Question 1

Each firm in a monopolistically competitive market

Accepted Answer

A) earns both short-run and long-run profits. 
B) faces a downward-sloping demand curve. 
C) cannot earn economic profit in the short run. 
D) sets price equal to marginal cost. 
A) earns both short-run and long-run profits. 
B) faces a downward-sloping demand curve. 
C) cannot earn economic profit in the short run. 
D) sets price equal to marginal cost.

Question 2

Describe the shape of the monopolistically competitive firm's demand curve.

Accepted Answer

The answer of Describe the shape of the monopolistically competitive...

Question 3

Economists defend brand names as useful to consumers because brand names

Accepted Answer

A) provide consumers with information about quality when quality cannot easily be judged in advance of purchase. 
B) give firms a financial incentive to maintain the high quality associated with their brand name. 
C) convince consumers to spend more for products nearly identical to generic versions. 
D) Both a and b are correct. 
A) provide consumers with information about quality when quality cannot easily be judged in advance of purchase. 
B) give firms a financial incentive to maintain the high quality associated with their brand name. 
C) convince consumers to spend more for products nearly identical to generic versions. 
D) Both a and b are correct.

Question 4

Monopolistic competition is characterized by a few sellers offering similar products, whereas oligopoly is characterized by many sellers offering differentiated products.

Accepted Answer

A) True 
 B)False

Question 5

Figure 16-12  
-Refer to Figure 16-12. Compare the price and marginal cost in this market with price and marginal cost if this were a perfectly competitive market.

Accepted Answer

Monopolistic competi

Question 6

Figure 16-14  
-Refer to Figure 16-14. Which of the following represents the excess capacity of this firm?

Accepted Answer

A) BJ 
B) GH 
C) LM 
D) There is no excess capacity. 
A) BJ 
B) GH 
C) LM 
D) There is no excess capacity.

Question 7

The term excess capacity refers to the fact that a firm operates on the upward-sloping portion of its average-total-cost curve.

Accepted Answer

A) True 
 B)False

Question 8

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-9. As the figure is drawn, the firm is in

Accepted Answer

A) a short-run equilibrium but it is not in a long-run equilibrium. 
B) a long-run equilibrium but it is not in a short-run equilibrium. 
C) a short-run equilibrium as well as a long-run equilibrium. 
D) neither a short-run equilibrium nor a long-run equilibrium. 
A) a short-run equilibrium but it is not in a long-run equilibrium. 
B) a long-run equilibrium but it is not in a short-run equilibrium. 
C) a short-run equilibrium as well as a long-run equilibrium. 
D) neither a short-run equilibrium nor a long-run equilibrium.

Question 9

Figure 16-10
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-10. If the firm were to produce 154.92 units of output,

Accepted Answer

A) efficient scale would be realized. 
B) ATC would be at its minimum value. 
C) the firm would sustain a loss of more than $2,000. 
D) All of the above are correct. 
A) efficient scale would be realized. 
B) ATC would be at its minimum value. 
C) the firm would sustain a loss of more than $2,000. 
D) All of the above are correct.

Question 10

When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium,

Accepted Answer

A) the demand curve will be perfectly elastic. 
B) price exceeds marginal cost. 
C) marginal cost must be falling. 
D) marginal revenue exceeds marginal cost. 
A) the demand curve will be perfectly elastic. 
B) price exceeds marginal cost. 
C) marginal cost must be falling. 
D) marginal revenue exceeds marginal cost.

Question 11

Evidence suggests that, in markets with differentiated products but little advertising,

Accepted Answer

A) consumers are not confused by conflicting signals. 
B) firms are generally less profitable. 
C) markets are less efficient. 
D) consumers make better choices. 
A) consumers are not confused by conflicting signals. 
B) firms are generally less profitable. 
C) markets are less efficient. 
D) consumers make better choices.

Question 12

According to one theory, advertising sends a signal to consumers about the quality of the product being offered. An implication of this theory is that

Accepted Answer

A) the actual quality of the product is irrelevant. 
B) the content of the advertisement is irrelevant. 
C) advertising is not in the best interest of society. 
D) it is irrational for firms to pay famous people large amounts of money to appear in their advertisements. 
A) the actual quality of the product is irrelevant. 
B) the content of the advertisement is irrelevant. 
C) advertising is not in the best interest of society. 
D) it is irrational for firms to pay famous people large amounts of money to appear in their advertisements.

Question 13

New firms will likely enter a monopolistically competitive market when price exceeds

Accepted Answer

A) marginal revenue. 
B) average revenue. 
C) marginal cost. 
D) average total cost. 
A) marginal revenue. 
B) average revenue. 
C) marginal cost. 
D) average total cost.

Question 14

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. What is the concentration ratio for Industry D?

Accepted Answer

A) approximately 48% 
B) approximately 54% 
C) approximately 60% 
D) approximately 66% 
A) approximately 48% 
B) approximately 54% 
C) approximately 60% 
D) approximately 66%

Question 15

The lower the concentration ratio, the

Accepted Answer

A) more control an individual firm has to set prices. 
B) more competitive the industry. 
C) less competitive the industry. 
D) Both a and c are correct. 
A) more control an individual firm has to set prices. 
B) more competitive the industry. 
C) less competitive the industry. 
D) Both a and c are correct.

Question 16

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 this firm profit maximizes and faces a constant marginal cost of $7, does it have excess capacity? How do you know?

Accepted Answer

Yes, avera

Question 17

Professional organizations and producer groups have an incentive to

Accepted Answer

A) restrict advertising in order to enhance competition on the basis of price. 
B) restrict advertising in order to reduce competition on the basis of price. 
C) encourage advertising in order to reduce competition on the basis of price. 
D) encourage advertising in order to enhance competition on the basis of price. 
A) restrict advertising in order to enhance competition on the basis of price. 
B) restrict advertising in order to reduce competition on the basis of price. 
C) encourage advertising in order to reduce competition on the basis of price. 
D) encourage advertising in order to enhance competition on the basis of price.

Question 18

When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium, marginal cost must lie below average total cost.

Accepted Answer

A) True 
 B)False

Question 19

When an industry has many firms, the industry is

Accepted Answer

A) an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. 
B) an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
C) monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
D) perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. 
A) an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. 
B) an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
C) monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
D) perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products.

Question 20

A profit-maximizing firm in a monopolistically competitive market charges a price equal to marginal cost.

Accepted Answer

A) True 
 B)False

Exam 16: Monopolistic Competition

Each firm in a monopolistically competitive market

Describe the shape of the monopolistically competitive firm's demand curve.

Economists defend brand names as useful to consumers because brand names

Monopolistic competition is characterized by a few sellers offering similar products, whereas oligopoly is characterized by many sellers offering differentiated products.

Figure 16-12 -Refer to Figure 16-12. Compare the price and marginal cost in this market with price and marginal cost if this were a perfectly competitive market.

Figure 16-14 -Refer to Figure 16-14. Which of the following represents the excess capacity of this firm?

The term excess capacity refers to the fact that a firm operates on the upward-sloping portion of its average-total-cost curve.

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. As the figure is drawn, the firm is in

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. If the firm were to produce 154.92 units of output,

When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium,

Evidence suggests that, in markets with differentiated products but little advertising,

According to one theory, advertising sends a signal to consumers about the quality of the product being offered. An implication of this theory is that

New firms will likely enter a monopolistically competitive market when price exceeds

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. What is the concentration ratio for Industry D?

The lower the concentration ratio, the

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 this firm profit maximizes and faces a constant marginal cost of $7, does it have excess capacity? How do you know?

Professional organizations and producer groups have an incentive to

When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium, marginal cost must lie below average total cost.

When an industry has many firms, the industry is

A profit-maximizing firm in a monopolistically competitive market charges a price equal to marginal cost.

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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