Question 1

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

Accepted Answer

M

Question 2

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 externality
business-stealing externality

Question 3

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 this firm profit maximizes and faces a constant marginal cost of $7, does it have excess capacity? How do you know?

Accepted Answer

Yes, average total cost is not minimized.

Question 4

Which of the following is not an example of Joel Waldfogel's "Tyranny of the Market"?

Accepted Answer

A) A daily newspaper tailored to appeal to the majority of readers in an area. 
B) Nike creating specialized shoes for American Indians' wider feet. 
C) Pharmaceutical companies spending research and development funds on drugs for common diseases. 
D) Airlines offering daily direct flights from one large city to another. 
A) A daily newspaper tailored to appeal to the majority of readers in an area. 
B) Nike creating specialized shoes for American Indians' wider feet. 
C) Pharmaceutical companies spending research and development funds on drugs for common diseases. 
D) Airlines offering daily direct flights from one large city to another.

Question 5

The government of Italy will not allow any Hard Rock Cafe restaurants to open in Italy. Defenders of the efficiency of brand-name markets would argue that this has hindered restaurant market efficiency in Italy.

Accepted Answer

A) True 
 B)False

Question 6

Figure 16-3
This figure depicts a situation in a monopolistically competitive market.  
-Refer to Figure 16-3. How much output will the monopolistically competitive firm produce in this situation?

Accepted Answer

A) 20 units 
B) 25 units 
C) 40 units 
D) 80 units 
A) 20 units 
B) 25 units 
C) 40 units 
D) 80 units

Question 7

The product-variety externality arises in monopolistically competitive markets because

Accepted Answer

A) firms produce with excess capacity. 
B) firms try to differentiate their products. 
C) firms would like to produce homogeneous products, but the large number of firms prohibits it. 
D) entry and exit is restricted. 
A) firms produce with excess capacity. 
B) firms try to differentiate their products. 
C) firms would like to produce homogeneous products, but the large number of firms prohibits it. 
D) entry and exit is restricted.

Question 8

The debate over the efficiency of markets in which products with brand names are sold

Accepted Answer

A) is framed by the role of regulation in advertising. 
B) is likely to be resolved by reference to anecdotal evidence. 
C) hinges on whether consumers are rational in their choices. 
D) hinges on the effectiveness of advertising that identifies price differences. 
A) is framed by the role of regulation in advertising. 
B) is likely to be resolved by reference to anecdotal evidence. 
C) hinges on whether consumers are rational in their choices. 
D) hinges on the effectiveness of advertising that identifies price differences.

Question 9

Scenario 16-5
McDonald's restaurants has recently announced intentions to open a new restaurant in Smalltown, Indiana. Assume that the fast-food restaurant market in Smalltown is characterized by monopolistic competition.
-Refer to Scenario 16-5. As a result of the new McDonald's, residents of Smalltown are likely to benefit from

Accepted Answer

A) a product-variety externality. 
B) a business-stealing externality. 
C) the fact that McDonald's will increase its production to achieve the efficient scale. 
D) Both b and c are correct. 
A) a product-variety externality. 
B) a business-stealing externality. 
C) the fact that McDonald's will increase its production to achieve the efficient scale. 
D) Both b and c are correct.

Question 10

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 11

Figure 16-6  
-Refer to Figure 16-6. Which of the graphs shown would be consistent with a profit maximizing firm in a monopolistically competitive market that is earning a positive profit?

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 12

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 13

Consider two industries in which firms hold the following market shares:
Industry A: 25%, 20%, 18%, 15%, 8%, 7%, 4%, 2%, 1%
Industry B: 30%, 10%, 9%, 8%, 8%, 8%, 8%, 6%, 6%, 5%, 2%
What are the concentration ratios for each industry? Which is more competitive?

Accepted Answer

The answer of Consider two industries in which firms hold...

Question 14

Defenders of advertising argue that firms use advertising as a signal of quality, even if the advertising delivers little helpful information about the product.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Which of the following best describes the idea of excess capacity in monopolistic competition?

Accepted Answer

A) Firms produce more output than is socially desirable. 
B) The output produced by a typical firm is less than what would occur at the minimum point on its ATC curve. 
C) Due to product differentiation, firms choose output levels where price equals average total cost. 
D) Firms keep some surplus output on hand in case there is a shift in the demand for their product. 
A) Firms produce more output than is socially desirable. 
B) The output produced by a typical firm is less than what would occur at the minimum point on its ATC curve. 
C) Due to product differentiation, firms choose output levels where price equals average total cost. 
D) Firms keep some surplus output on hand in case there is a shift in the demand for their product.

Question 17

Which type of market structure has the fewest number of firms?

Accepted Answer

The answer of Which type of market structure has the...

Question 18

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 19

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. If the government forces this firm to produce at its efficient output level, how much output will this firm produce?

Accepted Answer

A) 0 units of output 
B) 3 units of output 
C) 4 units of output 
D) 5 units of output 
A) 0 units of output 
B) 3 units of output 
C) 4 units of output 
D) 5 units of output

Question 20

In the long run, a firm in a perfectly competitive market operates

Accepted Answer

A) at its efficient scale, and a monopolistically competitive firm operates at its efficient scale. 
B) at its efficient scale, and a monopolistically competitive firm operates with excess capacity. 
C) with excess capacity, and a monopolistically competitive firm operates with excess capacity. 
D) with excess capacity, and a monopolistically competitive firm operates at its efficient scale. 
A) at its efficient scale, and a monopolistically competitive firm operates at its efficient scale. 
B) at its efficient scale, and a monopolistically competitive firm operates with excess capacity. 
C) with excess capacity, and a monopolistically competitive firm operates with excess capacity. 
D) with excess capacity, and a monopolistically competitive firm operates at its efficient scale.

Exam 16: Monopolistic Competition

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

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?

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 this firm profit maximizes and faces a constant marginal cost of $7, does it have excess capacity? How do you know?

Which of the following is not an example of Joel Waldfogel's "Tyranny of the Market"?

The government of Italy will not allow any Hard Rock Cafe restaurants to open in Italy. Defenders of the efficiency of brand-name markets would argue that this has hindered restaurant market efficiency in Italy.

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. How much output will the monopolistically competitive firm produce in this situation?

The product-variety externality arises in monopolistically competitive markets because

The debate over the efficiency of markets in which products with brand names are sold

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

Figure 16-6 -Refer to Figure 16-6. Which of the graphs shown would be consistent with a profit maximizing firm in a monopolistically competitive market that is earning a positive profit?

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.

Consider two industries in which firms hold the following market shares: Industry A: 25%, 20%, 18%, 15%, 8%, 7%, 4%, 2%, 1% Industry B: 30%, 10%, 9%, 8%, 8%, 8%, 8%, 6%, 6%, 5%, 2% What are the concentration ratios for each industry? Which is more competitive?

Defenders of advertising argue that firms use advertising as a signal of quality, even if the advertising delivers little helpful information about the product.

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

Which of the following best describes the idea of excess capacity in monopolistic competition?

Which type of market structure has the fewest number of firms?

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?

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. If the government forces this firm to produce at its efficient output level, how much output will this firm produce?

In the long run, a firm in a perfectly competitive market operates

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

Applications: 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

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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