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University of south california Chapter 10 HW 1) Nike has used Michael Jordan to create the impression that Air Jordan basketball shoes are superior to any other basketball shoes

Economics

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University of south california

Chapter 10 HW

1) Nike has used Michael Jordan to create the impression that Air Jordan basketball shoes are superior to any other basketball shoes. Nike is attempting to

A) convince consumers that Air Jordan basketball shoes are no different from other basketball shoes favored by celebrities.

B) increase its profit by raising the price of Air Jordan basketball shoes.

C) lower the marginal cost of producing Air Jordan basketball shoes.

D) differentiate Air Jordan basketball shoes from other types of basketball shoes.

 

2) A monopolistically competitive industry that earns economic profits in the short run will

A) experience the exit of existing firms out of the industry in the long run.

B) continue to earn economic profits in the long run.

C) experience the entry of new rival firms into the industry in the long run.

D) experience a rise in demand in the long run.

 

3) Which of the following characteristics is not common to monopolistic competition and perfect competition?

A) Firms act to maximize profit.

B) Entry barriers into the industry are low.

C) Firms take market prices as given.

D) The market demand curve is downward-sloping.

 

4) Which of the graphs in the figure depicts a monopolistically competitive firm that is earning economic profits?

A) Panel A

B) Panel B

C) Panel C

D) Panel A and Panel B

 

5) Is a monopolistically competitive firm productively efficient?

A) Yes, because it produces where marginal cost equals marginal revenue.

B) Yes, because price equals average total cost.

C) No, because price is greater than marginal cost.

D) No, because it does not produce at minimum average total cost.

 

6) For the monopolistically competitive firm

A) P = MR > AR.

B) P > MR = AR.

C) Price (P) = Marginal Revenue (MR) = Average Revenue (AR).

D) P = AR > MR.

 

7) Why do most firms in monopolistic competition typically make zero profit in the long run?

A) because the lack of entry barriers would compete away profits

B) because firms produce differentiated products

C) because the total market is not large enough to accommodate so many firms

D) because firms do not produce at their minimum efficient scale

 

8) A monopolistically competitive firm will  

A) charge the same price as its competitors do.

B) produce an output level that is productively and allocatively efficient.

C) have some control over its price because its product is differentiated.

D) always produce at the minimum efficient scale of production.

 

9) Refer to Figure 13-3. The marginal revenue from one additional unit sold is the sum of the gain in revenue from selling the additional unit and the loss in revenue from having to charge a lower price to sell the additional unit. Based on the diagram in the figure,

A) X represents the gain (price effect) and Y the loss (output effect).

B) Y represents the gain (output effect) and X the loss (price effect).

C) X represents the loss (price effect) and Y + Z the gain (output effect).

D) X + Z represents the loss (output effect) and Y the gain (price effect).

 

10) Because the monopolistically competitive firm faces a ________ demand curve for its product, it ________ the price of its output.

A) horizontal; cannot influence

B) downward-sloping; cannot influence

C) downward-sloping; can influence

D) horizontal; can influence

 

11) Is a monopolistically competitive firm allocatively efficient?

A) No, because it does not produce at minimum average total cost.

B) Yes, because price equals average total cost.

C) Yes, because it produces where marginal cost equals marginal revenue.

D) No, because price is greater than marginal cost.

 

12) A monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing and becoming more elastic in the long run as new firms move into the industry until

A) the firm exits the market.

B) the firm's demand curve is tangent to its average total cost curve.

C) the firm's demand curve is perfectly elastic.

D) the original firm is driven into bankruptcy.

 

13) The reason that the "fast-casual" restaurant market is monopolistically competitive rather than perfectly competitive is because

A) products are differentiated.

B) entry into the market is blocked.

C) barriers to entry are very low.

D) there are many firms in the market.

 

14) Long-run equilibrium under monopolistic competition is similar to that under perfect competition in that

A) firms produce at the minimum point of their average cost curves.

B) firms earn normal profits.

C) price equals marginal cost.

D) price equals marginal revenue.

 

15) When a credit card company offers different services with its card, like travel insurance for air travel tickets purchased with the credit card or product insurance for items purchased with the card, the credit card company is trying to

A) create a perfectly competitive market in which to sell its credit card.

B) shift the demand curve for competing firms to the right.

C) create a barrier to entry for competing firms.

D) convince customers that its card has greater value than those offered by rival firms.

 

16) Consumers benefit from monopolistic competition by

A) paying the same price as everyone else.

B) being able to purchase high-quality products at low prices.

C) paying the lowest possible price for the product.

D) being able to choose from products more closely suited to their tastes.

 

Figure 13-4 Figure 13-4 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.

 

17) Refer to Figure 13-4. If the firm represented in the diagram is currently producing and selling Qa units, what is the price charged?

A) P0

B) P1

C) P2

D) P3

 

18) Refer to Figure 13-4.What is the area that represents the total revenue made by the firm?

A) 0P0aQa

B) 0P2cQa

C) 0P3dQa

D) 0P1bQa

 

19) Refer to Figure 13-4.What is the area that represents the total variable cost of production?

A) 0P1bQa

B) P1bdP3

C) P0abP1

D) 0P0aQa

20) Refer to Figure 13-4.What is the area that represents the total fixed cost of production?  

A) 0P1aQa

B) P1bdP3

C) P0adP3

D) That information cannot be determined from the graph.

 

21) Refer to Figure 13-4.What is the area that represents the loss made by the firm?  

A) the area P2cdP3

B) the area P1bcP2

C) the area P0acP2

D) the area P0adP3

 

22) Refer to Figure 13-4. Should the firm represented in the diagram continue to stay in business despite its losses?

A) Yes, it should increase its revenue by raising its price.

B) No, it should shut down.

C) No, it is not able to cover its fixed cost.

D) Yes, its total revenue covers its variable cost.

 

23) Refer to Figure 13-11. What is the monopolistic competitor's profit maximizing output?

A) Q1 units

B) Q2 units

C) Q3 units

D) Q4 units

 

24) Refer to Figure 13-11. What is the monopolistic competitor's profit maximizing price?

A) P1

B) P2

C) P3

D) P4

 

25) Refer to Figure 13-11. The firm represented in the diagram

A) should expand its output to take advantage of economies of scale.

B) should exit the industry.

C) makes zero accounting profit.

D) makes zero economic profit.