Question 1

When consumers are exposed to additional choices that result from the introduction of a new product,

Accepted Answer

A) their satisfaction is likely to be lowered as a result of their having to make additional choices. 
B) a product-variety externality is said to occur. 
C) an advertising externality is said to occur. 
D) consumers are likely to experience negative consumption externalities. 
A) their satisfaction is likely to be lowered as a result of their having to make additional choices. 
B) a product-variety externality is said to occur. 
C) an advertising externality is said to occur. 
D) consumers are likely to experience negative consumption externalities.

Question 2

Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profit-maximizing firm experience zero economic profit?

Accepted Answer

A) perfect competition only 
B) perfect competition and monopolistic competition only 
C) perfect competition, monopolistic competition, and monopoly 
D) The answer cannot be determined without knowing whether the market is in the long run or short run. 
A) perfect competition only 
B) perfect competition and monopolistic competition only 
C) perfect competition, monopolistic competition, and monopoly 
D) The answer cannot be determined without knowing whether the market is in the long run or short run.

Question 3

Scenario 16-6
Ike's Ice Cream has decided to open a new ice cream parlor in Mayville, MS. The market for ice cream parlors is monopolistically competitive.
-Refer to Scenario 16-6. As a result of the new Ike's Ice Cream parlor, consumers living in and visiting Mayville are likely to experience a

Accepted Answer

A) business-stealing externality, which harms producers. 
B) business-stealing externality, which benefits producers. 
C) product-variety externality, which harms consumers. 
D) product-variety externality, which benefits consumers. 
A) business-stealing externality, which harms producers. 
B) business-stealing externality, which benefits producers. 
C) product-variety externality, which harms consumers. 
D) product-variety externality, which benefits consumers.

Question 4

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Accepted Answer

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

Question 5

Figure 16-13  
-Refer to Figure 16-13. Use the letters to identify the area of total revenue for this firm.

Accepted Answer

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

Question 6

A firm can signal the high quality of its product by

Accepted Answer

A) spending nothing on advertising to convey that the product is so good that the firm does not even need to advertise. 
B) spending a large amount of money on advertising. 
C) getting a patent for the product. 
D) not worrying about getting a patent for the product. 
A) spending nothing on advertising to convey that the product is so good that the firm does not even need to advertise. 
B) spending a large amount of money on advertising. 
C) getting a patent for the product. 
D) not worrying about getting a patent for the product.

Question 7

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

Accepted Answer

A) firms would most likely experience economic losses. 
B) firms would also operate at their efficient scale. 
C) new firms would likely to enter the market. 
D) the most efficient firms would not likely to be affected. 
A) firms would most likely experience economic losses. 
B) firms would also operate at their efficient scale. 
C) new firms would likely to enter the market. 
D) the most efficient firms would not likely to be affected.

Question 8

Table 16-1
The following table shows the percentage of output supplied by the top eight firms in four different industries.  
-Refer to Table 16-1. Which industry is the most competitive?

Accepted Answer

A) Industry A 
B) Industry B 
C) Industry C 
D) Industry D 
A) Industry A 
B) Industry B 
C) Industry C 
D) Industry D

Question 9

Advertising that uses celebrity endorsements is most likely intended to

Accepted Answer

A) increase elasticity of demand for the advertised product. 
B) reduce the ability of markets to allocate resources efficiently. 
C) provide a signal of product quality. 
D) be useful only for psychological effects. 
A) increase elasticity of demand for the advertised product. 
B) reduce the ability of markets to allocate resources efficiently. 
C) provide a signal of product quality. 
D) be useful only for psychological effects.

Question 10

Monopolistic competition is an

Accepted Answer

A) inefficient market structure because there is deadweight loss. 
B) inefficient market structure because price exceeds marginal cost. 
C) efficient market structure because free entry drives long-run profits to zero. 
D) Both a and b are correct. 
A) inefficient market structure because there is deadweight loss. 
B) inefficient market structure because price exceeds marginal cost. 
C) efficient market structure because free entry drives long-run profits to zero. 
D) Both a and b are correct.

Question 11

Each firm in a monopolistically competitive industry faces a downward-sloping demand curve because

Accepted Answer

A) there are many other sellers in the market. 
B) there are very few other sellers in the market. 
C) the firm's product is different from those offered by other firms in the market. 
D) the firm faces the threat of entry into the market by new firms. 
A) there are many other sellers in the market. 
B) there are very few other sellers in the market. 
C) the firm's product is different from those offered by other firms in the market. 
D) the firm faces the threat of entry into the market by new firms.

Question 12

Figure 16-10
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-10. As the figure is drawn, the firm is in

Accepted Answer

A) a short-run equilibrium but it is not in a long-run equilibrium. 
B) a long-run equilibrium but it is not in a short-run equilibrium. 
C) a short-run equilibrium as well as a long-run equilibrium. 
D) neither a short-run equilibrium nor a long-run equilibrium. 
A) a short-run equilibrium but it is not in a long-run equilibrium. 
B) a long-run equilibrium but it is not in a short-run equilibrium. 
C) a short-run equilibrium as well as a long-run equilibrium. 
D) neither a short-run equilibrium nor a long-run equilibrium.

Question 13

Which type of market structure has the fewest number of firms?

Accepted Answer

The answer of Which type of market structure has the...

Question 14

​Which of the following is the most distinguishing characteristic of a monopolistically competitive industry?

Accepted Answer

A) ​Market barriers 
B) ​One firm controls the industry 
C) ​Product differentiation 
D) ​A small number of firms dominate the market 
A) ​Market barriers 
B) ​One firm controls the industry 
C) ​Product differentiation 
D) ​A small number of firms dominate the market

Question 15

Senator Hubris wants to pass a law that would require all monopolistically competitive firms to operate at their efficient scale. If this law were to pass and be enforced, we would expect that monopolistically competitive firms would

Accepted Answer

A) see their profits increase. 
B) break even. 
C) lose money. 
D) not really be affected by the law. 
A) see their profits increase. 
B) break even. 
C) lose money. 
D) not really be affected by the law.

Question 16

Which of the following is an example of a monopolistically competitive industry?

Accepted Answer

A) electric lamp bulbs 
B) aircraft manufacturing 
C) corn 
D) sweaters 
A) electric lamp bulbs 
B) aircraft manufacturing 
C) corn 
D) sweaters

Question 17

Professional organizations and producer groups have an incentive to

Accepted Answer

A) restrict advertising in order to enhance competition on the basis of price. 
B) restrict advertising in order to reduce competition on the basis of price. 
C) encourage advertising in order to reduce competition on the basis of price. 
D) encourage advertising in order to enhance competition on the basis of price. 
A) restrict advertising in order to enhance competition on the basis of price. 
B) restrict advertising in order to reduce competition on the basis of price. 
C) encourage advertising in order to reduce competition on the basis of price. 
D) encourage advertising in order to enhance competition on the basis of price.

Question 18

Figure 16-3
This figure depicts a situation in a monopolistically competitive market.  
-Refer to Figure 16-3. How much profit will the monopolistically competitive firm earn in this situation?

Accepted Answer

A) $0 
B) $80 
C) $200 
D) $400 
A) $0 
B) $80 
C) $200 
D) $400

Question 19

​If a monopolistically competitive firms incurs an increase in fixed costs, its price will rise and its output will fall.

Accepted Answer

A) True 
 B)False

Question 20

Figure 16-14  
-Refer to Figure 16-14. Which letter identifies the efficient level of output for this firm?

Accepted Answer

The answer of Figure 16-14  
-Refer to Figure 16-14....

Exam 16: Monopolistic Competition

When consumers are exposed to additional choices that result from the introduction of a new product,

Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profit-maximizing firm experience zero economic profit?

Scenario 16-6 Ike's Ice Cream has decided to open a new ice cream parlor in Mayville, MS. The market for ice cream parlors is monopolistically competitive. -Refer to Scenario 16-6. As a result of the new Ike's Ice Cream parlor, consumers living in and visiting Mayville are likely to experience a

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Figure 16-13 -Refer to Figure 16-13. Use the letters to identify the area of total revenue for this firm.

A firm can signal the high quality of its product by

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

Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. -Refer to Table 16-1. Which industry is the most competitive?

Advertising that uses celebrity endorsements is most likely intended to

Monopolistic competition is an

Each firm in a monopolistically competitive industry faces a downward-sloping demand curve because

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. As the figure is drawn, the firm is in

Which type of market structure has the fewest number of firms?

​Which of the following is the most distinguishing characteristic of a monopolistically competitive industry?

Senator Hubris wants to pass a law that would require all monopolistically competitive firms to operate at their efficient scale. If this law were to pass and be enforced, we would expect that monopolistically competitive firms would

Which of the following is an example of a monopolistically competitive industry?

Professional organizations and producer groups have an incentive to

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. How much profit will the monopolistically competitive firm earn in this situation?

​If a monopolistically competitive firms incurs an increase in fixed costs, its price will rise and its output will fall.

Figure 16-14 -Refer to Figure 16-14. Which letter identifies the efficient level of output for this firm?

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

Which of the following is the most distinguishing characteristic of a monopolistically competitive industry?

If a monopolistically competitive firms incurs an increase in fixed costs, its price will rise and its output will fall.