Question 1

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product, the firm will

Accepted Answer

A) be able to increase its markup over marginal cost. 
B) eventually have to reduce price to remain competitive. 
C) increase the welfare of society. 
D) reduce its average total cost. 
A) be able to increase its markup over marginal cost. 
B) eventually have to reduce price to remain competitive. 
C) increase the welfare of society. 
D) reduce its average total cost.

Question 2

For the economy as a whole, spending on advertising comprises about what percent of total firm revenue?

Accepted Answer

A) 0.5 
B) 2 
C) 10 
D) 20 
A) 0.5 
B) 2 
C) 10 
D) 20

Question 3

​In which of the following market structures can a firm earn an economic profit in the short run?

Accepted Answer

A) ​Perfect competition 
B) ​Monopolistic competition 
C) ​Monopoly 
D) ​All of these market structures can earn an economic profit in the short run 
A) ​Perfect competition 
B) ​Monopolistic competition 
C) ​Monopoly 
D) ​All of these market structures can earn an economic profit in the short run

Question 4

A new Mexican restaurant opened in the town of Manchester. The residents of the town are

Accepted Answer

A) happy because of the product-variety externality, while other restaurant owners are unhappy because of the business-stealing externality. 
B) happy because of the business-stealing externality, while other restaurant owners are unhappy because of the product-variety externality. 
C) unhappy because of the product-variety externality, while other restaurant owners are happy because of the business-stealing externality. 
D) unhappy because of the business-stealing externality, while other restaurant owners are happy because of the product-variety externality. 
A) happy because of the product-variety externality, while other restaurant owners are unhappy because of the business-stealing externality. 
B) happy because of the business-stealing externality, while other restaurant owners are unhappy because of the product-variety externality. 
C) unhappy because of the product-variety externality, while other restaurant owners are happy because of the business-stealing externality. 
D) unhappy because of the business-stealing externality, while other restaurant owners are happy because of the product-variety externality.

Question 5

Figure 16-11  
-Refer to Figure 16-11. If this firm profit-maximizes, how much cost will it incur?

Accepted Answer

The answer of Figure 16-11  
-Refer to Figure 16-11....

Question 6

As firms exit a monopolistically competitive market, profits of remaining firms

Accepted Answer

A) decline, and product diversity in the market decreases. 
B) decline, and product diversity in the market increases. 
C) rise, and product diversity in the market decreases. 
D) rise, and product diversity in the market increases. 
A) decline, and product diversity in the market decreases. 
B) decline, and product diversity in the market increases. 
C) rise, and product diversity in the market decreases. 
D) rise, and product diversity in the market increases.

Question 7

To maximize its profit, a monopolistically competitive firm chooses its level of output by looking for the level of output at which

Accepted Answer

A) price equals marginal cost. 
B) marginal revenue equals marginal cost. 
C) average total cost is minimized. 
D) All of the above are correct. 
A) price equals marginal cost. 
B) marginal revenue equals marginal cost. 
C) average total cost is minimized. 
D) All of the above are correct.

Question 8

Figure 16-12  
-Refer to Figure 16-12. When this firm profit-maximizes, what is the amount of the firm's profit or loss?

Accepted Answer

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

Question 9

A monopolistically competitive market is characterized by barriers to entry.

Accepted Answer

A) True 
 B)False

Question 10

Because monopolistically competitive firms produce differentiated products, each firm

Accepted Answer

A) faces a demand curve that is horizontal. 
B) faces a demand curve that is vertical. 
C) has no control over product price. 
D) has some control over product price. 
A) faces a demand curve that is horizontal. 
B) faces a demand curve that is vertical. 
C) has no control over product price. 
D) has some control over product price.

Question 11

Figure 16-14  
-Refer to Figure 16-14. The deadweight loss from production for this firm is represented by which of the following areas?

Accepted Answer

A) ABC 
B) IJK 
C) BHJ 
D) BCIJ 
A) ABC 
B) IJK 
C) BHJ 
D) BCIJ

Question 12

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 13

Figure 16-10
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-10. The firm's maximum profit is

Accepted Answer

A) $-7,000. 
B) $-5,000. 
C) $-2,000. 
D) The firm's maximum profit cannot be determined from the figure. 
A) $-7,000. 
B) $-5,000. 
C) $-2,000. 
D) The firm's maximum profit cannot be determined from the figure.

Question 14

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome?
(i)perfect competition
(ii)monopolistic competition
(iii)monopoly

Accepted Answer

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

Question 15

A similarity between monopoly and monopolistic competition is that in both market structures

Accepted Answer

A) strategic interactions among sellers are important. 
B) there are a small number of sellers. 
C) sellers are price makers rather than price takers. 
D) there are only a few buyers but many sellers. 
A) strategic interactions among sellers are important. 
B) there are a small number of sellers. 
C) sellers are price makers rather than price takers. 
D) there are only a few buyers but many sellers.

Question 16

Figure 16-14  
-Refer to Figure 16-14. Which of the following represents the excess capacity of this firm?

Accepted Answer

A) BJ 
B) GH 
C) LM 
D) There is no excess capacity. 
A) BJ 
B) GH 
C) LM 
D) There is no excess capacity.

Question 17

Figure 16-5  
-Refer to Figure 16-5. Panel b is consistent with a firm in a monopolistically competitive market that is

Accepted Answer

A) not in long-run equilibrium. 
B) in long-run equilibrium. 
C) producing its efficient scale of output. 
D) earning a positive economic profit. 
A) not in long-run equilibrium. 
B) in long-run equilibrium. 
C) producing its efficient scale of output. 
D) earning a positive economic profit.

Question 18

In the long run,

Accepted Answer

A) monopolistically competitive firms earn a higher profit than perfectly competitive firms because monopolistically competitive firms have some monopoly power. 
B) monopolistically competitive firms produce a higher output than perfectly competitive firms because competition drives the perfectly competitive firms' output down. 
C) both monopolistically competitive and perfectly competitive firms produce where P = MC. 
D) both monopolistically competitive and perfectly competitive firms produce where P = ATC. 
A) monopolistically competitive firms earn a higher profit than perfectly competitive firms because monopolistically competitive firms have some monopoly power. 
B) monopolistically competitive firms produce a higher output than perfectly competitive firms because competition drives the perfectly competitive firms' output down. 
C) both monopolistically competitive and perfectly competitive firms produce where P = MC. 
D) both monopolistically competitive and perfectly competitive firms produce where P = ATC.

Question 19

The product-variety externality and the business-stealing externality are both spillover benefits of new firms entering a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 20

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 has a constant marginal cost of $7, what is the profit-maximizing level of output?

Accepted Answer

The answer of Table 16-7
A monopolistically competitive firm faces the...

Exam 16: Monopolistic Competition

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product, the firm will

For the economy as a whole, spending on advertising comprises about what percent of total firm revenue?

​In which of the following market structures can a firm earn an economic profit in the short run?

A new Mexican restaurant opened in the town of Manchester. The residents of the town are

Figure 16-11 -Refer to Figure 16-11. If this firm profit-maximizes, how much cost will it incur?

As firms exit a monopolistically competitive market, profits of remaining firms

To maximize its profit, a monopolistically competitive firm chooses its level of output by looking for the level of output at which

Figure 16-12 -Refer to Figure 16-12. When this firm profit-maximizes, what is the amount of the firm's profit or loss?

A monopolistically competitive market is characterized by barriers to entry.

Because monopolistically competitive firms produce differentiated products, each firm

Figure 16-14 -Refer to Figure 16-14. The deadweight loss from production for this firm is represented by which of the following areas?

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

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. The firm's maximum profit is

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome? (i)perfect competition (ii)monopolistic competition (iii)monopoly

A similarity between monopoly and monopolistic competition is that in both market structures

Figure 16-14 -Refer to Figure 16-14. Which of the following represents the excess capacity of this firm?

Figure 16-5 -Refer to Figure 16-5. Panel b is consistent with a firm in a monopolistically competitive market that is

In the long run,

The product-variety externality and the business-stealing externality are both spillover benefits of new firms entering a monopolistically competitive market.

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 has a constant marginal cost of $7, what is the profit-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

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

Filters

In which of the following market structures can a firm earn an economic profit in the short run?