NOT an example of product differentiation?

In the coffee shop industry, product differentiation is reflected by all these practices EXCEPT

Product differentiation

Which of these products is likely to be the MOST differentiated?

Which of these will NOT help a monopolistically competitive firm generate brand loyalty?

What are the two types of advertising?