Question 1

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 2

Monopolistically competitive firms, like monopoly firms, maximize their profits by charging a price that exceeds marginal cost.

Accepted Answer

A) True 
 B)False

Question 3

Table 16-5
A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20.
 $$\begin{array} { | l | l | } 
\hline \text { Price } & \text { Quantity } \
\hline \$ 30 & 1 \
\hline \$ 26 & 2 \
\hline \$ 22 & 3 \
\hline \$ 18 & 4 \
\hline \$ 14 & 5 \
\hline \$ 10 & 6 \
\hline \$ 6 & 7 \
\hline
\end{array}$$
-Refer to Table 16-5. When this firm profit maximizes and faces a constant marginal cost of $7, what is the amount of its markup over marginal cost?

Accepted Answer

The answer of Table 16-5
A monopolistically competitive firm faces the...

Question 4

Figure 16-9
​   ​
-Refer to Figure 16-9. If this firm profit-maximizes, how much cost will it incur?

Accepted Answer

The answer of Figure 16-9
​   ​
-Refer to Figure...

Question 5

Table 16-5
A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20.
 $$\begin{array} { | l | l | } 
\hline \text { Price } & \text { Quantity } \
\hline \$ 30 & 1 \
\hline \$ 26 & 2 \
\hline \$ 22 & 3 \
\hline \$ 18 & 4 \
\hline \$ 14 & 5 \
\hline \$ 10 & 6 \
\hline \$ 6 & 7 \
\hline
\end{array}$$
-Refer to Table 16-5. If this firm profit maximizes and faces a constant marginal cost of $7, does it have excess capacity? How do you know?

Accepted Answer

Yes, avera

Question 6

One thing that both critics of advertising and defenders of advertising agree on is that advertising fosters competition.

Accepted Answer

A) True 
 B)False

Question 7

Figure 16-6
The figure is drawn for a monopolistically competitive firm.   ​
-Refer to Figure 16-6. If the firm were to produce 154.92 units of output,

Accepted Answer

A) efficient scale would not be realized. 
B) the firm would earn zero profit. 
C) the firm would earn a positive profit. 
D) ATC would be at its minimum value. 
A) efficient scale would not be realized. 
B) the firm would earn zero profit. 
C) the firm would earn a positive profit. 
D) ATC would be at its minimum value.

Question 8

A markup of price over marginal cost is inconsistent with free entry and zero profit.

Accepted Answer

A) True 
 B)False

Question 9

When an industry has many firms, the industry is

Accepted Answer

A) an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. 
B) an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
C) monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
D) perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. 
A) an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. 
B) an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
C) monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
D) perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products.

Question 10

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 11

In a long-run equilibrium,

Accepted Answer

A) only a perfectly competitive firm operates at its efficient scale. 
B) only a monopolistically competitive firm operates at its efficient scale. 
C) neither a competitive firm nor a monopolistically competitive firm charges a markup over marginal cost. 
D) both a perfectly competitive firm and a monopolistically competitive firm operate at their efficient scale of production. 
A) only a perfectly competitive firm operates at its efficient scale. 
B) only a monopolistically competitive firm operates at its efficient scale. 
C) neither a competitive firm nor a monopolistically competitive firm charges a markup over marginal cost. 
D) both a perfectly competitive firm and a monopolistically competitive firm operate at their efficient scale of production.

Question 12

Product differentiation always leads to some measure of market power.

Accepted Answer

A) True 
 B)False

Question 13

In a monopolistically competitive market, the demand curves faced by incumbent firms are unaffected by the entry of new firms into the market.

Accepted Answer

A) True 
 B)False

Question 14

What is meant by the term "excess capacity" as it relates to monopolistically competitive firms?

Accepted Answer

Monopolistically competitive f

Question 15

Describe the shape of the monopolistically competitive firm's demand curve.

Accepted Answer

The answer of Describe the shape of the monopolistically competitive...

Question 16

Figure 16-9
​   ​
-Refer to Figure 16-9. If this firm profit-maximizes, how much output will it produce?

Accepted Answer

The answer of Figure 16-9
​   ​
-Refer to Figure...

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

When a monopolistically competitive firm raises its price,

Accepted Answer

A) quantity demanded falls to zero. 
B) quantity demanded declines but not to zero. 
C) the market supply curve shifts outward. 
D) quantity demanded remains constant. 
A) quantity demanded falls to zero. 
B) quantity demanded declines but not to zero. 
C) the market supply curve shifts outward. 
D) quantity demanded remains constant.

Question 19

In a monopolistically competitive market, the number of firms adjusts until economic profits are driven to zero.

Accepted Answer

A) True 
 B)False

Question 20

Advertising during the Super Bowl is an example of information about quality contained primarily in the existence and expense of the advertising.

Accepted Answer

A) True 
 B)False

Exam 16: Monopolistic Competition

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

Monopolistically competitive firms, like monopoly firms, maximize their profits by charging a price that exceeds marginal cost.

Figure 16-9 ​ ​ -Refer to Figure 16-9. If this firm profit-maximizes, how much cost will it incur?

One thing that both critics of advertising and defenders of advertising agree on is that advertising fosters competition.

Figure 16-6 The figure is drawn for a monopolistically competitive firm. ​ -Refer to Figure 16-6. If the firm were to produce 154.92 units of output,

A markup of price over marginal cost is inconsistent with free entry and zero profit.

When an industry has many firms, the industry is

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

In a long-run equilibrium,

Product differentiation always leads to some measure of market power.

In a monopolistically competitive market, the demand curves faced by incumbent firms are unaffected by the entry of new firms into the market.

What is meant by the term "excess capacity" as it relates to monopolistically competitive firms?

Describe the shape of the monopolistically competitive firm's demand curve.

Figure 16-9 ​ ​ -Refer to Figure 16-9. If this firm profit-maximizes, how much output will it produce?

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

When a monopolistically competitive firm raises its price,

In a monopolistically competitive market, the number of firms adjusts until economic profits are driven to zero.

Advertising during the Super Bowl is an example of information about quality contained primarily in the existence and expense of the advertising.

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 Nations 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

Figure 16-9 -Refer to Figure 16-9. If this firm profit-maximizes, how much cost will it incur?

Figure 16-6 The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-6. If the firm were to produce 154.92 units of output,

Figure 16-9 -Refer to Figure 16-9. If this firm profit-maximizes, how much output will it produce?