Question 1

Which of the following might be an example of an economic argument against advertising? ​

Accepted Answer

A) ​It causes the demand for the good to be more elastic 
B) ​It allows the producer to earn an economic profit in the long run 
C) ​People may be deluded into thinking that a good with a brand name is better than an otherwise identical generic brand 
D) ​The claims made in the ads are almost always false 
A) ​It causes the demand for the good to be more elastic 
B) ​It allows the producer to earn an economic profit in the long run 
C) ​People may be deluded into thinking that a good with a brand name is better than an otherwise identical generic brand 
D) ​The claims made in the ads are almost always false

Question 2

Figure 16-13  
-Refer to Figure 16-13. Which of the following areas represents the profit for this profit maximizing monopolistically competitive firm?

Accepted Answer

A) BCHG 
B) BCIJ 
C) GHIJ 
D) 0BCL 
A) BCHG 
B) BCIJ 
C) GHIJ 
D) 0BCL

Question 3

Monopolistic competition is a type of

Accepted Answer

A) oligopoly. 
B) market structure. 
C) price discrimination. 
D) advertising strategy. 
A) oligopoly. 
B) market structure. 
C) price discrimination. 
D) advertising strategy.

Question 4

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-9. When the firm is maximizing its profit, the markup over marginal cost amounts to

Accepted Answer

A) $16.67. 
B) $33.33. 
C) $50.00. 
D) $66.66. 
A) $16.67. 
B) $33.33. 
C) $50.00. 
D) $66.66.

Question 5

Under which of the following market structures would consumers likely receive the most product variety?

Accepted Answer

A) perfect competition 
B) monopolistic competition 
C) oligopoly 
D) monopoly 
A) perfect competition 
B) monopolistic competition 
C) oligopoly 
D) monopoly

Question 6

Table 16-3
The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries.  
-Refer to Table 16-3. Based on the concentration ratio, which industry is the least competitive?

Accepted Answer

A) Industry A 
B) Industry B 
C) Industry C 
D) Industry D 
A) Industry A 
B) Industry B 
C) Industry C 
D) Industry D

Question 7

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. Which of the following is most likely?

Accepted Answer

A) Both YumYum and Bertollini will advertise. 
B) Neither YumYum nor Bertollini will advertise. 
C) YumYum will advertise, but Bertollini will not advertise. 
D) Bertollini will advertise, but YumYum will not advertise. 
A) Both YumYum and Bertollini will advertise. 
B) Neither YumYum nor Bertollini will advertise. 
C) YumYum will advertise, but Bertollini will not advertise. 
D) Bertollini will advertise, but YumYum will not advertise.

Question 8

Figure 16-5  
-Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will not encourage either the entry or exit of firms in a monopolistically competitive industry?

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

Figure 16-11  
-Refer to Figure 16-11. If this firm profit-maximizes, how much profit or loss will it earn?

Accepted Answer

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

Question 10

Figure 16-2. The figure is drawn for a monopolistically competitive firm.
 
-Refer to Figure 16-2. If the average variable cost is $24 at the profit-maximizing quantity, and if the firm's fixed costs amount to $60, then the firm's maximum profit is

Accepted Answer

A) $-60. 
B) $196. 
C) $228. 
D) $288. 
A) $-60. 
B) $196. 
C) $228. 
D) $288.

Question 11

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

Accepted Answer

A) perfectly competitive market. 
B) monopolistically competitive market. 
C) oligopoly. 
D) monopoly. 
A) perfectly competitive market. 
B) monopolistically competitive market. 
C) oligopoly. 
D) monopoly.

Question 12

Free entry and exit means that the number of firms in the market adjusts until

Accepted Answer

A) producers continuously enter the market freely. 
B) the market grows to a profitable level. 
C) economic profits are driven to zero. 
D) products are free. 
A) producers continuously enter the market freely. 
B) the market grows to a profitable level. 
C) economic profits are driven to zero. 
D) products are free.

Question 13

With respect to monopolistic competition,

Accepted Answer

A) both the business-stealing externality and the product-variety externality are positive externalities. 
B) the business-stealing externality is a positive externality, while the product-variety externality is a negative externality. 
C) the business-stealing externality is a negative externality, while the product-variety externality is a positive externality. 
D) both the business-stealing externality and the product-variety externality are negative externalities. 
A) both the business-stealing externality and the product-variety externality are positive externalities. 
B) the business-stealing externality is a positive externality, while the product-variety externality is a negative externality. 
C) the business-stealing externality is a negative externality, while the product-variety externality is a positive externality. 
D) both the business-stealing externality and the product-variety externality are negative externalities.

Question 14

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. If YumYum decides to advertise its product it can expect to

Accepted Answer

A) incur a loss of $15 million. 
B) incur a loss of $1.5 million. 
C) earn a profit of $1.5 million. 
D) earn a profit of $13.5 million. 
A) incur a loss of $15 million. 
B) incur a loss of $1.5 million. 
C) earn a profit of $1.5 million. 
D) earn a profit of $13.5 million.

Question 15

In a monopolistically competitive market,

Accepted Answer

A) entry by new firms is impeded by barriers to entry; thus, the number of firms in the market is never ideal. 
B) entry by new firms is impeded by barriers to entry, but the number of firms in the market is nevertheless always ideal. 
C) free entry ensures that the number of firms in the market is ideal. 
D) there may be too few or too many firms in the market, despite free entry. 
A) entry by new firms is impeded by barriers to entry; thus, the number of firms in the market is never ideal. 
B) entry by new firms is impeded by barriers to entry, but the number of firms in the market is nevertheless always ideal. 
C) free entry ensures that the number of firms in the market is ideal. 
D) there may be too few or too many firms in the market, despite free entry.

Question 16

To maximize its profit, a monopolistically competitive firm chooses its level of output by looking for the level of output at which

Accepted Answer

A) price equals marginal cost. 
B) marginal revenue equals marginal cost. 
C) average total cost is minimized. 
D) All of the above are correct. 
A) price equals marginal cost. 
B) marginal revenue equals marginal cost. 
C) average total cost is minimized. 
D) All of the above are correct.

Question 17

The product-variety externality and the business-stealing externality are both spillover benefits of new firms entering a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 18

Piper consumes Ragu spaghetti sauce exclusively. She claims that there is a clear taste difference and that competing brands of spaghetti sauce leave an unsavory taste in her mouth. However, in a blind taste test, Piper is found to prefer generic store-brand spaghetti sauce to Ragu spaghetti sauce eight out of ten times. The results of Piper's taste test would reinforce claims by critics of brand names that

Accepted Answer

A) consumers are always willing to pay more for brand names. 
B) brand names cause consumers to perceive differences that do not really exist. 
C) brand names are always preferred to generics. 
D) consumers are only willing to buy generics if they are less expensive. 
A) consumers are always willing to pay more for brand names. 
B) brand names cause consumers to perceive differences that do not really exist. 
C) brand names are always preferred to generics. 
D) consumers are only willing to buy generics if they are less expensive.

Question 19

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. Martina offers two reasons for agreeing with Dean's decision. What are they?

Accepted Answer

brand names provide informatio

Question 20

When monopolistically competitive firms advertise, in the long run

Accepted Answer

A) they will still earn zero economic profit. 
B) they can earn positive economic profit by increasing market share. 
C) the market price must fall. 
D) the market price must rise. 
A) they will still earn zero economic profit. 
B) they can earn positive economic profit by increasing market share. 
C) the market price must fall. 
D) the market price must rise.

Which of the following might be an example of an economic argument against advertising?

Figure 16-13 -Refer to Figure 16-13. Which of the following areas represents the profit for this profit maximizing monopolistically competitive firm?

Monopolistic competition is a type of

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. When the firm is maximizing its profit, the markup over marginal cost amounts to

Under which of the following market structures would consumers likely receive the most product variety?

Table 16-3 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. -Refer to Table 16-3. Based on the concentration ratio, which industry is the least competitive?

Figure 16-5 -Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will not encourage either the entry or exit of firms in a monopolistically competitive industry?

Figure 16-11 -Refer to Figure 16-11. If this firm profit-maximizes, how much profit or loss will it earn?

Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. If the average variable cost is $24 at the profit-maximizing quantity, and if the firm's fixed costs amount to $60, then the firm's maximum profit is

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

Free entry and exit means that the number of firms in the market adjusts until

With respect to monopolistic competition,

In a monopolistically competitive market,

To maximize its profit, a monopolistically competitive firm chooses its level of output by looking for the level of output at which

The product-variety externality and the business-stealing externality are both spillover benefits of new firms entering a monopolistically competitive market.

When monopolistically competitive firms advertise, in the long run

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

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Exam 16: Monopolistic Competition

Which of the following might be an example of an economic argument against advertising? ​

Figure 16-13 -Refer to Figure 16-13. Which of the following areas represents the profit for this profit maximizing monopolistically competitive firm?

Monopolistic competition is a type of

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. When the firm is maximizing its profit, the markup over marginal cost amounts to

Under which of the following market structures would consumers likely receive the most product variety?

Table 16-3 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. -Refer to Table 16-3. Based on the concentration ratio, which industry is the least competitive?

Figure 16-5 -Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will not encourage either the entry or exit of firms in a monopolistically competitive industry?

Figure 16-11 -Refer to Figure 16-11. If this firm profit-maximizes, how much profit or loss will it earn?

Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. If the average variable cost is $24 at the profit-maximizing quantity, and if the firm's fixed costs amount to $60, then the firm's maximum profit is

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

Free entry and exit means that the number of firms in the market adjusts until

With respect to monopolistic competition,

In a monopolistically competitive market,

To maximize its profit, a monopolistically competitive firm chooses its level of output by looking for the level of output at which

The product-variety externality and the business-stealing externality are both spillover benefits of new firms entering a monopolistically competitive market.

When monopolistically competitive firms advertise, in the long run

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

Which of the following might be an example of an economic argument against advertising?