Question 1

In a monopolistically competitive market, social welfare would be enhanced if

Accepted Answer

A) price equaled marginal cost. 
B) government regulation eliminated the product-variety externality. 
C) the government raised taxes to subsidize firms that price below average total cost. 
D) there were fewer firms, making the industry closer to an oligopoly. 
A) price equaled marginal cost. 
B) government regulation eliminated the product-variety externality. 
C) the government raised taxes to subsidize firms that price below average total cost. 
D) there were fewer firms, making the industry closer to an oligopoly.

Question 2

Excess capacity is

Accepted Answer

A) an example of the inefficiencies of monopolistically competitive markets. 
B) a short-run problem but not a long-run problem. 
C) a characteristic of rising average total cost curves. 
D) Both a and b are correct. 
A) an example of the inefficiencies of monopolistically competitive markets. 
B) a short-run problem but not a long-run problem. 
C) a characteristic of rising average total cost curves. 
D) Both a and b are correct.

Question 3

A profit-maximizing firm operating in a monopolistically competitive market that is in a long-run equilibrium has

Accepted Answer

A) minimized average total cost. 
B) chosen to produce where demand is unitary elastic. 
C) produced the efficient scale of output. 
D) chosen a quantity of output where average revenue equals average total cost. 
A) minimized average total cost. 
B) chosen to produce where demand is unitary elastic. 
C) produced the efficient scale of output. 
D) chosen a quantity of output where average revenue equals average total cost.

Question 4

Table 16-5
This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm.  
-Refer to Table 16-5. How much profit will this firm earn at the monopolistically competitive price?

Accepted Answer

A) $0 
B) $5 
C) $12 
D) $16 
A) $0 
B) $5 
C) $12 
D) $16

Question 5

Scenario 16-8
Burger Bonanza, a major national burger chain, recently decided to spend $4 million on an advertising campaign featuring a world famous actor to promote its new Bomber Burger.
-Refer to Scenario 16-8. What can consumers conclude from Burger Bonanza's willingness to spend $4 million on an advertising campaign?

Accepted Answer

high quali

Question 6

The LookGood BePopular (LGBP) Clothing Company embarked on a new advertising campaign in which a group of young beautiful people are having fun eating out at a restaurant wearing the company's clothes. Critics of advertising argue that this advertisement

Accepted Answer

A) causes demand for LGBP Clothing to be less elastic. 
B) is more effective than other forms of advertisement because of its content. 
C) will cause the market to be more competitive. 
D) Both a and b are correct. 
A) causes demand for LGBP Clothing to be less elastic. 
B) is more effective than other forms of advertisement because of its content. 
C) will cause the market to be more competitive. 
D) Both a and b are correct.

Question 7

New firms will likely enter a monopolistically competitive market when price exceeds

Accepted Answer

A) marginal revenue. 
B) average revenue. 
C) marginal cost. 
D) average total cost. 
A) marginal revenue. 
B) average revenue. 
C) marginal cost. 
D) average total cost.

Question 8

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 9

Critics of advertising argue that advertising

Accepted Answer

A) creates desires that otherwise might not exist. 
B) enhances competition. 
C) benefits television viewers who enjoy TV commercials. 
D) All of the above are correct. 
A) creates desires that otherwise might not exist. 
B) enhances competition. 
C) benefits television viewers who enjoy TV commercials. 
D) All of the above are correct.

Question 10

Which market structure(s) is(are) considered highly concentrated?

Accepted Answer

The answer of Which market structure(s) is(are) considered highly concentrated?...

Question 11

A profit-maximizing firm in a monopolistically competitive market charges a price equal to marginal cost.

Accepted Answer

A) True 
 B)False

Question 12

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 13

Evaluate the following statement: "Advertisements that use celebrity endorsements are devoid of any value and do not enhance the efficient functioning of markets."

Accepted Answer

Some people argue that celebrity endorse

Question 14

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 15

Scenario 16-7
Consider the problem facing two firms, YumYum and Bertollini, in the frozen food market. Each firm has just come up with an idea for a new "frozen meal for two" which it would sell for $9. Assume that the marginal cost for each new product is a constant $2, and the only fixed cost is for advertising. Each company knows that if it spends $12 million on advertising it will get 1.5 million consumers to try its new product. YumYum has done market research which suggests that its product does not have any "staying" power in the market. Even though it could get 1.5 million consumers to buy the product once, it is unlikely that they will continue to buy the product in the future. Bertollini's market research suggests that its product is very good, and consumers who try the product will continue to be consumers over the ensuing year. On the basis of its market research, Bertollini estimates that its initial 1.5 million customers will buy one unit of the product each month in the coming year, for a total of 18 million units.
-Refer to Scenario 16-7. Which of the following is most likely?

Accepted Answer

A) Both YumYum and Bertollini will advertise. 
B) Neither YumYum nor Bertollini will advertise. 
C) YumYum will advertise, but Bertollini will not advertise. 
D) Bertollini will advertise, but YumYum will not advertise. 
A) Both YumYum and Bertollini will advertise. 
B) Neither YumYum nor Bertollini will advertise. 
C) YumYum will advertise, but Bertollini will not advertise. 
D) Bertollini will advertise, but YumYum will not advertise.

Question 16

Which market structure would likely have the highest concentration ratio?

Accepted Answer

A) Monopoly 
B) Oligopoly 
C) Monopolistic competition 
D) Perfect competition 
A) Monopoly 
B) Oligopoly 
C) Monopolistic competition 
D) Perfect competition

Question 17

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

Accepted Answer

Books, CDs, movies,

Question 18

Which of the following is not a characteristic of monopolistic competition?

Accepted Answer

A) a large number of sellers 
B) firms are price takers 
C) free entry into the market 
D) a differentiated product 
A) a large number of sellers 
B) firms are price takers 
C) free entry into the market 
D) a differentiated product

Question 19

Figure 16-2. The figure is drawn for a monopolistically competitive firm.  
-Refer to Figure 16-2. Suppose ATC = $36 when Q = 24. Then the

Accepted Answer

A) firm is in a long-run equilibrium when it produces 24 units of output. 
B) firm is in a long-run equilibrium when it produces 32 units of output. 
C) best the firm can do is sustain a loss of $48. 
D) best the firm can do is earn a profit of $96. 
A) firm is in a long-run equilibrium when it produces 24 units of output. 
B) firm is in a long-run equilibrium when it produces 32 units of output. 
C) best the firm can do is sustain a loss of $48. 
D) best the firm can do is earn a profit of $96.

Question 20

A monopolistically competitive market has characteristics that are similar to

Accepted Answer

A) a monopoly only. 
B) a competitive firm only. 
C) both a monopoly and a competitive firm. 
D) neither a monopoly nor a competitive firm. 
A) a monopoly only. 
B) a competitive firm only. 
C) both a monopoly and a competitive firm. 
D) neither a monopoly nor a competitive firm.

Exam 16: Monopolistic Competition

In a monopolistically competitive market, social welfare would be enhanced if

Excess capacity is

A profit-maximizing firm operating in a monopolistically competitive market that is in a long-run equilibrium has

Table 16-5 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-5. How much profit will this firm earn at the monopolistically competitive price?

The LookGood BePopular (LGBP) Clothing Company embarked on a new advertising campaign in which a group of young beautiful people are having fun eating out at a restaurant wearing the company's clothes. Critics of advertising argue that this advertisement

New firms will likely enter a monopolistically competitive market when price exceeds

The two types of imperfectly competitive markets are

Critics of advertising argue that advertising

Which market structure(s) is(are) considered highly concentrated?

A profit-maximizing firm in a monopolistically competitive market charges a price equal to marginal cost.

One way in which monopolistic competition differs from oligopoly is that

Evaluate the following statement: "Advertisements that use celebrity endorsements are devoid of any value and do not enhance the efficient functioning of markets."

Which of the following statements is not correct?

Which market structure would likely have the highest concentration ratio?

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

Which of the following is not a characteristic of monopolistic competition?

Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. Suppose ATC = $36 when Q = 24. Then the

A monopolistically competitive market has characteristics that are similar to

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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