Question 1

The entry of new firms into a monopolistically competitive market is accompanied by

Accepted Answer

A) both positive and negative externalities. 
B) only positive externalities. 
C) only negative externalities. 
D) only private profit opportunities (no externalities). 
A) both positive and negative externalities. 
B) only positive externalities. 
C) only negative externalities. 
D) only private profit opportunities (no externalities).

Question 2

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 most 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 3

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

Accepted Answer

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

Question 4

Figure 16-13  
-Refer to Figure 16-13. Use the letters to identify the deadweight loss associated with this firm's profit-maximizing production.

Accepted Answer

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

Question 5

A monopolistically competitive industry is characterized by

Accepted Answer

A) many firms, differentiated products, and barriers to entry. 
B) many firms, differentiated products, and free entry. 
C) a few firms, identical products, and free entry. 
D) a few firms, differentiated products, and barriers to entry. 
A) many firms, differentiated products, and barriers to entry. 
B) many firms, differentiated products, and free entry. 
C) a few firms, identical products, and free entry. 
D) a few firms, differentiated products, and barriers to entry.

Question 6

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product, the firm will

Accepted Answer

A) be able to increase its markup over marginal cost. 
B) eventually have to reduce price to remain competitive. 
C) increase the welfare of society. 
D) reduce its average total cost. 
A) be able to increase its markup over marginal cost. 
B) eventually have to reduce price to remain competitive. 
C) increase the welfare of society. 
D) reduce its average total cost.

Question 7

Scenario 16-4
Delish, a moderately priced restaurant, has recently announced intentions to open a restaurant in Boston, MA. Assume that the restaurant market in Boston is characterized by monopolistic competition.
-Refer to Scenario 16-4. As a result of the new restaurant, existing restauranteurs in Boston are likely to experience a

Accepted Answer

A) product-variety externality, which is a negative externality. 
B) product-variety externality, which is a positive externality. 
C) business-stealing externality, which is a negative externality. 
D) business-stealing externality, which is a positive externality. 
A) product-variety externality, which is a negative externality. 
B) product-variety externality, which is a positive externality. 
C) business-stealing externality, which is a negative externality. 
D) business-stealing externality, which is a positive externality.

Question 8

Which of these types of firms can earn a positive economic profit in the long run?

Accepted Answer

A) monopolies, but not competitive firms or monopolistically competitive firms 
B) monopolies and monopolistically competitive firms, but not competitive firms 
C) monopolies, monopolistically competitive firms, and competitive firms 
D) No firms earn positive economic profit in the long run. Entry will reduce all firms' economic profit to zero in the long run. 
A) monopolies, but not competitive firms or monopolistically competitive firms 
B) monopolies and monopolistically competitive firms, but not competitive firms 
C) monopolies, monopolistically competitive firms, and competitive firms 
D) No firms earn positive economic profit in the long run. Entry will reduce all firms' economic profit to zero in the long run.

Question 9

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. What is the concentration ratio for Industry K?

Accepted Answer

A) about 8% 
B) about 36% 
C) about 48% 
D) about 84% 
A) about 8% 
B) about 36% 
C) about 48% 
D) about 84%

Question 10

Scenario 16-2
Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q.
-Refer to Scenario 16-2. If the marginal cost of producing this good is 0, what quantity would a profit-maximizing monopolist produce?

Accepted Answer

A) Q = 0 
B) Q = 2 
C) Q = 5 
D) Q = 10 
A) Q = 0 
B) Q = 2 
C) Q = 5 
D) Q = 10

Question 11

Firms that sell highly differentiated consumer goods, such as over-the-counter drugs, soft drinks, breakfast cereals, and dog food, typically spend between 10 and 20 percent of revenue for

Accepted Answer

The answer of Firms that sell highly differentiated consumer goods,...

Question 12

A firm that would experience higher average total cost by increasing production is operating with excess capacity.

Accepted Answer

A) True 
 B)False

Question 13

Figure 16-1        
-Refer to Figure 16-1. Which of the graphs illustrates a relatively elastic, though not perfectly elastic, demand curve consistent with a market that has many substitute products?

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 14

A firm in a monopolistically competitive market faces a

Accepted Answer

A) downward-sloping demand curve because the firm's product is different from those offered by other firms. 
B) downward-sloping demand curve because there are only a few firms in the market. 
C) horizontal demand curve because there are many firms in the market. 
D) horizontal demand curve because firms can enter the market without restriction. 
A) downward-sloping demand curve because the firm's product is different from those offered by other firms. 
B) downward-sloping demand curve because there are only a few firms in the market. 
C) horizontal demand curve because there are many firms in the market. 
D) horizontal demand curve because firms can enter the market without restriction.

Question 15

The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which

Accepted Answer

A) marginal revenue is equal to marginal cost. 
B) average total cost is equal to marginal revenue. 
C) average total cost is equal to price. 
D) average revenue exceeds average total cost. 
A) marginal revenue is equal to marginal cost. 
B) average total cost is equal to marginal revenue. 
C) average total cost is equal to price. 
D) average revenue exceeds average total cost.

Question 16

Which of the following statements is not correct?

Accepted Answer

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

Question 17

Suppose that monopolistically competitive firms in a certain market are experiencing losses. In the transition from this initial situation to a long-run equilibrium,

Accepted Answer

A) the number of firms in the market decreases. 
B) each existing firm experiences a decrease in demand for its product. 
C) each firm experiences an upward shift of its marginal cost and average total cost curves. 
D) each existing firm's average total cost falls to bring economic profit back to zero. 
A) the number of firms in the market decreases. 
B) each existing firm experiences a decrease in demand for its product. 
C) each firm experiences an upward shift of its marginal cost and average total cost curves. 
D) each existing firm's average total cost falls to bring economic profit back to zero.

Question 18

When a new firm considers entering a market, it takes into account only the profit it would make. What are the two external effects that occur in the market that the firm does not consider?

Accepted Answer

product-variety exte

Question 19

In both perfect competition and monopolistic competition, each firm

Accepted Answer

A) has some monopoly power. 
B) sells a product that is at least slightly different from those of other firms. 
C) faces a downward-sloping demand curve. 
D) has many competitors. 
A) has some monopoly power. 
B) sells a product that is at least slightly different from those of other firms. 
C) faces a downward-sloping demand curve. 
D) has many competitors.

Question 20

If regulators required firms in monopolistically competitive markets to set price equal to marginal cost,

Accepted Answer

A) firms would most likely experience economic losses. 
B) firms would also operate at their efficient scale. 
C) new firms would likely to enter the market. 
D) the most efficient firms would not likely to be affected. 
A) firms would most likely experience economic losses. 
B) firms would also operate at their efficient scale. 
C) new firms would likely to enter the market. 
D) the most efficient firms would not likely to be affected.

Exam 16: Monopolistic Competition

The entry of new firms into a monopolistically competitive market is accompanied by

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 most competitive?

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

Figure 16-13 -Refer to Figure 16-13. Use the letters to identify the deadweight loss associated with this firm's profit-maximizing production.

A monopolistically competitive industry is characterized by

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product, the firm will

Which of these types of firms can earn a positive economic profit in the long run?

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. What is the concentration ratio for Industry K?

Scenario 16-2 Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q. -Refer to Scenario 16-2. If the marginal cost of producing this good is 0, what quantity would a profit-maximizing monopolist produce?

Firms that sell highly differentiated consumer goods, such as over-the-counter drugs, soft drinks, breakfast cereals, and dog food, typically spend between 10 and 20 percent of revenue for

A firm that would experience higher average total cost by increasing production is operating with excess capacity.

Figure 16-1 -Refer to Figure 16-1. Which of the graphs illustrates a relatively elastic, though not perfectly elastic, demand curve consistent with a market that has many substitute products?

A firm in a monopolistically competitive market faces a

The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which

Which of the following statements is not correct?

Suppose that monopolistically competitive firms in a certain market are experiencing losses. In the transition from this initial situation to a long-run equilibrium,

When a new firm considers entering a market, it takes into account only the profit it would make. What are the two external effects that occur in the market that the firm does not consider?

In both perfect competition and monopolistic competition, each firm

If regulators required firms in monopolistically competitive markets to set 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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