Question 1

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 2

Among the following situations, which one is least likely to apply to a monopolistically competitive firm?

Accepted Answer

A) profit is positive in the short run 
B) total cost exceeds total revenue in the short run 
C) profit is positive in the long run 
D) total revenue equals total cost in the long run 
A) profit is positive in the short run 
B) total cost exceeds total revenue in the short run 
C) profit is positive in the long run 
D) total revenue equals total cost in the long run

Question 3

Figure 16-10
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-10. In order to maximize its profit, the firm will choose to produce

Accepted Answer

A) 100 units of output. 
B) between 100 and 133.33 units of output. 
C) 133.33 units of output. 
D) 154.92 units of output. 
A) 100 units of output. 
B) between 100 and 133.33 units of output. 
C) 133.33 units of output. 
D) 154.92 units of output.

Question 4

In monopolistically competitive markets, positive economic profits

Accepted Answer

A) suggest that some existing firms will exit the market. 
B) suggest that new firms will enter the market. 
C) are sustained through government-imposed barriers to entry. 
D) are never possible. 
A) suggest that some existing firms will exit the market. 
B) suggest that new firms will enter the market. 
C) are sustained through government-imposed barriers to entry. 
D) are never possible.

Question 5

Advertisements that appear to convey no information at all

Accepted Answer

A) are usually associated with "infomercials." 
B) are useless to consumers but valuable to firms. 
C) are useless to firms but valuable to consumers for their entertainment quality alone. 
D) may convey information to consumers by providing them with a signal that firms are willing to spend significant amounts of money to advertise. 
A) are usually associated with "infomercials." 
B) are useless to consumers but valuable to firms. 
C) are useless to firms but valuable to consumers for their entertainment quality alone. 
D) may convey information to consumers by providing them with a signal that firms are willing to spend significant amounts of money to advertise.

Question 6

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

Accepted Answer

A) firms would respond by lowering their costs. 
B) firms would require a subsidy to stay in business 
C) new firms that enter the market would operate at efficient scale. 
D) the most efficient firms would not be affected. 
A) firms would respond by lowering their costs. 
B) firms would require a subsidy to stay in business 
C) new firms that enter the market would operate at efficient scale. 
D) the most efficient firms would not be affected.

Question 7

Your company has recently requested that you travel to Dhaka, Bangladesh, to work on negotiations for a new factory to be located in one of the port cities. Your travel agent provides a list of several hundred local hotels and a Sheraton. In this case, the Sheraton brand-name is likely to be used as a signal of

Accepted Answer

A) perceived differences that are not likely to exist among your various options. 
B) quality when quality cannot be easily judged. 
C) inefficiency in markets characterized by recognizable brand names. 
D) the quality of general lodging accommodations in Dhaka. 
A) perceived differences that are not likely to exist among your various options. 
B) quality when quality cannot be easily judged. 
C) inefficiency in markets characterized by recognizable brand names. 
D) the quality of general lodging accommodations in Dhaka.

Question 8

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 J?

Accepted Answer

A) about 14% 
B) about 48% 
C) about 74% 
D) about 80% 
A) about 14% 
B) about 48% 
C) about 74% 
D) about 80%

Question 9

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures can have positive profits in the short run?

Accepted Answer

perfect competition

Question 10

The Mikati Philippines Hard Rock Cafe has the exact same menu as the Hard Rock Cafe in New York. This is an example of a brand name enhancing market efficiency for U.S. tourists visiting the Philippines.

Accepted Answer

A) True 
 B)False

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 monopolistically competitive firm is currently earning a positive economic profit. If other firms enter the market, we would expect that the added competition will cause this firm to adjust its output such that it

Accepted Answer

A) will operate closer to its efficient scale. 
B) will operate further from its efficient scale. 
C) will no longer be at its efficient scale. 
D) might move either closer to or further from its efficient scale. 
A) will operate closer to its efficient scale. 
B) will operate further from its efficient scale. 
C) will no longer be at its efficient scale. 
D) might move either closer to or further from its efficient scale.

Question 13

Figure 16-4  
-Refer to Figure 16-4. What price will the monopolistically competitive firm charge in this market?

Accepted Answer

A) $400 
B) $600 
C) $700 
D) $800 
A) $400 
B) $600 
C) $700 
D) $800

Question 14

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 15

The breakfast cereal industry, with its concentration ratio of 80%, would best be described as a(n)

Accepted Answer

A) perfectly competitive market. 
B) monopolistically competitive market. 
C) oligopoly. 
D) monopoly. 
A) perfectly competitive market. 
B) monopolistically competitive market. 
C) oligopoly. 
D) monopoly.

Question 16

Scenario 16-3
Peter operates an ice cream shop in the center of Fairfield. He sells several unusual flavors of organic, homemade ice cream so he has a monopoly over his own ice cream, though he competes with many other firms selling ice cream in Fairfield for the same customers. Peter's demand and cost values for sales per day are given in the table below. (Everyone who purchases Peter's ice cream buys a double scoop cone because it's so delicious.)  
-Refer to Scenario 16-3. What is the maximum amount of profit that Peter can earn per day?

Accepted Answer

The answer of Scenario 16-3
Peter operates an ice cream shop...

Question 17

In monopolistically competitive markets, free entry and exit suggests that

Accepted Answer

A) the market structure will eventually be characterized by perfect competition in the long run. 
B) all firms earn zero economic profits in the long run. 
C) some firms will be able to earn economic profits in the long run. 
D) some firms will be forced to incur economic losses in the long run. 
A) the market structure will eventually be characterized by perfect competition in the long run. 
B) all firms earn zero economic profits in the long run. 
C) some firms will be able to earn economic profits in the long run. 
D) some firms will be forced to incur economic losses in the long run.

Question 18

Scenario 16-3
Peter operates an ice cream shop in the center of Fairfield. He sells several unusual flavors of organic, homemade ice cream so he has a monopoly over his own ice cream, though he competes with many other firms selling ice cream in Fairfield for the same customers. Peter's demand and cost values for sales per day are given in the table below. (Everyone who purchases Peter's ice cream buys a double scoop cone because it's so delicious.)  
-Refer to Scenario 16-3. How many double scoop ice cream cones should Peter sell per day to maximize his profit?

Accepted Answer

A) 80 
B) 100 
C) 120 
D) 140 
A) 80 
B) 100 
C) 120 
D) 140

Question 19

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 20

A new Mexican restaurant opens in the city of Manchester. The other restaurant owners are not happy about this new restaurant because they are experiencing what externality?

Accepted Answer

business-s

Exam 16: Monopolistic Competition

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

Among the following situations, which one is least likely to apply to a monopolistically competitive firm?

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. In order to maximize its profit, the firm will choose to produce

In monopolistically competitive markets, positive economic profits

Advertisements that appear to convey no information at all

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

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 J?

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures can have positive profits in the short run?

The Mikati Philippines Hard Rock Cafe has the exact same menu as the Hard Rock Cafe in New York. This is an example of a brand name enhancing market efficiency for U.S. tourists visiting the Philippines.

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 monopolistically competitive firm is currently earning a positive economic profit. If other firms enter the market, we would expect that the added competition will cause this firm to adjust its output such that it

Figure 16-4 -Refer to Figure 16-4. What price will the monopolistically competitive firm charge in this market?

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

The breakfast cereal industry, with its concentration ratio of 80%, would best be described as a(n)

In monopolistically competitive markets, free entry and exit suggests that

A new Mexican restaurant opens in the city of Manchester. The other restaurant owners are not happy about this new restaurant because they are experiencing what externality?

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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