Exam 12: Monopolistic Competition and Advertising

A) is the head of the Securities and Exchange Commission (SEC) .
B) was sued by the Federal Trade Commission (FTC) for false advertising in 1998.
C) is the former CEO of Enron.
D) is the former prime minister of Canada.
E) is the former head of the FTC.

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A) homogeneous goods and services.
B) differentiated products.
C) monopolistic goods only.
D) only industrial products-and no consumer products.
E) only consumer products-and no industrial products.

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A) increase the price elasticity of demand for the firm and shift the firm's demand curve rightward.
B) decrease the price elasticity of demand for the firm and shift the firm's demand curve rightward.
C) increase the price elasticity of demand for the industry and shift the firm's demand curve rightward.
D) decrease the price elasticity of demand for the industry,but have no effect on the firm's demand.
E) cause the income elasticity of consumers to become zero.

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The student will show that for every one...

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A) revenue is greater than average variable cost.
B) revenue equals average total cost.
C) cost is greater than marginal revenue.
D) revenue equals average revenue.
E) revenue equals marginal cost.

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A) 0 (zero) .
B) $600 per day.
C) $1,200 per day.
D) $1,800 per day.
E) $20 per hour.

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A) has high barriers to entry,but is "competitive" because it has many firms.
B) has low barriers to entry,but is "competitive" because it has few firms.
C) has product differentiation,but is "competitive" because it has many firms.
D) has a monopoly,but is "competitive" because there are low barriers to entry,meaning it has potential rivals.
E) holds patents,but is "competitive" because other firms might invent similar patentable products.

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A) differentiation by style or type.
B) differentiation by a cartel.
C) monopolistic competition with differentiation by location.
D) a market with horizontal demand.
E) perfect competition because there are so many drugstores in the area.

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A) a monopoly.
B) a cartel.
C) an oligopoly.
D) monopolistic competition.
E) a competitive market.

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A) is no longer viewed as homogeneous.
B) will now be viewed as homogeneous for all producers.
C) may be characterized by a horizontal demand curve.
D) will now have a price elasticity of demand that is more elastic.
E) will be sold in perfectly competitive markets.

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A) price is above the average total cost curve.
B) price is below the average total cost curve.
C) price is equal to marginal revenue.
D) price is less than marginal revenue.
E) average total cost equals marginal cost.

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A) elasticity
B) direction
C) price
D) quantity
E) rigidity

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A) eventually become perfectly competitive.
B) follow the price leader.
C) earn long-run economic profits.
D) necessarily earn short-run economic profits.
E) "compete away" economic profit to zero.

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A) generally causes a firm's costs to fall.
B) generally causes industry costs to fall.
C) normally causes demand for the firm to shift right.
D) normally causes industry demand to shift left.
E) normally causes consumers to buy things for which they have no use.

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A) perfectly elastic,because market competition eliminates pricing power.
B) perfectly inelastic,because differentiation is awarded with monopoly pricing.
C) monopolistically elastic,as the forces of competition mitigate the market power created by significant entry barriers.
D) competitively inelastic,as the forces of competition generate demand that is not sensitive to changes in price.
E) relatively elastic,because differentiation offsets the perfect elasticity of a perfectly competitive market.

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A) There is little price or quality competition.
B) The firms compete using quality,location,and style.
C) Firms do not compete using advertising.
D) There is little competition between firms.
E) There are a few firms that collude to set the highest price.

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A) perfectly elastic.
B) less elastic than in a competitive market.
C) more elastic than in a competitive market.
D) perfectly inelastic.
E) less elastic than that of a monopoly.

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A) produce an output amount where marginal cost equals marginal revenue and make a small profit.
B) produce an output amount that corresponded to the place where marginal cost equals marginal revenue and break even.
C) produce an output amount that corresponded to the place where marginal cost equals marginal revenue,but make a small loss.
D) shut down because it would cost more to produce and sell output than it would to shut down and lose all fixed costs.
E) produce an output amount that corresponded to the place where average total cost equals average variable cost and incur a small loss.

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