Exam 16: Monopolistic Competition

The product-variety externality is associated with the

Monopolistic competition is the only market structure that features many sellers.

The term excess capacity refers to the fact that a firm operates on the upward-sloping portion of its average-total-cost curve.

​In the long run, a monopolistically competitive firm's demand curve becomes more elastic and shifts to the left

The "monopoly" in monopolistically competitive markets is most likely a result of firms having some pricing power due to product differentiation.

An oligopoly is a market in which

Under which of the following market structures would consumers likely receive the most product variety?

Economists measure a market's domination by a small number of firms with a statistic called the

The product-variety externality states the benefits to consumers from the introduction of a new product.

Critics of advertising argue that firms use advertising to manipulate consumers' tastes.

A monopolistically competitive firm chooses the quantity to produce where

The market for wheat is most likely considered a monopolistically competitive market.

Two bottles of over-the-counter pain reliever sit side-by-side in a grocery store: Advil (a brand name) sells for $5.00, while Feel Better (not a brand name) sells for $2.50. In a typical day the store sells some of each type of pain reliever, which suggests that

In perfect competition as well as in monopolistic competition,

In the long run, monopolistically competitive firms produce where demand equals average total cost.

Which of the following market structures is considered a differentiated products market?

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures results in production of the welfare-maximizing level of output?

Firms that sell highly differentiated consumer goods, such as soft drinks, breakfast cereals, and dog food, typically spend what percent of their revenues on advertising?

In markets where the government imposes an excise tax on unit sales, it also has a tendency to dabble with restrictions on advertising (for example, cigarettes and hard liquor). Do potential (or actual) restrictions on advertising in these markets serve the interest of a government that is interested in maximizing its tax revenue from the sale of these products? Explain your answer.

In many college towns, private independent bookstores typically locate on the periphery of the college campus. However, in some college towns, the university has used political power to restrict private bookstores near campus through community zoning laws. Use your knowledge of markets to predict the price and quality of service differences in the market for college textbooks under the two different market regimes.