Question 1

The relationship between advertising and product differentiation is

Accepted Answer

A) positive; the more differentiated the product, the more a firm is likely to spend on advertising. 
B) negative; the more differentiated the product, the less a firm is likely to spend on advertising. 
C) zero; there is no relationship between product differentiation and advertising. 
D) irrelevant; firms with differentiated products do not need to advertise. 
A) positive; the more differentiated the product, the more a firm is likely to spend on advertising. 
B) negative; the more differentiated the product, the less a firm is likely to spend on advertising. 
C) zero; there is no relationship between product differentiation and advertising. 
D) irrelevant; firms with differentiated products do not need to advertise.

Question 2

Figure 16-4  
-Refer to Figure 16-4. The firm in this figure is monopolistically competitive. This firm

Accepted Answer

A) is operating in the long run. 
B) is earning a short-run economic profit. 
C) is incurring a short-run loss. 
D) The answer cannot be determined from the information given. 
A) is operating in the long run. 
B) is earning a short-run economic profit. 
C) is incurring a short-run loss. 
D) The answer cannot be determined from the information given.

Question 3

When a firm's demand curve is tangent to its average total cost curve, the

Accepted Answer

A) firm's economic profit is zero. 
B) firm must be earning economic profits. 
C) firm must be incurring economic losses. 
D) firm must be operating at its efficient scale. 
A) firm's economic profit is zero. 
B) firm must be earning economic profits. 
C) firm must be incurring economic losses. 
D) firm must be operating at its efficient scale.

Question 4

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

Accepted Answer

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

Question 5

A firm can signal the high quality of its product by

Accepted Answer

A) spending nothing on advertising to convey that the product is so good that the firm does not even need to advertise. 
B) spending a large amount of money on advertising. 
C) getting a patent for the product. 
D) not worrying about getting a patent for the product. 
A) spending nothing on advertising to convey that the product is so good that the firm does not even need to advertise. 
B) spending a large amount of money on advertising. 
C) getting a patent for the product. 
D) not worrying about getting a patent for the product.

Question 6

Because a monopolistically competitive firm has some market power, in the long-run the price of its product exceeds its

Accepted Answer

A) average revenue. 
B) average total cost. 
C) marginal cost. 
D) None of the above is correct. 
A) average revenue. 
B) average total cost. 
C) marginal cost. 
D) None of the above is correct.

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. Suppose YumYum has an opportunity to create a cheaper advertising campaign in newspapers rather than on television for its new product. This campaign will cost $8 million and is expected to result in the same 1.5 million one-time customers. YumYum should

Accepted Answer

A) invest in the cheaper campaign because they will earn a profit. 
B) invest in the cheaper campaign because they will signal the high quality of their product. 
C) not invest in the cheaper campaign because they will incur a loss. 
D) not invest in the cheaper campaign because their brand name will be negatively affected. 
A) invest in the cheaper campaign because they will earn a profit. 
B) invest in the cheaper campaign because they will signal the high quality of their product. 
C) not invest in the cheaper campaign because they will incur a loss. 
D) not invest in the cheaper campaign because their brand name will be negatively affected.

Question 8

Oligopoly and monopolistic competition are examples of a market structure called imperfect competition.

Accepted Answer

A) True 
 B)False

Question 9

Figure 16-13  
-Refer to Figure 16-13. What is the first step in this industry's adjustment to long run equilibrium?

Accepted Answer

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

Question 10

In a monopolistically competitive market,

Accepted Answer

A) the entry of new firms creates externalities. 
B) the absence of restrictions on entry by new firms ensures that there will be no deadweight loss. 
C) there are always too many firms in the market relative to the socially-optimal number of firms. 
D) firms cannot earn positive economic profits in the short run. 
A) the entry of new firms creates externalities. 
B) the absence of restrictions on entry by new firms ensures that there will be no deadweight loss. 
C) there are always too many firms in the market relative to the socially-optimal number of firms. 
D) firms cannot earn positive economic profits in the short run.

Question 11

Critics of advertising argue that advertising

Accepted Answer

A) creates desires that otherwise might not exist. 
B) enhances competition. 
C) benefits television viewers who enjoy TV commercials. 
D) All of the above are correct. 
A) creates desires that otherwise might not exist. 
B) enhances competition. 
C) benefits television viewers who enjoy TV commercials. 
D) All of the above are correct.

Question 12

Which market structure(s) is(are) considered highly concentrated?

Accepted Answer

The answer of Which market structure(s) is(are) considered highly concentrated?...

Question 13

A firm in a monopolistically competitive market is usually indifferent to an additional customer walking through the door, since a sale to that customer will not increase the firm's profit.

Accepted Answer

A) True 
 B)False

Question 14

​Which of the following is the most distinguishing characteristic of a monopolistically competitive industry?

Accepted Answer

A) ​Market barriers 
B) ​One firm controls the industry 
C) ​Product differentiation 
D) ​A small number of firms dominate the market 
A) ​Market barriers 
B) ​One firm controls the industry 
C) ​Product differentiation 
D) ​A small number of firms dominate the market

Question 15

Which of the following pairs illustrates the two extreme examples of market structures?

Accepted Answer

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

Question 16

Which of the following statements is correct?

Accepted Answer

A) Cigarettes are likely to be produced in a monopolistically competitive industry. 
B) Novels are likely to be produced in a monopoly industry. 
C) Movies are likely to be produced in a monopolistically competitive industry. 
D) Milk is likely to be produced in an oligopoly industry. 
A) Cigarettes are likely to be produced in a monopolistically competitive industry. 
B) Novels are likely to be produced in a monopoly industry. 
C) Movies are likely to be produced in a monopolistically competitive industry. 
D) Milk is likely to be produced in an oligopoly industry.

Question 17

To be considered an oligopoly, the market must have a concentration ratio below 50%.

Accepted Answer

A) True 
 B)False

Question 18

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures can have positive profits in the short run?

Accepted Answer

perfect competition

Question 19

A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

Accepted Answer

A) no change in profits for all hotels/motels. 
B) reduced efficiency of local lodging markets. 
C) a request by consumers to increase the number of billboards. 
D) increased price competition among hotels/motels in the community. 
A) no change in profits for all hotels/motels. 
B) reduced efficiency of local lodging markets. 
C) a request by consumers to increase the number of billboards. 
D) increased price competition among hotels/motels in the community.

Question 20

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....

Exam 16: Monopolistic Competition

The relationship between advertising and product differentiation is

Figure 16-4 -Refer to Figure 16-4. The firm in this figure is monopolistically competitive. This firm

When a firm's demand curve is tangent to its average total cost curve, the

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

A firm can signal the high quality of its product by

Because a monopolistically competitive firm has some market power, in the long-run the price of its product exceeds its

Oligopoly and monopolistic competition are examples of a market structure called imperfect competition.

Figure 16-13 -Refer to Figure 16-13. What is the first step in this industry's adjustment to long run equilibrium?

In a monopolistically competitive market,

Critics of advertising argue that advertising

Which market structure(s) is(are) considered highly concentrated?

A firm in a monopolistically competitive market is usually indifferent to an additional customer walking through the door, since a sale to that customer will not increase the firm's profit.

​Which of the following is the most distinguishing characteristic of a monopolistically competitive industry?

Which of the following pairs illustrates the two extreme examples of market structures?

Which of the following statements is correct?

To be considered an oligopoly, the market must have a concentration ratio below 50%.

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures can have positive profits in the short run?

A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

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

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 is the most distinguishing characteristic of a monopolistically competitive industry?