67) In the long run, a firm in monopolistic competition has its price equal to ________ and also

has its price ________.

A) marginal cost; exceeding its average total cost.
B) marginal cost; equal to its average total cost
C) average total cost; exceeds its marginal cost
D) average total cost; less than its marginal cost
Answer: C
21) A textbook publisher is in monopolistic competition. The firm can sell no books at $100 a
book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day.
The firm's average variable cost and marginal cost is a constant $20 per book. What is the
publisher's profit-maximizing level of output?
A) 60 books per day
B) 80 books per day
C) 100 books per day
D) 120 books per day
Answer: B
Topic: Monopolistic Competition, Short-Run Profit Maximization
Skill: Analytical
AACSB: Analytical Skills

22) A textbook publisher is in monopolistic competition. The firm can sell no books at $100 a
book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day.
The firm's average variable cost and marginal cost is a constant $20 per book. What is the
publisher's profit-maximizing price?
A) $40
B) $50
C) $60
D) $70
Answer: C
Topic: Monopolistic Competition, Short-Run Profit Maximization
Skill: Analytical
AACSB: Analytical Skills

23) A textbook publisher is in monopolistic competition. The firm can sell no books at $100 a
book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day.
The firm's average variable cost and marginal cost is a constant $20 per book. What is the firm's
markup?
A) zero
B) $20
C) $40
D) $60
Answer: C
Topic: Monopolistic Competition, Short-Run Profit Maximization
Skill: Analytical
AACSB: Analytical Skills
24) A textbook publisher is in monopolistic competition. The firm can sell no books at $100 a
book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day.
The firm's total fixed cost is $2,400 a day. Its average variable cost and marginal cost is a
constant $20 per book. What is the firm's maximum economic profit?
A) zero
B) $800
C) -$400
D) $1,000
Answer: B
Topic: Monopolistic Competition, Short-Run Profit Maximization
Skill: Analytical
AACSB: Analytical Skills

25) A textbook publisher is in monopolistic competition. If the firm spends nothing on

advertising, it can sell no books at $100 a book, but for each $10 cut in price, the quantity of
books it can sell increases by 20 books a day. The firm's total fixed cost is $2,400 a day. Its
average variable cost and marginal cost is a constant $20 per book. If the firm spends $1,200 a
day on advertising, it can increase the quantity of books sold at each price by 50 percent. If the
publisher advertises, its profit maximizing level of output is
A) 120 books per day.
B) 80 books per day.
C) 160 books per day.
D) 100 books per day.
Answer: A
Topic: Marketing
Skill: Analytical
AACSB: Analytical Skills

26) A textbook publisher is in monopolistic competition. If the firm spends nothing on

advertising, it can sell no books at $100 a book, but for each $10 cut in price, the quantity of
books it can sell increases by 20 books a day. The firm's total fixed cost is $2,400 a day. Its
average variable cost and marginal cost is a constant $20 per book. If the firm spends $1,200 a
day on advertising, it can increase the quantity of books sold at each price by 50 percent.
Compared to the situation if it does not advertise, if the firm advertises, the profit-maximizing
output
A) doubles.
B) increases by 40 books per day.
C) decreases by 40 books per day.
D) is the same as without advertising.
Answer: B
Topic: Marketing
Skill: Analytical
AACSB: Analytical Skills
27) A textbook publisher is in monopolistic competition. If the firm spends nothing on
advertising, it can sell no books at $100 a book, but for each $10 cut in price, the quantity of
books it can sell increases by 20 books a day. The firm's total fixed cost is $2,400 a day. Its
average variable cost and marginal cost is a constant $20 per book. If the firm spends $1,200 a
day on advertising, it can increase the quantity of books sold at each price by 50 percent. If the
publisher advertises, its profit maximizing price is
A) $40.
B) $50.
C) $60.
D) $70.
Answer: C
Topic: Marketing
Skill: Analytical
AACSB: Analytical Skills

28) A textbook publisher is in monopolistic competition. If the firm spends nothing on

advertising, it can sell no books at $100 a book, but for each $10 cut in price, the quantity of
books it can sell increases by 20 books a day. The firm's total fixed cost is $2,400 a day. Its
average variable cost and marginal cost is a constant $20 per book. If the firm spends $1,200 a
day on advertising, it can increase the quantity of books sold at each price by 50 percent.
Compared to the situation if it does not advertise, if the firm advertises, the profit-maximizing
price
A) rises by $10.
B) falls by $10.
C) rises by $5.
D) does not change.
Answer: D
Topic: Marketing
Skill: Analytical
AACSB: Analytical Skills

29) A textbook publisher is in monopolistic competition. If the firm spends nothing on

advertising, it can sell no books at $100 a book, but for each $10 cut in price, the quantity of
books it can sell increases by 20 books a day. The firm's total fixed cost is $2,400 a day. Its
average variable cost and marginal cost is a constant $20 per book. If the firm spends $1,200 a
day on advertising, it can increase the quantity of books sold at each price by 50 percent. If the
firm advertises, its maximum economic profit is
A) zero.
B) $800.
C) $1,200.
D) -$400.
Answer: C
Topic: Marketing
Skill: Analytical
AACSB: Analytical Skills

30) A textbook publisher is in monopolistic competition. If the firm spends nothing on

advertising, it can sell no books at $100 a book, but for each $10 cut in price, the quantity of
books it can sell increases by 20 books a day. The firm's total fixed cost is $2,400 a day. Its
average variable cost and marginal cost is a constant $20 per book. If the firm spends $1,200 a
day on advertising, it can increase the quantity of books sold at each price by 50 percent.
Compared to the situation if it does not advertise, if the firm advertises, its economic profit
A) increases by $400.
B) decreases by $400.
C) doubles.
D) is the same as with no advertising.
Answer: A
Topic: Marketing
Skill: Analytical
AACSB: Analytical Skills

31) A textbook publisher is in monopolistic competition. If the firm spends nothing on

advertising, it can sell no books at $100 a book, but for each $10 cut in price, the quantity of
books it can sell increases by 20 books a day. The firm's total fixed cost is $2,400 a day. Its
average variable cost and marginal cost is a constant $20 per book. If the firm spends $1,200 a
day on advertising, it can increase the quantity of books sold at each price by 50 percent. The
firm will
A) advertise because advertising will increase its economic profit.
B) not advertise because advertising will lower its economic profit.
C) advertise because advertising will decrease its economic loss.
D) not advertise because advertising will increase its economic loss.
Answer: A
Topic: Marketing
Skill: Analytical
AACSB: Analytical Skills