Question 1

A monopolistically competitive market

Accepted Answer

A) is imperfectly competitive, and all imperfectly competitive markets are monopolistically competitive. 
B) is imperfectly competitive, but not all imperfectly competitive markets are monopolistically competitive. 
C) is imperfectly competitive, whereas an oligopolistic market is not imperfectly competitive. 
D) is not imperfectly competitive. 
A) is imperfectly competitive, and all imperfectly competitive markets are monopolistically competitive. 
B) is imperfectly competitive, but not all imperfectly competitive markets are monopolistically competitive. 
C) is imperfectly competitive, whereas an oligopolistic market is not imperfectly competitive. 
D) is not imperfectly competitive.

Question 2

Joe's Juice Shop operates in a monopolistically competitive market. Joe's is currently producing where its average total cost is minimized. In the long run we would expect Joe's output to

Accepted Answer

A) decrease and average total cost to increase. 
B) decrease and average total cost to decrease. 
C) remain unchanged as Joe's is doing the best it can. 
D) increase and average total costs to decrease. 
A) decrease and average total cost to increase. 
B) decrease and average total cost to decrease. 
C) remain unchanged as Joe's is doing the best it can. 
D) increase and average total costs to decrease.

Question 3

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 4, how much total consumer surplus would consumers receive in this market?

Accepted Answer

A) 8 
B) 12 
C) 32 
D) 64 
A) 8 
B) 12 
C) 32 
D) 64

Question 4

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Accepted Answer

A) industrial products. 
B) homogeneous products. 
C) consumer goods for which there are no close substitutes. 
D) highly-differentiated consumer goods. 
A) industrial products. 
B) homogeneous products. 
C) consumer goods for which there are no close substitutes. 
D) highly-differentiated consumer goods.

Question 5

A typical firm in the US economy would be classified as

Accepted Answer

A) perfectly competitive. 
B) imperfectly competitive. 
C) a duopolist. 
D) an oligopolist. 
A) perfectly competitive. 
B) imperfectly competitive. 
C) a duopolist. 
D) an oligopolist.

Question 6

A monopolistically competitive market could be considered inefficient because

Accepted Answer

A) marginal revenue exceeds average revenue. 
B) price exceeds marginal cost. 
C) the efficient scale of production is only achieved in the long run, not in the short run. 
D) markup pricing does not occur in any other market structure. 
A) marginal revenue exceeds average revenue. 
B) price exceeds marginal cost. 
C) the efficient scale of production is only achieved in the long run, not in the short run. 
D) markup pricing does not occur in any other market structure.

Question 7

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 the firm produces its profit-maximizing level of output and there is a constant marginal cost of $7 per unit, which of the following is correct?

Accepted Answer

A) This firm is operating at its efficient scale. 
B) This firm should expect its demand curve to shift to the left. 
C) Firms will leave the market and profits for firms that remain in the market will rise. 
D) This firm is in a long-run equilibrium. 
A) This firm is operating at its efficient scale. 
B) This firm should expect its demand curve to shift to the left. 
C) Firms will leave the market and profits for firms that remain in the market will rise. 
D) This firm is in a long-run equilibrium.

Question 8

One way in which monopolistic competition differs from oligopoly is that

Accepted Answer

A) there are no barriers to entry in oligopolies. 
B) in oligopoly markets there are only a few sellers. 
C) all firms in an oligopoly eventually earn zero economic profits. 
D) strategic interactions between firms are rare in oligopolies. 
A) there are no barriers to entry in oligopolies. 
B) in oligopoly markets there are only a few sellers. 
C) all firms in an oligopoly eventually earn zero economic profits. 
D) strategic interactions between firms are rare in oligopolies.

Question 9

A monopolistically competitive firm has the following cost structure:   The firm faces the following demand curve:   To maximize profit (or minimize losses), the firm will produce

Accepted Answer

A) 20 units. 
B) 30 units. 
C) 40 units. 
D) 50 units. 
A) 20 units. 
B) 30 units. 
C) 40 units. 
D) 50 units.

Question 10

Which of the following statements is not correct?

Accepted Answer

A) The typical monopolistically competitive firm could reduce its average total cost if it produced more output. 
B) Monopolistically competitive firms advertise in order to increase the elasticity of the demand curve they face. 
C) Expensive advertising might help consumers if it is a signal that the product is good. 
D) Brand names acquired at great cost might help consumers by assuring quality. 
A) The typical monopolistically competitive firm could reduce its average total cost if it produced more output. 
B) Monopolistically competitive firms advertise in order to increase the elasticity of the demand curve they face. 
C) Expensive advertising might help consumers if it is a signal that the product is good. 
D) Brand names acquired at great cost might help consumers by assuring quality.

Question 11

The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) price is equal to average total cost. 
B) price is equal to marginal cost. 
C) price is equal to marginal revenue. 
D) the firm operates at its efficient scale. 
A) price is equal to average total cost. 
B) price is equal to marginal cost. 
C) price is equal to marginal revenue. 
D) the firm operates at its efficient scale.

Question 13

Under which of the following market structures would the highest output of a particular good be produced?

Accepted Answer

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

Question 14

As developing countries make a transition to market-based economies, one of the first major capital investments is in "Western-quality" hotels. Explain why brand-name hotel accommodations are a critical step in attracting foreign investment.

Accepted Answer

Brand-name hotels are a critic

Question 15

Advertising that uses celebrity endorsements is most likely intended to

Accepted Answer

A) increase elasticity of demand for the advertised product. 
B) reduce the ability of markets to allocate resources efficiently. 
C) provide a signal of product quality. 
D) be useful only for psychological effects. 
A) increase elasticity of demand for the advertised product. 
B) reduce the ability of markets to allocate resources efficiently. 
C) provide a signal of product quality. 
D) be useful only for psychological effects.

Question 16

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-9. The firm's maximum profit is

Accepted Answer

A) $-5,000.00. 
B) $0. 
C) $5,000.00. 
D) $8,887.78. 
A) $-5,000.00. 
B) $0. 
C) $5,000.00. 
D) $8,887.78.

Question 17

Economists measure a market's domination by a small number of firms with a statistic called the

Accepted Answer

concentrat

Question 18

Monopolistic competition is characterized by which of the following attributes? (i)
Free entry
(ii)
Product differentiation
(iii)
Many sellers

Accepted Answer

A) (i) and (iii) only 
B) (i) and (ii) only 
C) (ii) and (iii) only 
D) (i), (ii), and (iii) 
A) (i) and (iii) only 
B) (i) and (ii) only 
C) (ii) and (iii) only 
D) (i), (ii), and (iii)

Question 19

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 M?

Accepted Answer

A) about 96% 
B) about 52% 
C) about 40% 
D) about 22% 
A) about 96% 
B) about 52% 
C) about 40% 
D) about 22%

Question 20

In which of the following product markets are we likely to observe the largest amount of advertising?

Accepted Answer

A) markets with highly differentiated products 
B) perfectly competitive markets 
C) markets in which industrial products are sold 
D) markets in which there is very little difference between different firms' products 
A) markets with highly differentiated products 
B) perfectly competitive markets 
C) markets in which industrial products are sold 
D) markets in which there is very little difference between different firms' products

Exam 16: Monopolistic Competition

A monopolistically competitive market

Joe's Juice Shop operates in a monopolistically competitive market. Joe's is currently producing where its average total cost is minimized. In the long run we would expect Joe's output to

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 4, how much total consumer surplus would consumers receive in this market?

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

A typical firm in the US economy would be classified as

A monopolistically competitive market could be considered inefficient because

One way in which monopolistic competition differs from oligopoly is that

A monopolistically competitive firm has the following cost structure: The firm faces the following demand curve: To maximize profit (or minimize losses), the firm will produce

Which of the following statements is not correct?

The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.

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

Under which of the following market structures would the highest output of a particular good be produced?

As developing countries make a transition to market-based economies, one of the first major capital investments is in "Western-quality" hotels. Explain why brand-name hotel accommodations are a critical step in attracting foreign investment.

Advertising that uses celebrity endorsements is most likely intended to

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. The firm's maximum profit is

Economists measure a market's domination by a small number of firms with a statistic called the

Monopolistic competition is characterized by which of the following attributes? (i) Free entry (ii) Product differentiation (iii) Many sellers

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 M?

In which of the following product markets are we likely to observe the largest amount of advertising?

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