Question 1

Figure 16-1        
-Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?

Accepted Answer

A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D 
A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D

Question 2

An important difference between the situation faced by a profit-maximizing monopolistically competitive firm in the short run and the situation faced by that same firm in the long run is that in the short run,

Accepted Answer

A) price may exceed marginal revenue, but in the long run, price equals marginal revenue. 
B) price may exceed marginal cost, but in the long run, price equals marginal cost. 
C) price may exceed average total cost, but in the long run, price equals average total cost. 
D) there are many firms in the market, but in the long run, there are only a few firms in the market. 
A) price may exceed marginal revenue, but in the long run, price equals marginal revenue. 
B) price may exceed marginal cost, but in the long run, price equals marginal cost. 
C) price may exceed average total cost, but in the long run, price equals average total cost. 
D) there are many firms in the market, but in the long run, there are only a few firms in the market.

Question 3

Of the following market structures, which are considered imperfectly competitive?
I.
Perfect competition
II.
Monopoly
III.
Monopolistic competition
IV.
Oligopoly

Accepted Answer

A) III only 
B) II and III 
C) III and IV 
D) II, III, and IV 
A) III only 
B) II and III 
C) III and IV 
D) II, III, and IV

Question 4

Scenario 16-1
Suppose the following are the sales for all of the firms in two different industries.  
-Refer to Scenario 16-1. What are the concentration ratios for these industries?

Accepted Answer

A) Industry A: 22%, Industry B: 26% 
B) Industry A: 41%, Industry B: 47%. 
C) Industry A: 68%, Industry B: 79% 
D) Industry A: 100%, Industry B: 100%. 
A) Industry A: 22%, Industry B: 26% 
B) Industry A: 41%, Industry B: 47%. 
C) Industry A: 68%, Industry B: 79% 
D) Industry A: 100%, Industry B: 100%.

Question 5

Piper consumes Ragu spaghetti sauce exclusively. She claims that there is a clear taste difference and that competing brands of spaghetti sauce leave an unsavory taste in her mouth. However, in a blind taste test, Piper is found to prefer generic store-brand spaghetti sauce to Ragu spaghetti sauce eight out of ten times. The results of Piper's taste test would reinforce claims by critics of brand names that

Accepted Answer

A) consumers are always willing to pay more for brand names. 
B) brand names cause consumers to perceive differences that do not really exist. 
C) brand names are always preferred to generics. 
D) consumers are only willing to buy generics if they are less expensive. 
A) consumers are always willing to pay more for brand names. 
B) brand names cause consumers to perceive differences that do not really exist. 
C) brand names are always preferred to generics. 
D) consumers are only willing to buy generics if they are less expensive.

Question 6

A firm has the following cost structure:   ٍ
If this firm is in a typical perfectly competitive market, in the long run it will likely produce

Accepted Answer

A) 8 or fewer units of output. 
B) 10 units of output. 
C) more than 10 units of output. 
D) None of the above are necessarily correct because there is not enough information to tell. 
A) 8 or fewer units of output. 
B) 10 units of output. 
C) more than 10 units of output. 
D) None of the above are necessarily correct because there is not enough information to tell.

Question 7

For the economy as a whole, about what percentage of total firm revenue is spent on advertising?

Accepted Answer

The answer of For the economy as a whole, about...

Question 8

In a monopolistically competitive market,

Accepted Answer

A) entry by new firms is impeded by barriers to entry; thus, the number of firms in the market is never ideal. 
B) entry by new firms is impeded by barriers to entry, but the number of firms in the market is nevertheless always ideal. 
C) free entry ensures that the number of firms in the market is ideal. 
D) there may be too few or too many firms in the market, despite free entry. 
A) entry by new firms is impeded by barriers to entry; thus, the number of firms in the market is never ideal. 
B) entry by new firms is impeded by barriers to entry, but the number of firms in the market is nevertheless always ideal. 
C) free entry ensures that the number of firms in the market is ideal. 
D) there may be too few or too many firms in the market, despite free entry.

Question 9

A firm in a monopolistically competitive market faces a

Accepted Answer

A) downward-sloping demand curve because the firm's product is different from those offered by other firms. 
B) downward-sloping demand curve because there are only a few firms in the market. 
C) horizontal demand curve because there are many firms in the market. 
D) horizontal demand curve because firms can enter the market without restriction. 
A) downward-sloping demand curve because the firm's product is different from those offered by other firms. 
B) downward-sloping demand curve because there are only a few firms in the market. 
C) horizontal demand curve because there are many firms in the market. 
D) horizontal demand curve because firms can enter the market without restriction.

Question 10

Which of the following statements is not correct?

Accepted Answer

A) The typical monopolistically competitive firm could reduce its average total cost if it produced more output. 
B) Monopolistically competitive firms advertise in order to increase the elasticity of the demand curve they face. 
C) Expensive advertising might help consumers if it is a signal that the product is good. 
D) Brand names acquired at great cost might help consumers by assuring quality. 
A) The typical monopolistically competitive firm could reduce its average total cost if it produced more output. 
B) Monopolistically competitive firms advertise in order to increase the elasticity of the demand curve they face. 
C) Expensive advertising might help consumers if it is a signal that the product is good. 
D) Brand names acquired at great cost might help consumers by assuring quality.

Question 11

Free entry eliminates long-run profits for firms in competitive and monopolistic industries.

Accepted Answer

A) True 
 B)False

Question 12

Critics of advertising argue that advertising

Accepted Answer

A) creates desires that otherwise might not exist. 
B) hinders competition. 
C) often fails to convey substantive information. 
D) All of the above are correct. 
A) creates desires that otherwise might not exist. 
B) hinders competition. 
C) often fails to convey substantive information. 
D) All of the above are correct.

Question 13

Figure 16-4  
-Refer to Figure 16-4. At the profit-maximizing, or loss-minimizing, output level, the firm in this figure has total revenue of approximately

Accepted Answer

A) $12,000. 
B) $21,000. 
C) $24,000. 
D) $27,300. 
A) $12,000. 
B) $21,000. 
C) $24,000. 
D) $27,300.

Question 14

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, diners 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 15

Product differentiation always leads to some measure of market power.

Accepted Answer

A) True 
 B)False

Question 16

In a monopolistically competitive industry, a firm's demand curve also represent its

Accepted Answer

A) marginal revenue. 
B) marginal cost. 
C) average revenue. 
D) profit. 
A) marginal revenue. 
B) marginal cost. 
C) average revenue. 
D) profit.

Question 17

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 K?

Accepted Answer

A) about 8% 
B) about 36% 
C) about 48% 
D) about 84% 
A) about 8% 
B) about 36% 
C) about 48% 
D) about 84%

Question 18

The market structure in which each firm has a monopoly over the product it makes, but many other firms make similar products that compete for the same customers is called

Accepted Answer

monopolist

Question 19

In some countries, brand name fast-food restaurants are not allowed to operate. Such restrictions are likely to

Accepted Answer

A) enhance the social welfare of society. 
B) increase the number of fast-food restaurants. 
C) reduce barriers to entry in imperfect markets. 
D) reduce the competitive nature of local fast-food markets. 
A) enhance the social welfare of society. 
B) increase the number of fast-food restaurants. 
C) reduce barriers to entry in imperfect markets. 
D) reduce the competitive nature of local fast-food markets.

Question 20

Figure 16-10
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-10. When the firm is maximizing its profit,

Accepted Answer

A) TR = $9,000 and TC =$16,000. 
B) TR = $14,000 and TC =$16,000. 
C) TR = $16,000 and TC =$16,000. 
D) MC exceeds MR by $66.66 on the last unit of output produced. 
A) TR = $9,000 and TC =$16,000. 
B) TR = $14,000 and TC =$16,000. 
C) TR = $16,000 and TC =$16,000. 
D) MC exceeds MR by $66.66 on the last unit of output produced.

Exam 16: Monopolistic Competition

Figure 16-1 -Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?

An important difference between the situation faced by a profit-maximizing monopolistically competitive firm in the short run and the situation faced by that same firm in the long run is that in the short run,

Of the following market structures, which are considered imperfectly competitive? I. Perfect competition II. Monopoly III. Monopolistic competition IV. Oligopoly

Scenario 16-1 Suppose the following are the sales for all of the firms in two different industries. -Refer to Scenario 16-1. What are the concentration ratios for these industries?

A firm has the following cost structure: ٍ If this firm is in a typical perfectly competitive market, in the long run it will likely produce

For the economy as a whole, about what percentage of total firm revenue is spent on advertising?

In a monopolistically competitive market,

A firm in a monopolistically competitive market faces a

Which of the following statements is not correct?

Free entry eliminates long-run profits for firms in competitive and monopolistic industries.

Critics of advertising argue that advertising

Figure 16-4 -Refer to Figure 16-4. At the profit-maximizing, or loss-minimizing, output level, the firm in this figure has total revenue of approximately

Product differentiation always leads to some measure of market power.

In a monopolistically competitive industry, a firm's demand curve also represent its

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 K?

The market structure in which each firm has a monopoly over the product it makes, but many other firms make similar products that compete for the same customers is called

In some countries, brand name fast-food restaurants are not allowed to operate. Such restrictions are likely to

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. When the firm is maximizing its profit,

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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