Question 1

​A monopolistically competitive firm cannot earn an economic profit in the long run.

Accepted Answer

A) True 
 B)False

Question 2

Table 16-1
The following table shows the percentage of output supplied by the top eight firms in four different industries.  
-Refer to Table 16-1. Which industry is the least 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

The deadweight loss that is associated with a monopolistically competitive market is a result of

Accepted Answer

A) price falling short of marginal cost in order to increase market share. 
B) price exceeding marginal cost. 
C) the firm operating in a regulated industry. 
D) excessive advertising costs. 
A) price falling short of marginal cost in order to increase market share. 
B) price exceeding marginal cost. 
C) the firm operating in a regulated industry. 
D) excessive advertising costs.

Question 4

Figure 16-2. The figure is drawn for a monopolistically competitive firm.
 
-Refer to Figure 16-2. In order to maximize profit, the firm will charge a price of

Accepted Answer

A) $16. 
B) $24. 
C) $32. 
D) $36. 
A) $16. 
B) $24. 
C) $32. 
D) $36.

Question 5

Monopolistically competitive firms, like monopoly firms, maximize their profits by charging a price that exceeds marginal cost.

Accepted Answer

A) True 
 B)False

Question 6

Figure 16-11  
-Refer to Figure 16-11. How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

Accepted Answer

A) $250. 
B) $500 
C) $562.50. 
D) $1250. 
A) $250. 
B) $500 
C) $562.50. 
D) $1250.

Question 7

A firm in a monopolistically competitive market is similar to a monopoly in the sense that (i)
They both face downward-sloping demand curves.
(ii)
They both charge a price that exceeds marginal cost.
(iii)
Free entry and exit determines the long-run equilibrium.

Accepted Answer

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

Question 8

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, diners 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 9

List five goods that are likely sold in a monopolistically competitive market.

Accepted Answer

Books, CDs, movies,

Question 10

Scenario 16-1
Suppose the following are the sales for all of the firms in two different industries.  
-Refer to Scenario 16-1. What are the concentration ratios for these industries?

Accepted Answer

A) Industry A: 22%, Industry B: 26% 
B) Industry A: 41%, Industry B: 47%. 
C) Industry A: 68%, Industry B: 79% 
D) Industry A: 100%, Industry B: 100%. 
A) Industry A: 22%, Industry B: 26% 
B) Industry A: 41%, Industry B: 47%. 
C) Industry A: 68%, Industry B: 79% 
D) Industry A: 100%, Industry B: 100%.

Question 11

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. Which of the following is likely to happen in the long run in this market?

Accepted Answer

A) The market is currently in a long-run equilibrium. 
B) The market price is likely to rise. 
C) Firms are likely to enter the market since firms are earning a positive economic profit. 
D) Firms are likely to leave the market since firms are earning a negative economic profit. 
A) The market is currently in a long-run equilibrium. 
B) The market price is likely to rise. 
C) Firms are likely to enter the market since firms are earning a positive economic profit. 
D) Firms are likely to leave the market since firms are earning a negative economic profit.

Question 12

One theory of advertising suggests that

Accepted Answer

A) advertising is more effective for industrial products than consumer products. 
B) the content of advertising may be irrelevant to product success in the market. 
C) regulations limiting advertising benefit consumers, but not producers. 
D) television advertising is more effective in reducing competition than ads on websites. 
A) advertising is more effective for industrial products than consumer products. 
B) the content of advertising may be irrelevant to product success in the market. 
C) regulations limiting advertising benefit consumers, but not producers. 
D) television advertising is more effective in reducing competition than ads on websites.

Question 13

Figure 16-5  
-Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into a monopolistically competitive industry?

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

Figure 16-5  
-Refer to Figure 16-5. Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm?

Accepted Answer

A) panel a 
B) panel b 
C) panel c 
D) All of the above are correct. 
A) panel a 
B) panel b 
C) panel c 
D) All of the above are correct.

Question 15

A monopolistically competitive market is characterized by barriers to entry.

Accepted Answer

A) True 
 B)False

Question 16

In a long-run equilibrium, a firm in a monopolistically competitive market operates

Accepted Answer

A) where marginal revenue is zero. 
B) where marginal revenue is negative. 
C) on the rising portion of its average total cost curve. 
D) on the declining portion of its average total cost curve. 
A) where marginal revenue is zero. 
B) where marginal revenue is negative. 
C) on the rising portion of its average total cost curve. 
D) on the declining portion of its average total cost curve.

Question 17

Monopolistic competition is an inefficient market structure because

Accepted Answer

A) price exceeds marginal cost. 
B) it has a deadweight loss, just as monopoly does. 
C) at the equilibrium, some consumers will value the good at more than the marginal cost of production. 
D) All of the above are correct. 
A) price exceeds marginal cost. 
B) it has a deadweight loss, just as monopoly does. 
C) at the equilibrium, some consumers will value the good at more than the marginal cost of production. 
D) All of the above are correct.

Question 18

The two types of imperfectly competitive markets are

Accepted Answer

A) monopoly and monopolistic competition. 
B) monopoly and oligopoly. 
C) monopolistic competition and oligopoly. 
D) monopolistic competition and cartels. 
A) monopoly and monopolistic competition. 
B) monopoly and oligopoly. 
C) monopolistic competition and oligopoly. 
D) monopolistic competition and cartels.

Question 19

Assume the role of a defender of advertising. Describe the characteristics of advertising that enhance the effectiveness of markets and increase the social welfare of society.

Accepted Answer

Advertising provides information to cons

Question 20

Figure 16-12  
-Refer to Figure 16-12. Does this monopolistically competitive market produce the welfare-maximizing level of output?

Accepted Answer

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

Exam 16: Monopolistic Competition

​A monopolistically competitive firm cannot earn an economic profit in the long run.

Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. -Refer to Table 16-1. Which industry is the least competitive?

The deadweight loss that is associated with a monopolistically competitive market is a result of

Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. In order to maximize profit, the firm will charge a price of

Monopolistically competitive firms, like monopoly firms, maximize their profits by charging a price that exceeds marginal cost.

Figure 16-11 -Refer to Figure 16-11. How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

A firm in a monopolistically competitive market is similar to a monopoly in the sense that (i) They both face downward-sloping demand curves. (ii) They both charge a price that exceeds marginal cost. (iii) Free entry and exit determines the long-run equilibrium.

List five goods that are likely sold in a monopolistically competitive market.

Scenario 16-1 Suppose the following are the sales for all of the firms in two different industries. -Refer to Scenario 16-1. What are the concentration ratios for these industries?

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. Which of the following is likely to happen in the long run in this market?

One theory of advertising suggests that

Figure 16-5 -Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into a monopolistically competitive industry?

Figure 16-5 -Refer to Figure 16-5. Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm?

A monopolistically competitive market is characterized by barriers to entry.

In a long-run equilibrium, a firm in a monopolistically competitive market operates

Monopolistic competition is an inefficient market structure because

The two types of imperfectly competitive markets are

Assume the role of a defender of advertising. Describe the characteristics of advertising that enhance the effectiveness of markets and increase the social welfare of society.

Figure 16-12 -Refer to Figure 16-12. Does this monopolistically competitive market produce the welfare-maximizing level of output?

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

A monopolistically competitive firm cannot earn an economic profit in the long run.