Question 1

Figure 16-5  
-Refer to Figure 16-5. Panel b is consistent with a firm in a monopolistically competitive market that is

Accepted Answer

A) not in long-run equilibrium. 
B) in long-run equilibrium. 
C) producing its efficient scale of output. 
D) earning a positive economic profit. 
A) not in long-run equilibrium. 
B) in long-run equilibrium. 
C) producing its efficient scale of output. 
D) earning a positive economic profit.

Question 2

Oligopoly is characterized by a few sellers offering similar products, whereas monopolistic competition is characterized by many sellers offering differentiated products.

Accepted Answer

A) True 
 B)False

Question 3

A new Mexican restaurant opens in the city of Manchester. The residents are happy about this new restaurant because they are experiencing what externality?

Accepted Answer

product-va

Question 4

Which market structure(s) is(are) imperfectly competitive?

Accepted Answer

oligopoly

Question 5

Figure 16-14  
-Refer to Figure 16-14. Which letter identifies the efficient level of output for this firm?

Accepted Answer

The answer of Figure 16-14  
-Refer to Figure 16-14....

Question 6

Scenario 16-7
Consider the problem facing two firms, YumYum and Bertollini, in the frozen food market. Each firm has just come up with an idea for a new "frozen meal for two" which it would sell for $9. Assume that the marginal cost for each new product is a constant $2, and the only fixed cost is for advertising. Each company knows that if it spends $12 million on advertising it will get 1.5 million consumers to try its new product. YumYum has done market research which suggests that its product does not have any "staying" power in the market. Even though it could get 1.5 million consumers to buy the product once, it is unlikely that they will continue to buy the product in the future. Bertollini's market research suggests that its product is very good, and consumers who try the product will continue to be consumers over the ensuing year. On the basis of its market research, Bertollini estimates that its initial 1.5 million customers will buy one unit of the product each month in the coming year, for a total of 18 million units.
-Refer to Scenario 16-7. On the basis of a theory that people buy a product because it is advertised, the content of advertisements for Bertollini's product

Accepted Answer

A) must show a consumer taste-test to be successful. 
B) must include celebrity endorsements to be successful. 
C) is irrelevant to the success of the advertisement. 
D) Both a and b would be equally successful. 
A) must show a consumer taste-test to be successful. 
B) must include celebrity endorsements to be successful. 
C) is irrelevant to the success of the advertisement. 
D) Both a and b would be equally successful.

Question 7

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome? (i)
Perfect competition
(ii)
Monopolistic competition
(iii)
Monopoly

Accepted Answer

A) (i) only 
B) (i) and (ii) only 
C) (ii) and (iii) only 
D) (i), (ii), and (iii) 
A) (i) only 
B) (i) and (ii) only 
C) (ii) and (iii) only 
D) (i), (ii), and (iii)

Question 8

Which of the following best describes the idea of excess capacity in monopolistic competition?

Accepted Answer

A) Firms produce more output than is socially desirable. 
B) The output produced by a typical firm is less than what would occur at the minimum point on its ATC curve. 
C) Due to product differentiation, firms choose output levels where price equals average total cost. 
D) Firms keep some surplus output on hand in case there is a shift in the demand for their product. 
A) Firms produce more output than is socially desirable. 
B) The output produced by a typical firm is less than what would occur at the minimum point on its ATC curve. 
C) Due to product differentiation, firms choose output levels where price equals average total cost. 
D) Firms keep some surplus output on hand in case there is a shift in the demand for their product.

Question 9

Scenario 16-2
Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q.
-Refer to Scenario 16-2. If the marginal cost of producing this good is 0, what price would a profit-maximizing monopolist charge for the product?

Accepted Answer

A) P = 0 
B) P = 5 
C) P = 10 
D) P = 20 
A) P = 0 
B) P = 5 
C) P = 10 
D) P = 20

Question 10

Figure 16-7  
-Refer to Figure 16-7. The firm depicted in panel b faces a horizontal demand curve. If panel b depicts a profit-maximizing firm,

Accepted Answer

A) it could be operating in either a perfectly competitive market or in a monopolistically competitive market. 
B) it would not have excess capacity in its production as long as it is earning zero economic profit. 
C) it is able to choose the price at which it sells its product. 
D) the firm can always raise its profit by increasing production since consumers will buy as much as the firm can produce. 
A) it could be operating in either a perfectly competitive market or in a monopolistically competitive market. 
B) it would not have excess capacity in its production as long as it is earning zero economic profit. 
C) it is able to choose the price at which it sells its product. 
D) the firm can always raise its profit by increasing production since consumers will buy as much as the firm can produce.

Question 11

Figure 16-11  
-Refer to Figure 16-11. If this firm profit-maximizes, what price will it charge?

Accepted Answer

The answer of Figure 16-11  
-Refer to Figure 16-11....

Question 12

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures results in production of the welfare-maximizing level of output?

Accepted Answer

The answer of Considering perfect competition, monopolistic competition, and monopoly,...

Question 13

In monopolistically competitive markets, free entry and exit suggests that

Accepted Answer

A) the market structure will eventually be characterized by perfect competition in the long run. 
B) all firms earn zero economic profits in the long run. 
C) some firms will be able to earn economic profits in the long run. 
D) some firms will be forced to incur economic losses in the long run. 
A) the market structure will eventually be characterized by perfect competition in the long run. 
B) all firms earn zero economic profits in the long run. 
C) some firms will be able to earn economic profits in the long run. 
D) some firms will be forced to incur economic losses in the long run.

Question 14

Table 16-7
A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20.  
-Refer to Table 16-7. If the firm has a constant marginal cost of $7 per unit, how much profit will the firm earn at the profit-maximizing level of output?

Accepted Answer

A) $24 
B) $25 
C) $41 
D) $66 
A) $24 
B) $25 
C) $41 
D) $66

Question 15

Figure 16-5  
-Refer to Figure 16-5. Panel a shows a profit-maximizing monopolistically competitive firm that is

Accepted Answer

A) earning zero economic profit. 
B) likely to exit the market in the long run. 
C) producing its efficient scale of output. 
D) not maximizing its profit. 
A) earning zero economic profit. 
B) likely to exit the market in the long run. 
C) producing its efficient scale of output. 
D) not maximizing its profit.

Question 16

Which two curves are tangent to each other in a monopolistically competitive market with zero economic profit?

Accepted Answer

A) demand and average variable cost 
B) demand and average total cost 
C) marginal revenue and average variable cost 
D) marginal revenue and average total cost 
A) demand and average variable cost 
B) demand and average total cost 
C) marginal revenue and average variable cost 
D) marginal revenue and average total cost

Question 17

Critics of markets that are characterized by firms that sell brand name products argue that brand names encourage consumers to pay more for branded products that

Accepted Answer

A) have elastic demand curves. 
B) are very different from generic products. 
C) are indistinguishable from generic products. 
D) consumer-advocate groups have found to be inferior. 
A) have elastic demand curves. 
B) are very different from generic products. 
C) are indistinguishable from generic products. 
D) consumer-advocate groups have found to be inferior.

Question 18

Table 16-4
This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm.  
-Refer to Table 16-4. How much profit will this firm earn when it chooses its output to maximize profit?

Accepted Answer

A) a $12 loss 
B) an $8 profit 
C) a $25 profit 
D) a $32 profit 
A) a $12 loss 
B) an $8 profit 
C) a $25 profit 
D) a $32 profit

Question 19

Assume the role of a critic of advertising. Describe the characteristics of advertising that reduce the effectiveness of markets and decrease the social welfare of society.

Accepted Answer

Advertising manipulates people's tastes

Question 20

The "competition" in monopolistically competitive markets is most likely a result of having many sellers in the market.

Accepted Answer

A) True 
 B)False

Figure 16-5 -Refer to Figure 16-5. Panel b is consistent with a firm in a monopolistically competitive market that is

Oligopoly is characterized by a few sellers offering similar products, whereas monopolistic competition is characterized by many sellers offering differentiated products.

A new Mexican restaurant opens in the city of Manchester. The residents are happy about this new restaurant because they are experiencing what externality?

Which market structure(s) is(are) imperfectly competitive?

Figure 16-14 -Refer to Figure 16-14. Which letter identifies the efficient level of output for this firm?

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome? (i) Perfect competition (ii) Monopolistic competition (iii) Monopoly

Which of the following best describes the idea of excess capacity in monopolistic competition?

Scenario 16-2 Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q. -Refer to Scenario 16-2. If the marginal cost of producing this good is 0, what price would a profit-maximizing monopolist charge for the product?

Figure 16-7 -Refer to Figure 16-7. The firm depicted in panel b faces a horizontal demand curve. If panel b depicts a profit-maximizing firm,

Figure 16-11 -Refer to Figure 16-11. If this firm profit-maximizes, what price will it charge?

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures results in production of the welfare-maximizing level of output?

In monopolistically competitive markets, free entry and exit suggests that

Figure 16-5 -Refer to Figure 16-5. Panel a shows a profit-maximizing monopolistically competitive firm that is

Which two curves are tangent to each other in a monopolistically competitive market with zero economic profit?

Critics of markets that are characterized by firms that sell brand name products argue that brand names encourage consumers to pay more for branded products that

Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-4. How much profit will this firm earn when it chooses its output to maximize profit?

Assume the role of a critic of advertising. Describe the characteristics of advertising that reduce the effectiveness of markets and decrease the social welfare of society.

The "competition" in monopolistically competitive markets is most likely a result of having many sellers in the market.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Filters

Exam 16: Monopolistic Competition

Figure 16-5 -Refer to Figure 16-5. Panel b is consistent with a firm in a monopolistically competitive market that is

Oligopoly is characterized by a few sellers offering similar products, whereas monopolistic competition is characterized by many sellers offering differentiated products.

A new Mexican restaurant opens in the city of Manchester. The residents are happy about this new restaurant because they are experiencing what externality?

Which market structure(s) is(are) imperfectly competitive?

Figure 16-14 -Refer to Figure 16-14. Which letter identifies the efficient level of output for this firm?

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome? (i) Perfect competition (ii) Monopolistic competition (iii) Monopoly

Which of the following best describes the idea of excess capacity in monopolistic competition?

Scenario 16-2 Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q. -Refer to Scenario 16-2. If the marginal cost of producing this good is 0, what price would a profit-maximizing monopolist charge for the product?

Figure 16-7 -Refer to Figure 16-7. The firm depicted in panel b faces a horizontal demand curve. If panel b depicts a profit-maximizing firm,

Figure 16-11 -Refer to Figure 16-11. If this firm profit-maximizes, what price will it charge?

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures results in production of the welfare-maximizing level of output?

In monopolistically competitive markets, free entry and exit suggests that

Figure 16-5 -Refer to Figure 16-5. Panel a shows a profit-maximizing monopolistically competitive firm that is

Which two curves are tangent to each other in a monopolistically competitive market with zero economic profit?

Critics of markets that are characterized by firms that sell brand name products argue that brand names encourage consumers to pay more for branded products that

Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-4. How much profit will this firm earn when it chooses its output to maximize profit?

Assume the role of a critic of advertising. Describe the characteristics of advertising that reduce the effectiveness of markets and decrease the social welfare of society.

The "competition" in monopolistically competitive markets is most likely a result of having many sellers in the market.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopoly

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Filters