Q: Suppose a monopolistically competitive firm faces the following cost and revenue data: At the profit-maximizing output, price is $$4, average total cost is 3$$, and quantity is 1,000 units. What is the firm's total profit?

$$1,000 ($$calculated as $$(4-3) \times 1,000)$$

Question 1

Which of the following best explains why a monopolistically competitive firm faces a downward-sloping demand curve?

Accepted Answer

Because the firm sells a differentiated product, so some customers are willing to pay more for its unique features.

Question 2

Suppose Blue Bottle Coffee reduces the price of its cappuccinos from $$3.50 to 3.00 $$and sells one additional cup. What is the marginal revenue from selling the sixth cup if it loses $0.50 on each of the previous five cups?

Accepted Answer

$0.50

Question 3

A monopolistically competitive firm maximizes profit in the short run by producing the quantity at which:

Accepted Answer

$$MR = MC$$

Question 4

In the long run, what happens to the economic profit of a monopolistically competitive firm if it does not innovate or further differentiate its product?

Accepted Answer

It will earn zero economic profit as new firms enter and compete away profits.

Question 5

Which of the following is NOT a characteristic of monopolistic competition?

Accepted Answer

Identical products

Question 6

If a monopolistically competitive firm is earning an economic profit in the short run, what will likely happen in the market in the long run?

Accepted Answer

New firms will enter, decreasing the firm's demand until profit is zero.

Question 7

Which of the following best describes productive efficiency?

Accepted Answer

Producing at the lowest possible average total cost

Question 8

Why does a monopolistically competitive firm have excess capacity in the long run?

Accepted Answer

Because it produces less than the output that minimizes average total cost

Question 9

Which of the following is a real-world example of product differentiation in monopolistic competition?

Accepted Answer

A coffee shop offering unique blends and ambiance compared to other coffee shops

Question 10

Suppose a monopolistically competitive firm faces the following cost and revenue data: At the profit-maximizing output, price is $$4, average total cost is 3$$, and quantity is 1,000 units. What is the firm's total profit?

Accepted Answer

$$1,000 ($$calculated as $$(4-3) 	imes 1,000)$$

Question 11

Which of the following strategies can help a monopolistically competitive firm maintain economic profit in the long run?

Accepted Answer

Innovating to lower costs or enhance product uniqueness

Question 12

Allocative efficiency occurs when:

Accepted Answer

$$P = MC$$

Question 13

Which of the following is a key difference between perfect competition and monopolistic competition?

Accepted Answer

Firms in monopolistic competition sell differentiated products.

Question 14

A successful brand name can help a monopolistically competitive firm by:

Accepted Answer

Maintaining product differentiation and delaying profit erosion

Question 15

If a monopolistically competitive firm is producing where $$MC \u003e MR$$, what should the firm do to maximize profit?

Accepted Answer

Decrease output

Question 16

Which of the following is an example of brand management?

Accepted Answer

A firm continuously advertising and improving its product to maintain its unique image

Question 17

In the long run, the demand curve facing a monopolistically competitive firm becomes:

Accepted Answer

More elastic due to increased competition

Question 18

Which of the following best describes the 'output effect' when a monopolistically competitive firm lowers its price?

Accepted Answer

The firm gains revenue from selling additional units at the new price.

Question 19

Suppose a new coffeehouse enters the market and offers a similar product to Blue Bottle. What is the likely effect on Blue Bottle's demand curve?

Accepted Answer

The demand curve will shift to the left and become more elastic.

Question 20

Which of the following is NOT a factor under a firm's direct control that can affect its profitability in monopolistic competition?

Accepted Answer

Chance events in the market

Ch.13 Monopolistic Competition: The Competitive Model in a More Realistic Setting

스터디 가이드 - 연습 문제

학습 가이드 - 플래시카드