Question 1

Monopolistic competition is characterized by many buyers and sellers, product differentiation, and barriers to entry.

Accepted Answer

A) True 
 B)False

Question 2

Figure 16-13  
-Refer to Figure 16-13. Which letter represents the profit-maximizing price?

Accepted Answer

The answer of Figure 16-13  
-Refer to Figure 16-13....

Question 3

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. When Peter maximizes his profits, how much revenue does he earn per day?

Accepted Answer

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

Question 4

Scenario 16-9
Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products.
-Refer to Scenario 16-9. If advertising were banned in these markets, what would likely happen to the prices of chips and soda?

Accepted Answer

They would

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

Brand names are rarely used to convey information about product quality.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not a key feature of monopolistic competition?

Accepted Answer

A) Excess capacity 
B) A markup of price over marginal cost 
C) Positive economic profits for firms in the long run 
D) Differentiated products among firms in the market 
A) Excess capacity 
B) A markup of price over marginal cost 
C) Positive economic profits for firms in the long run 
D) Differentiated products among firms in the market

Question 8

Critics of advertising argue that in some markets advertising may

Accepted Answer

A) attract products of lower quality into the market. 
B) attract less informed buyers into the market. 
C) decrease elasticity of demand allowing firms to charge a larger markup over marginal cost. 
D) enhance competition in markets to an unnecessary degree. 
A) attract products of lower quality into the market. 
B) attract less informed buyers into the market. 
C) decrease elasticity of demand allowing firms to charge a larger markup over marginal cost. 
D) enhance competition in markets to an unnecessary degree.

Question 9

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-9. For this firm, the long-run equilibrium quantity of output is

Accepted Answer

A) 100 and the long-run equilibrium price is $90. 
B) 100 and the long-run equilibrium price is $140. 
C) 133.33 and the long-run equilibrium price is $56.67. 
D) 133.33 and the long-run equilibrium price is $123.33. 
A) 100 and the long-run equilibrium price is $90. 
B) 100 and the long-run equilibrium price is $140. 
C) 133.33 and the long-run equilibrium price is $56.67. 
D) 133.33 and the long-run equilibrium price is $123.33.

Question 10

How does advertising signal to consumers that the product is a good one?

Accepted Answer

A) By seeing famous people using the product, consumers infer that they too can be famous. 
B) By being willing to spend money on advertising, firms let consumers know the product is likely a good one since firms would not likely advertise a poor product. 
C) By making consumers laugh during commercials, firms are associating positive experiences with the product. 
D) Without allowing consumers to actually use the product, it is not possible for firms to signal to consumers the product's quality. 
A) By seeing famous people using the product, consumers infer that they too can be famous. 
B) By being willing to spend money on advertising, firms let consumers know the product is likely a good one since firms would not likely advertise a poor product. 
C) By making consumers laugh during commercials, firms are associating positive experiences with the product. 
D) Without allowing consumers to actually use the product, it is not possible for firms to signal to consumers the product's quality.

Question 11

When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium,

Accepted Answer

A) the demand curve will be perfectly elastic. 
B) price exceeds marginal cost. 
C) marginal cost must be falling. 
D) marginal revenue exceeds marginal cost. 
A) the demand curve will be perfectly elastic. 
B) price exceeds marginal cost. 
C) marginal cost must be falling. 
D) marginal revenue exceeds marginal cost.

Question 12

Monopolistic competition is characterized by
i.efficient scale
ii.markup pricing over marginal cost
iii.deadweight loss
iv.excess capacity

Accepted Answer

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

Question 13

Which two curves are tangent to each other in a monopolistically competitive market with zero economic profit?

Accepted Answer

A) demand and average variable cost 
B) demand and average total cost 
C) marginal revenue and average variable cost 
D) marginal revenue and average total cost 
A) demand and average variable cost 
B) demand and average total cost 
C) marginal revenue and average variable cost 
D) marginal revenue and average total cost

Question 14

"In a long-run equilibrium, price is equal to average total cost." This statement applies to

Accepted Answer

A) competitive markets, but not to monopolistically competitive markets or monopolies. 
B) competitive and monopolistically competitive markets, but not to monopolies. 
C) competitive markets, monopolistically competitive markets, and monopolies. 
D) None of the above is correct. 
A) competitive markets, but not to monopolistically competitive markets or monopolies. 
B) competitive and monopolistically competitive markets, but not to monopolies. 
C) competitive markets, monopolistically competitive markets, and monopolies. 
D) None of the above is correct.

Question 15

Figure 16-2. The figure is drawn for a monopolistically competitive firm.  
-Refer to Figure 16-2. If the ATC=40 at the profit-maximizing level of output, which of the following will occur in the long run in this industry?

Accepted Answer

A) Firms will exit this industry. 
B) Firms will enter this industry. 
C) This firm will continue to earn positive economic profits. 
D) This firm will incur losses. 
A) Firms will exit this industry. 
B) Firms will enter this industry. 
C) This firm will continue to earn positive economic profits. 
D) This firm will incur losses.

Question 16

Entry of firms in a monopolistically competitive industry is characterized by two externalities. List them and briefly describe how consumers and existing firms are influenced by them.

Accepted Answer

Business-stealing effect: incumbent firm

Question 17

Table 16-3
The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries.  
-Refer to Table 16-3. What is the concentration ratio for Industry A?

Accepted Answer

A) approximately 52% 
B) approximately 58% 
C) approximately 66% 
D) approximately 72% 
A) approximately 52% 
B) approximately 58% 
C) approximately 66% 
D) approximately 72%

Question 18

In a long-run equilibrium, firms in both perfectly competitive markets and monopolistically competitive markets produce a quantity below the efficient scale of production.

Accepted Answer

A) True 
 B)False

Question 19

Scenario 16-9
Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products.
-Refer to Scenario 16-9. Martina offers two reasons for agreeing with Dean's decision. What are they?

Accepted Answer

brand names provide informatio

Question 20

Entry by new firms into a monopolistically competitive market

Accepted Answer

A) creates additional consumer surplus. 
B) imposes a positive externality on existing firms. 
C) leads to the same externalities that are observed when new firms enter a perfectly competitive market. 
D) increases the demand for existing firms' products. 
A) creates additional consumer surplus. 
B) imposes a positive externality on existing firms. 
C) leads to the same externalities that are observed when new firms enter a perfectly competitive market. 
D) increases the demand for existing firms' products.

Exam 16: Monopolistic Competition

Monopolistic competition is characterized by many buyers and sellers, product differentiation, and barriers to entry.

Figure 16-13 -Refer to Figure 16-13. Which letter represents the profit-maximizing price?

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

Brand names are rarely used to convey information about product quality.

Which of the following is not a key feature of monopolistic competition?

Critics of advertising argue that in some markets advertising may

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. For this firm, the long-run equilibrium quantity of output is

How does advertising signal to consumers that the product is a good one?

When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium,

Monopolistic competition is characterized by i.efficient scale ii.markup pricing over marginal cost iii.deadweight loss iv.excess capacity

Which two curves are tangent to each other in a monopolistically competitive market with zero economic profit?

"In a long-run equilibrium, price is equal to average total cost." This statement applies to

Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. If the ATC=40 at the profit-maximizing level of output, which of the following will occur in the long run in this industry?

Entry of firms in a monopolistically competitive industry is characterized by two externalities. List them and briefly describe how consumers and existing firms are influenced by them.

Table 16-3 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. -Refer to Table 16-3. What is the concentration ratio for Industry A?

In a long-run equilibrium, firms in both perfectly competitive markets and monopolistically competitive markets produce a quantity below the efficient scale of production.

Entry by new firms into a monopolistically competitive market

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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