Economic Chapter

If advertising makes consumers more loyal to particular brands, it could __________the elasticity of demand and __________the markup of price over marginal cost.

Decrease, decrease

Increase, decrease

Decrease, increase

Increase, increase

Which of the following goods best fits the definition of monopolistic competition?

Soft drink

Tap water

Wheat

Crude Oil

A monopolistically competitive firm will increase its production if

Marginal revenue is greater than marginal cost

Price is greater than average total cost

Marginal revenue is greater than average total cost

Price is greater than marginal cost

You are hired as the consultant to a monopolistically competitive firm. The firm reports that it has P < MC and P > ATC. Which statement is correct?

The firm is minimizing loss

The firm should increase its output to increase its profit

Marginal revenue must be less than marginal cost

The firm is maximizing profit

The firms reports that it has P = MC, P>ATC. Which statement is correct?

The firm is not maximizing profit

MC < MR

The firm earns zero economic profit

The firm should increase output to increase its profit

Which firm would be more likely to engage in advertising?

A family owned restaurant

A family owned farm

A company invented a less comfortable razor

A manufacturer forklifts

The two types of imperfectly competitive markets are

Public goods and common resources

Monopolistic competition and oligopoly

Oligopoly and monopoly

Markets with advertising and markets with price competition

A profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competitive market because the firm in the monopolistically competitive market

Can earn profits in the long run

Sell its product in highly-concentrated market

Faces a downward-sloping demand curve for its product

Chooses its profit-maximizing quantity where marginal revenue equals marginal cost

Which of the following conditions does not describe a firm in a monopolistically competitive market?

It takes its price as given by market conditions

It maximizes profit both in the short run and the long run

It has the freedom to enter or exit in the long run

It makes a product different from its competitors

New firms will enter a monopolistically competitive market if

Marginal revenue is greater than marginal cost

Marginal revenue is greater than average total cost

Price is greater than marginal cost

Price is greater than average total cost

What is true of a monopolistically competitive market in long run equilibruim?

Price is equal to marginal revenue

Firms make positive economics profits

Price is greater than marginal cost

Firms produce at the minimum of average total cost

Economic Chapter

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