Question 1

Figure 16-14  
-Refer to Figure 16-14. Which of the following best describes the profit-maximizing outcome for the firm depicted here?

Accepted Answer

A) This firm is earning a short run profit, but will earn zero profit in the long run. 
B) This firm is incurring a short run loss, but will earn zero profit in the long run. 
C) This firm is earning zero profit in the short run, but will earn a positive profit in the long run. 
D) This firm is in long run equilibrium and will continue to earn zero profit. 
A) This firm is earning a short run profit, but will earn zero profit in the long run. 
B) This firm is incurring a short run loss, but will earn zero profit in the long run. 
C) This firm is earning zero profit in the short run, but will earn a positive profit in the long run. 
D) This firm is in long run equilibrium and will continue to earn zero profit.

Question 2

Figure 16-5  
-Refer to Figure 16-5. Which of the panels depicts a firm in a monopolistically competitive market earning positive economic profits?

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 3

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 4

A monopolistically competitive market is characterized by

Accepted Answer

A) free entry, but not differentiated products. 
B) differentiated products, but not long run profits. 
C) long run profits, but not many firms. 
D) many firms, but not free entry. 
A) free entry, but not differentiated products. 
B) differentiated products, but not long run profits. 
C) long run profits, but not many firms. 
D) many firms, but not free entry.

Question 5

To maximize its profit, a monopolistically competitive firm

Accepted Answer

A) takes the price as given and chooses its quantity, just as a competitive firm does. 
B) takes the price as given and chooses its quantity, just as a colluding oligopolist does. 
C) chooses its quantity and price, just as a competitive firm does. 
D) chooses its quantity and price, just as a monopoly does. 
A) takes the price as given and chooses its quantity, just as a competitive firm does. 
B) takes the price as given and chooses its quantity, just as a colluding oligopolist does. 
C) chooses its quantity and price, just as a competitive firm does. 
D) chooses its quantity and price, just as a monopoly does.

Question 6

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

Accepted Answer

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

Question 7

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. What price will this firm charge to maximize profit?

Accepted Answer

A) $25 
B) $30 
C) $35 
D) $40 
A) $25 
B) $30 
C) $35 
D) $40

Question 8

If there are many firms participating in a market, the market is either

Accepted Answer

A) an oligopoly or monopolistically competitive. 
B) perfectly competitive or monopolistically competitive. 
C) an oligopoly or perfectly competitive. 
D) an oligopoly or a cartel. 
A) an oligopoly or monopolistically competitive. 
B) perfectly competitive or monopolistically competitive. 
C) an oligopoly or perfectly competitive. 
D) an oligopoly or a cartel.

Question 9

Table 16-6
Beatrice's Birthday Cakes is one bakery among many in the market for birthday cakes. The following table presents cost and revenue data for birthday cakes at Beatrice's.  
-Refer to Table 16-6. What is the profit-maximizing output for Beatrice's Birthday Cakes?

Accepted Answer

A) 3 cakes 
B) 4 cakes 
C) 5 cakes 
D) 6 cakes 
A) 3 cakes 
B) 4 cakes 
C) 5 cakes 
D) 6 cakes

Question 10

If firms in a particular market sell similar or identical products, then the market is (i)
Perfectly competitive.(ii)
Monopolistically competitive.(iii)
An oligopoly.

Accepted Answer

A) (i) or (ii) only 
B) (ii) or (iii) only 
C) (i) or (iii) only 
D) (i) only 
A) (i) or (ii) only 
B) (ii) or (iii) only 
C) (i) or (iii) only 
D) (i) only

Question 11

When a firm operates with excess capacity,

Accepted Answer

A) additional production would lower the average total cost. 
B) additional production would increase the average total cost. 
C) it must be a perfectly competitive firm. 
D) it must be a monopolistically competitive firm. 
A) additional production would lower the average total cost. 
B) additional production would increase the average total cost. 
C) it must be a perfectly competitive firm. 
D) it must be a monopolistically competitive firm.

Question 12

Figure 16-12  
-Refer to Figure 16-12. If this firm profit-maximizes, what price will it charge?

Accepted Answer

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

Question 13

Which of the following is a commonly-cited benefit of advertising?

Accepted Answer

A) Advertising can be a signal of the quality of a product. 
B) Advertising impedes competition. 
C) Advertising reduces the deadweight loss associated with monopolistic competition. 
D) Advertising encourages free entry, which increases profits. 
A) Advertising can be a signal of the quality of a product. 
B) Advertising impedes competition. 
C) Advertising reduces the deadweight loss associated with monopolistic competition. 
D) Advertising encourages free entry, which increases profits.

Question 14

Entry of new firms in monopolistically competitive industries can convey a negative externality on producers because firms lose customers and profits from the entry of new competitors. This externality is called the

Accepted Answer

business-s

Question 15

Firms that spend a large amount of money on advertising a particular product are likely to be providing consumers with

Accepted Answer

A) information about the availability of the product. 
B) information about product price. 
C) a signal of product quality. 
D) a good example of wasted resources. 
A) information about the availability of the product. 
B) information about product price. 
C) a signal of product quality. 
D) a good example of wasted resources.

Question 16

When a market is monopolistically competitive, the typical firm in the market is likely to experience a

Accepted Answer

A) positive profit in the short run and in the long run. 
B) positive or negative profit in the short run and a zero profit in the long run. 
C) zero profit in the short run and a positive or negative profit in the long run. 
D) zero profit in the short run and in the long run. 
A) positive profit in the short run and in the long run. 
B) positive or negative profit in the short run and a zero profit in the long run. 
C) zero profit in the short run and a positive or negative profit in the long run. 
D) zero profit in the short run and in the long run.

Question 17

A new Mexican restaurant opened in the town of Manchester. The residents of the town are

Accepted Answer

A) happy because of the product-variety externality, while other restaurant owners are unhappy because of the business-stealing externality. 
B) happy because of the business-stealing externality, while other restaurant owners are unhappy because of the product-variety externality. 
C) unhappy because of the product-variety externality, while other restaurant owners are happy because of the business-stealing externality. 
D) unhappy because of the business-stealing externality, while other restaurant owners are happy because of the product-variety externality. 
A) happy because of the product-variety externality, while other restaurant owners are unhappy because of the business-stealing externality. 
B) happy because of the business-stealing externality, while other restaurant owners are unhappy because of the product-variety externality. 
C) unhappy because of the product-variety externality, while other restaurant owners are happy because of the business-stealing externality. 
D) unhappy because of the business-stealing externality, while other restaurant owners are happy because of the product-variety externality.

Question 18

Which of the following industries has the highest concentration ratio?

Accepted Answer

A) jeans 
B) fruit 
C) household laundry equipment 
D) restaurants 
A) jeans 
B) fruit 
C) household laundry equipment 
D) restaurants

Question 19

The traditional view of monopolistic competition holds that this type of industrial structure is inefficient because

Accepted Answer

A) there are too few firms to reach an efficient level of production. 
B) firms do not operate at the output that minimizes average costs. 
C) more advertising is needed to inform customers about product differences. 
D) consumers do not have enough choice among the product varieties available. 
A) there are too few firms to reach an efficient level of production. 
B) firms do not operate at the output that minimizes average costs. 
C) more advertising is needed to inform customers about product differences. 
D) consumers do not have enough choice among the product varieties available.

Question 20

Table 16-2
The following table shows the total output produced by the top six firms as well as the total industry output for each industry.  
-Refer to Table 16-2. Which industry is the least competitive?

Accepted Answer

A) Industry J 
B) Industry K 
C) Industry L 
D) Industry M 
A) Industry J 
B) Industry K 
C) Industry L 
D) Industry M

Exam 16: Monopolistic Competition

Figure 16-14 -Refer to Figure 16-14. Which of the following best describes the profit-maximizing outcome for the firm depicted here?

Figure 16-5 -Refer to Figure 16-5. Which of the panels depicts a firm in a monopolistically competitive market earning positive economic profits?

A monopolistically competitive market is characterized by

To maximize its profit, a monopolistically competitive firm

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

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. What price will this firm charge to maximize profit?

If there are many firms participating in a market, the market is either

Table 16-6 Beatrice's Birthday Cakes is one bakery among many in the market for birthday cakes. The following table presents cost and revenue data for birthday cakes at Beatrice's. -Refer to Table 16-6. What is the profit-maximizing output for Beatrice's Birthday Cakes?

If firms in a particular market sell similar or identical products, then the market is (i) Perfectly competitive.(ii) Monopolistically competitive.(iii) An oligopoly.

When a firm operates with excess capacity,

Figure 16-12 -Refer to Figure 16-12. If this firm profit-maximizes, what price will it charge?

Which of the following is a commonly-cited benefit of advertising?

Entry of new firms in monopolistically competitive industries can convey a negative externality on producers because firms lose customers and profits from the entry of new competitors. This externality is called the

Firms that spend a large amount of money on advertising a particular product are likely to be providing consumers with

When a market is monopolistically competitive, the typical firm in the market is likely to experience a

A new Mexican restaurant opened in the town of Manchester. The residents of the town are

Which of the following industries has the highest concentration ratio?

The traditional view of monopolistic competition holds that this type of industrial structure is inefficient because

Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2. Which industry is the least competitive?

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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