11) Refer to Figure 11-6. What is the monopolistic competitor’s profit maximizing price? A) P1 B) P2 C) P3 D) P4 12) Refer to Figure 11-6. The firm represented in the diagram A) makes zero economic profit. B) makes zero accounting profit. C) should exit the industry. D) should expand its output to take advantage of economies of scale. 13) Refer to Figure 11-6. What is the productively efficient output for the firm represented in the diagram? A) Q1 units B) Q2 units C) Q3 units D) Q4 units 14) Refer to Figure 11-6. What is the allocatively efficient output for the firm represented in the diagram? A) Q1 units B) Q2 units C) Q3 units D) Q4 units 15) Refer to Figure 11-6. The diagram depicts a firm A) in a constant cost industry. B) in an increasing cost industry. C) in long run equilibrium. D) that is making short run losses. 16) Refer to Figure 11-6. What is the amount of excess capacity? A) Q4 – Q3 units B) Q4 – Q2 units C) Q3 – Q2 units D) Q3 – Q1 units 17) Why do most firms in monopolistic competition typically make zero profit in the long run? A) because firms produce differentiated products B) because the lack of entry barriers would compete away profits C) because firms do not produce at their minimum efficient scale D) because the total market is not large enough to accommodate so many firms 18) If a monopolistically competitive firm breaks even, the firm A) is earning an accounting profit and will have to pay taxes on that profit. B) is earning zero accounting and zero economic profit. C) should advertise its product to stimulate demand. D) should expand production. 19) Refer to Figure 11-7. If the diagram represents a typical firm in the designer watch market, what is likely to happen in the long run? A) Some firms will exit the market causing the demand to increase for firms remaining in the market. B) The firms that are making losses will be purchased by their more successful rivals. C) Inefficient firms will exit the market and new cost efficient firms will enter the market. D) Firms will have to raise their prices to cover costs of production. 20) Firms such as Caribou Coffee and Diedrich Coffee operate hundreds of coffeehouses nationwide while firms such as Dunn Brothers Coffee operate only in four states. How would you characterize these stores? A) Caribou Coffee and Diedrich Coffee are oligopolists while Dunn Brothers is a monopolistic competitor. B) Caribou Coffee and Diedrich Coffee are duopolists while Dunn Brothers is a monopolistic competitor. C) Caribou Coffee and Diedrich Coffee are duopolists while Dunn Brothers is an oligopolist D) They are all monopolistic competitors.