Question 1

Entry by new firms into a monopolistically competitive market

Accepted Answer

A) creates additional consumer surplus. 
B) imposes a positive externality on existing firms. 
C) leads to the same externalities that are observed when new firms enter a perfectly competitive market. 
D) increases the demand for existing firms' products. 
A) creates additional consumer surplus. 
B) imposes a positive externality on existing firms. 
C) leads to the same externalities that are observed when new firms enter a perfectly competitive market. 
D) increases the demand for existing firms' products.

Question 2

In a monopolistically competitive market, the number of firms adjusts until economic profits are driven to zero.

Accepted Answer

A) True 
 B)False

Question 3

Figure 16-3
This figure depicts a situation in a monopolistically competitive market.  
-Refer to Figure 16-3. Which of the following will occur in the long run in this industry?

Accepted Answer

A) Firms will exit this industry. 
B) Firms will enter this industry. 
C) This firm will continue to earn positive economic profits. 
D) This firm will incur losses. 
A) Firms will exit this industry. 
B) Firms will enter this industry. 
C) This firm will continue to earn positive economic profits. 
D) This firm will incur losses.

Question 4

Discuss how brand names may enhance the efficiency of markets in a less developed country.

Accepted Answer

Recognizable brand names signal quality

Question 5

Figure 16-1        
-Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?

Accepted Answer

A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D 
A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D

Question 6

Which of the following conditions is characteristic of a monopolistically competitive firm in long-run equilibrium?

Accepted Answer

A) P > MR and P = MC 
B) ATC = demand and MR = MC 
C) P  ATC and demand > MR 
A) P > MR and P = MC 
B) ATC = demand and MR = MC 
C) P  ATC and demand > MR

Question 7

Scenario 16-9
Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products.
-Refer to Scenario 16-9. If advertising were banned in these markets, what would likely happen to the prices of chips and soda?

Accepted Answer

They would

Question 8

Figure 16-6  
-Refer to Figure 16-6. Which of the graphs shown would be consistent with a profit maximizing firm in a monopolistically competitive market that is earning a positive profit?

Accepted Answer

A) panel a 
B) panel b 
C) panel c 
D) panel d 
A) panel a 
B) panel b 
C) panel c 
D) panel d

Question 9

An oligopoly

Accepted Answer

A) has a concentration ratio of less than 50 percent. 
B) is a price taker. 
C) is a type of imperfectly competitive market. 
D) has many firms rather than just one firm or a few firms. 
A) has a concentration ratio of less than 50 percent. 
B) is a price taker. 
C) is a type of imperfectly competitive market. 
D) has many firms rather than just one firm or a few firms.

Question 10

Defenders of advertising argue that firms use advertising as a signal of quality, even if the advertising delivers little helpful information about the product.

Accepted Answer

A) True 
 B)False

Question 11

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Accepted Answer

A) firms are more likely to operate at efficient scale. 
B) there are likely to be too many firms in a monopolistically competitive market. 
C) market efficiency is likely to be enhanced by the entry of new firms. 
D) all firms are earning zero economic profit. 
A) firms are more likely to operate at efficient scale. 
B) there are likely to be too many firms in a monopolistically competitive market. 
C) market efficiency is likely to be enhanced by the entry of new firms. 
D) all firms are earning zero economic profit.

Question 12

The LookGood BePopular (LGBP) Clothing Company embarked on a new advertising campaign in which a group of young beautiful people are having fun eating out at a restaurant wearing the company's clothes. Critics of advertising argue that this advertisement

Accepted Answer

A) causes demand for LGBP Clothing to be less elastic. 
B) is more effective than other forms of advertisement because of its content. 
C) will cause the market to be more competitive. 
D) Both a and b are correct. 
A) causes demand for LGBP Clothing to be less elastic. 
B) is more effective than other forms of advertisement because of its content. 
C) will cause the market to be more competitive. 
D) Both a and b are correct.

Question 13

Which market structure(s) include(s) many firms with differentiated products who can enter and exit the market freely?

Accepted Answer

monopolist

Question 14

Some firms have an incentive to advertise because they sell a

Accepted Answer

A) homogeneous product and charge a price equal to marginal cost. 
B) homogeneous product and charge a price above marginal cost. 
C) differentiated product and charge a price equal to marginal cost. 
D) differentiated product and charge a price above marginal cost. 
A) homogeneous product and charge a price equal to marginal cost. 
B) homogeneous product and charge a price above marginal cost. 
C) differentiated product and charge a price equal to marginal cost. 
D) differentiated product and charge a price above marginal cost.

Question 15

Since a firm in a monopolistically competitive market faces a

Accepted Answer

A) downward-sloping demand curve, it will always operate with excess capacity. 
B) downward-sloping demand curve, it will always operate at its efficient scale. 
C) perfectly elastic demand curve, it will always operate with excess capacity. 
D) perfectly inelastic demand curve, it will always operate at its efficient scale. 
A) downward-sloping demand curve, it will always operate with excess capacity. 
B) downward-sloping demand curve, it will always operate at its efficient scale. 
C) perfectly elastic demand curve, it will always operate with excess capacity. 
D) perfectly inelastic demand curve, it will always operate at its efficient scale.

Question 16

A recent outbreak of hepatitis was linked to a national fast-food restaurant chain. This is an example of a case in which

Accepted Answer

A) brand name identity increases the effectiveness of markets. 
B) brand name identity can be detrimental to the profitability of a firm. 
C) advertising is ineffective in salvaging perceptions of product quality. 
D) advertising cannot be used to establish brand loyalty. 
A) brand name identity increases the effectiveness of markets. 
B) brand name identity can be detrimental to the profitability of a firm. 
C) advertising is ineffective in salvaging perceptions of product quality. 
D) advertising cannot be used to establish brand loyalty.

Question 17

Figure 16-13  
-Refer to Figure 16-13. Which letter represents the profit-maximizing quantity?

Accepted Answer

The answer of Figure 16-13  
-Refer to Figure 16-13....

Question 18

Figure 16-13  
-Refer to Figure 16-13. Use the letters to identify the area of total cost for this firm.

Accepted Answer

The answer of Figure 16-13  
-Refer to Figure 16-13....

Question 19

Scenario 16-5
McDonald's restaurants has recently announced intentions to open a new restaurant in Smalltown, Indiana. Assume that the fast-food restaurant market in Smalltown is characterized by monopolistic competition.
-Refer to Scenario 16-5. As a result of the new McDonald's, residents of Smalltown are likely to benefit from

Accepted Answer

A) a product-variety externality. 
B) a business-stealing externality. 
C) the fact that McDonald's will increase its production to achieve the efficient scale. 
D) Both b and c are correct. 
A) a product-variety externality. 
B) a business-stealing externality. 
C) the fact that McDonald's will increase its production to achieve the efficient scale. 
D) Both b and c are correct.

Question 20

Figure 16-12  
-Refer to Figure 16-12. When this firm profit-maximizes, what is the amount of the firm's profit or loss?

Accepted Answer

The answer of Figure 16-12  
-Refer to Figure 16-12....

Entry by new firms into a monopolistically competitive market

In a monopolistically competitive market, the number of firms adjusts until economic profits are driven to zero.

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. Which of the following will occur in the long run in this industry?

Discuss how brand names may enhance the efficiency of markets in a less developed country.

Figure 16-1 -Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?

Which of the following conditions is characteristic of a monopolistically competitive firm in long-run equilibrium?

Figure 16-6 -Refer to Figure 16-6. Which of the graphs shown would be consistent with a profit maximizing firm in a monopolistically competitive market that is earning a positive profit?

An oligopoly

Defenders of advertising argue that firms use advertising as a signal of quality, even if the advertising delivers little helpful information about the product.

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

The LookGood BePopular (LGBP) Clothing Company embarked on a new advertising campaign in which a group of young beautiful people are having fun eating out at a restaurant wearing the company's clothes. Critics of advertising argue that this advertisement

Which market structure(s) include(s) many firms with differentiated products who can enter and exit the market freely?

Some firms have an incentive to advertise because they sell a

Since a firm in a monopolistically competitive market faces a

A recent outbreak of hepatitis was linked to a national fast-food restaurant chain. This is an example of a case in which

Figure 16-13 -Refer to Figure 16-13. Which letter represents the profit-maximizing quantity?

Figure 16-13 -Refer to Figure 16-13. Use the letters to identify the area of total cost for this firm.

Figure 16-12 -Refer to Figure 16-12. When this firm profit-maximizes, what is the amount of the firm's profit or loss?

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

Entry by new firms into a monopolistically competitive market

In a monopolistically competitive market, the number of firms adjusts until economic profits are driven to zero.

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. Which of the following will occur in the long run in this industry?

Discuss how brand names may enhance the efficiency of markets in a less developed country.

Figure 16-1 -Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?

Which of the following conditions is characteristic of a monopolistically competitive firm in long-run equilibrium?

Figure 16-6 -Refer to Figure 16-6. Which of the graphs shown would be consistent with a profit maximizing firm in a monopolistically competitive market that is earning a positive profit?

An oligopoly

Defenders of advertising argue that firms use advertising as a signal of quality, even if the advertising delivers little helpful information about the product.

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

The LookGood BePopular (LGBP) Clothing Company embarked on a new advertising campaign in which a group of young beautiful people are having fun eating out at a restaurant wearing the company's clothes. Critics of advertising argue that this advertisement

Which market structure(s) include(s) many firms with differentiated products who can enter and exit the market freely?

Some firms have an incentive to advertise because they sell a

Since a firm in a monopolistically competitive market faces a

A recent outbreak of hepatitis was linked to a national fast-food restaurant chain. This is an example of a case in which

Figure 16-13 -Refer to Figure 16-13. Which letter represents the profit-maximizing quantity?

Figure 16-13 -Refer to Figure 16-13. Use the letters to identify the area of total cost for this firm.

Figure 16-12 -Refer to Figure 16-12. When this firm profit-maximizes, what is the amount of the firm's profit or loss?

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