Question 1

Which of the following statements regarding monopolistic competition is not correct?

Accepted Answer

A) In the long-run equilibrium, price equals average total cost. 
B) In the long-run equilibrium, firms earn zero economic profit. 
C) In the long-run equilibrium, firms charge a price above marginal cost. 
D) In the long-run equilibrium, firms produce a quantity in excess of their efficient scale. 
A) In the long-run equilibrium, price equals average total cost. 
B) In the long-run equilibrium, firms earn zero economic profit. 
C) In the long-run equilibrium, firms charge a price above marginal cost. 
D) In the long-run equilibrium, firms produce a quantity in excess of their efficient scale.

Question 2

Which market structure(s) is(are) considered highly concentrated?

Accepted Answer

The answer of Which market structure(s) is(are) considered highly concentrated?...

Question 3

Monopolistic competition and monopoly are examples of a market structure called imperfect competition.

Accepted Answer

A) True 
 B)False

Question 4

When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium, marginal cost must lie below average total cost.

Accepted Answer

A) True 
 B)False

Question 5

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. What price should Peter charge per double scoop ice cream cone to maximize his profit?

Accepted Answer

A) $5.60 
B) $4.40 
C) $3.20 
D) $2.40 
A) $5.60 
B) $4.40 
C) $3.20 
D) $2.40

Question 6

The entry of new firms into a monopolistically competitive market is accompanied by

Accepted Answer

A) both positive and negative externalities. 
B) only positive externalities. 
C) only negative externalities. 
D) only private profit opportunities (no externalities). 
A) both positive and negative externalities. 
B) only positive externalities. 
C) only negative externalities. 
D) only private profit opportunities (no externalities).

Question 7

If we observe a great deal more advertising for Mucinex, an over-the-counter drug, than for a Grainger drill press, we can infer that

Accepted Answer

A) more money is spent on Mucinex than on Grainger drill presses. 
B) the market for Mucinex is more highly differentiated than the market for Grainger drill presses. 
C) Grainger has lower costs of production than Mucinex. 
D) Mucinex operates in an oligopoly, while Grainger operates in a monopolistically competitive market. 
A) more money is spent on Mucinex than on Grainger drill presses. 
B) the market for Mucinex is more highly differentiated than the market for Grainger drill presses. 
C) Grainger has lower costs of production than Mucinex. 
D) Mucinex operates in an oligopoly, while Grainger operates in a monopolistically competitive market.

Question 8

Figure 16-12  
-Refer to Figure 16-12. If this firm profit-maximizes, how much output will it produce?

Accepted Answer

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

Question 9

Monopolistically competitive firms could reduce the average total cost of producing by increasing output; therefore, these firms have

Accepted Answer

The answer of Monopolistically competitive firms could reduce the average...

Question 10

If firms in a monopolistically competitive market are incurring economic losses, which of the following statements describes the changes that occur as the market adjusts to the long-run equilibrium?

Accepted Answer

A) Each existing firm's demand curve shifts to the right. 
B) More firms exit the market. 
C) Each firm eliminates its excess capacity. 
D) Both a and b are correct. 
A) Each existing firm's demand curve shifts to the right. 
B) More firms exit the market. 
C) Each firm eliminates its excess capacity. 
D) Both a and b are correct.

Question 11

Defenders of advertising argue that it is not rational for profit-maximizing firms to spend money on advertising for products that have

Accepted Answer

A) superior quality. 
B) inferior or mediocre quality. 
C) low prices. 
D) limited availability. 
A) superior quality. 
B) inferior or mediocre quality. 
C) low prices. 
D) limited availability.

Question 12

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

Accepted Answer

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

Question 13

Critics of markets that are characterized by firms that sell brand name products argue that brand names encourage consumers to pay more for branded products that

Accepted Answer

A) have elastic demand curves. 
B) are very different from generic products. 
C) are indistinguishable from generic products. 
D) consumer-advocate groups have found to be inferior. 
A) have elastic demand curves. 
B) are very different from generic products. 
C) are indistinguishable from generic products. 
D) consumer-advocate groups have found to be inferior.

Question 14

Firms that spend a large amount of money on advertising a particular product are likely to be providing consumers with

Accepted Answer

A) information about the availability of the product. 
B) information about product price. 
C) a signal of product quality. 
D) a good example of wasted resources. 
A) information about the availability of the product. 
B) information about product price. 
C) a signal of product quality. 
D) a good example of wasted resources.

Question 15

A monopolistically competitive firm chooses its

Accepted Answer

A) price and quantity just as a monopoly does. 
B) quantity but faces a horizontal demand curve just as a competitive firm does. 
C) price but can sell any quantity at the market price just as an oligopoly does. 
D) price and quantity based on the decisions of the other firms in the industry just as an oligopoly does. 
A) price and quantity just as a monopoly does. 
B) quantity but faces a horizontal demand curve just as a competitive firm does. 
C) price but can sell any quantity at the market price just as an oligopoly does. 
D) price and quantity based on the decisions of the other firms in the industry just as an oligopoly does.

Question 16

Figure 16-11  
-Refer to Figure 16-11. What, if any, long run adjustment will occur in this industry?

Accepted Answer

firms will enter
pri

Question 17

Scenario 16-2
Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q.
-Refer to Scenario 16-2. If the marginal cost of producing this good is 0, how much total consumer surplus would consumers receive in this market?

Accepted Answer

A) 10 
B) 20 
C) 50 
D) 100 
A) 10 
B) 20 
C) 50 
D) 100

Question 18

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

Accepted Answer

A) perfectly competitive market. 
B) monopolistically competitive market. 
C) oligopoly. 
D) monopoly. 
A) perfectly competitive market. 
B) monopolistically competitive market. 
C) oligopoly. 
D) monopoly.

Question 19

A monopolistically competitive firm faces the following demand curve for its product:   The firm has total fixed costs of $120 and a constant marginal cost of $12 per unit. We can conclude that

Accepted Answer

A) firms will exit this market. 
B) firms will enter this market. 
C) this market is in long-run equilibrium. 
D) this firm is operating at its efficient scale. 
A) firms will exit this market. 
B) firms will enter this market. 
C) this market is in long-run equilibrium. 
D) this firm is operating at its efficient scale.

Question 20

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. What is the concentration ratio in Industry D?

Accepted Answer

A) 23% 
B) 39% 
C) 58% 
D) 72% 
A) 23% 
B) 39% 
C) 58% 
D) 72%

Exam 16: Monopolistic Competition

Which of the following statements regarding monopolistic competition is not correct?

Which market structure(s) is(are) considered highly concentrated?

Monopolistic competition and monopoly are examples of a market structure called imperfect competition.

When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium, marginal cost must lie below average total cost.

The entry of new firms into a monopolistically competitive market is accompanied by

If we observe a great deal more advertising for Mucinex, an over-the-counter drug, than for a Grainger drill press, we can infer that

Figure 16-12 -Refer to Figure 16-12. If this firm profit-maximizes, how much output will it produce?

Monopolistically competitive firms could reduce the average total cost of producing by increasing output; therefore, these firms have

If firms in a monopolistically competitive market are incurring economic losses, which of the following statements describes the changes that occur as the market adjusts to the long-run equilibrium?

Defenders of advertising argue that it is not rational for profit-maximizing firms to spend money on advertising for products that have

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

Critics of markets that are characterized by firms that sell brand name products argue that brand names encourage consumers to pay more for branded products that

Firms that spend a large amount of money on advertising a particular product are likely to be providing consumers with

A monopolistically competitive firm chooses its

Figure 16-11 -Refer to Figure 16-11. What, if any, long run adjustment will occur in this industry?

Scenario 16-2 Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q. -Refer to Scenario 16-2. If the marginal cost of producing this good is 0, how much total consumer surplus would consumers receive in this market?

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

A monopolistically competitive firm faces the following demand curve for its product: The firm has total fixed costs of $120 and a constant marginal cost of $12 per unit. We can conclude that

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. What is the concentration ratio in Industry D?

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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