Question 1

Figure 16-5
The figure is drawn for a monopolistically competitive firm.  
-Refer to Figure 16-5. In order to maximize its profit, the firm will choose to produce

Accepted Answer

A) less than 100 units of output. 
B) 100 units of output. 
C) between 100 and 133.33 units of output. 
D) more than 133.33 units of output. 
A) less than 100 units of output. 
B) 100 units of output. 
C) between 100 and 133.33 units of output. 
D) more than 133.33 units of output.

Question 2

Figure 16-10
​   ​
-Refer to Figure 16-10. How much excess capacity does this firm have?

Accepted Answer

The answer of Figure 16-10
​   ​
-Refer to Figure...

Question 3

Figure 16-9
​   ​
-Refer to Figure 16-9. What, if any, long run adjustment will occur in this industry?

Accepted Answer

firms will enter
pri

Question 4

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

Accepted Answer

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

Question 5

Adibok knows that it produces and sells high-quality athletic shoes. Wurkout knows that it produces and sells low-quality athletic shoes. According to the signaling theory of advertising,

Accepted Answer

A) both Adibok and Wurkout have incentives to spend large amounts of money on advertising for their athletic shoes. 
B) Adibok has an incentive to spend a large amount of money on advertising for its athletic shoes, but Wurkout does not. 
C) Wurkout has an incentive to spend a large amount of money on advertising for its athletic shoes, but Adibok does not. 
D) neither Adibok nor Wurkout has an incentive to spend a large amount of money on advertising for their athletic shoes. 
A) both Adibok and Wurkout have incentives to spend large amounts of money on advertising for their athletic shoes. 
B) Adibok has an incentive to spend a large amount of money on advertising for its athletic shoes, but Wurkout does not. 
C) Wurkout has an incentive to spend a large amount of money on advertising for its athletic shoes, but Adibok does not. 
D) neither Adibok nor Wurkout has an incentive to spend a large amount of money on advertising for their athletic shoes.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

A monopolistically competitive firm faces a downward-sloping demand curve because there are few firms in the market.

Accepted Answer

A) True 
 B)False

Question 8

The product-variety externality states that entry of a new firm conveys a negative externality on consumers.

Accepted Answer

A) True 
 B)False

Question 9

Table 16-4
Beatrice's Birthday Cakes operates in a monopolistically competitive market, so it is one bakery among many in the market for birthday cakes. The following table presents cost and revenue data for birthday cakes at Beatrice's.
​
​
   ​
​
-Refer to Table 16-4. What is the profit-maximizing output for Beatrice's Birthday Cakes?

Accepted Answer

A) 3 cakes 
B) 4 cakes 
C) 5 cakes 
D) 6 cakes 
A) 3 cakes 
B) 4 cakes 
C) 5 cakes 
D) 6 cakes

Question 10

Entry of new firms in monopolistically competitive industries can convey a positive externality on consumers because new products result in more consumer surplus. This externality is called the

Accepted Answer

product-va

Question 11

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 12

Ellie consumes Pepsi exclusively. She claims that there is a clear taste difference and that competing brands of cola leave an unsavory taste in her mouth. In a blind taste test, Ellie is found to prefer Pepsi to store-brand cola nine out of ten times. The results of Ellie's taste test would refute 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) consumers with the lowest levels of income are the most likely to be influenced by brand name advertising. 
D) brand names are a form of socially efficient advertising. 
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) consumers with the lowest levels of income are the most likely to be influenced by brand name advertising. 
D) brand names are a form of socially efficient advertising.

Question 13

Figure 16-11
​   ​
-Refer to Figure 16-11. What is the first step in this industry's adjustment to long run equilibrium?

Accepted Answer

The answer of Figure 16-11
​   ​
-Refer to Figure...

Question 14

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 15

In a long-run equilibrium, both perfectly competitive markets and monopolistically competitive markets have price equal to average total cost.

Accepted Answer

A) True 
 B)False

Question 16

​A monopolistically competitive firm is a price-taker.

Accepted Answer

A) True 
 B)False

Question 17

Scenario 16-4
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.)
 $\begin{array}{|l|l|l|l|l|}
\hline \text { Quantity } & \text { Price } & \text { MR } & \text { MC } & \text { ATC } \
\hline 20 & \$ 5.60 & \$ 5.20 & \$ 2.20 & \$ 2.05 \
\hline 40 & \$ 5.20 & \$ 4.40 & \$ 2.40 & \$ 2.10 \
\hline 60 & \$ 4.80 & \$ 3.60 & \$ 2.60 & \$ 2.15 \
\hline 80 & \$ 4.40 & \$ 2.80 & \$ 2.80 & \$ 2.20 \
\hline 100 & \$ 4.00 & \$ 2.00 & \$ 3.00 & \$ 2.25 \
\hline 120 & \$ 3.60 & \$ 1.20 & \$ 3.20 & \$ 2.30 \
\hline 140 & \$ 3.20 & \$ 0.40 & \$ 3.40 & \$ 2.35 \
\hline 160 & \$ 2.80 & -\$ 0.40 & \$ 3.60 & \$ 2.40 \
\hline 180 & \$ 2.40 & -\$ 1.20 & \$ 3.80 & \$ 2.45 \
\hline
\end{array}$

-Refer to Scenario 16-4. When Peter maximizes his profits, what is his total cost per day?

Accepted Answer

The answer of Scenario 16-4
Peter operates an ice cream shop...

Question 18

Which of the following conditions is characteristic of a monopolistically competitive firm in short-run equilibrium?

Accepted Answer

A) MR > MC 
B) P = MC 
C) P > ATC 
D) MR = MC 
A) MR > MC 
B) P = MC 
C) P > ATC 
D) MR = MC

Question 19

In the short run, a firm operating in a monopolistically competitive market

Accepted Answer

A) produces an output level where marginal revenue equals average total cost. 
B) produces an output where marginal revenue equals marginal cost, and the price is determined by demand. 
C) must earn zero economic profits. 
D) maximizes revenues as well as profits. 
A) produces an output level where marginal revenue equals average total cost. 
B) produces an output where marginal revenue equals marginal cost, and the price is determined by demand. 
C) must earn zero economic profits. 
D) maximizes revenues as well as profits.

Question 20

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures features entry in the long run?

Accepted Answer

perfect co

Exam 16: Monopolistic Competition

Figure 16-5 The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-5. In order to maximize its profit, the firm will choose to produce

Figure 16-10 ​ ​ -Refer to Figure 16-10. How much excess capacity does this firm have?

Figure 16-9 ​ ​ -Refer to Figure 16-9. What, if any, long run adjustment will occur in this industry?

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

Adibok knows that it produces and sells high-quality athletic shoes. Wurkout knows that it produces and sells low-quality athletic shoes. According to the signaling theory of advertising,

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

A monopolistically competitive firm faces a downward-sloping demand curve because there are few firms in the market.

The product-variety externality states that entry of a new firm conveys a negative externality on consumers.

Entry of new firms in monopolistically competitive industries can convey a positive externality on consumers because new products result in more consumer surplus. This externality is called the

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

Figure 16-11 ​ ​ -Refer to Figure 16-11. What is the first step in this industry's adjustment to long run equilibrium?

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.

In a long-run equilibrium, both perfectly competitive markets and monopolistically competitive markets have price equal to average total cost.

​A monopolistically competitive firm is a price-taker.

Which of the following conditions is characteristic of a monopolistically competitive firm in short-run equilibrium?

In the short run, a firm operating in a monopolistically competitive market

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures features entry in the long run?

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 16-10 -Refer to Figure 16-10. How much excess capacity does this firm have?

Figure 16-9 -Refer to Figure 16-9. What, if any, long run adjustment will occur in this industry?

Figure 16-11 -Refer to Figure 16-11. What is the first step in this industry's adjustment to long run equilibrium?

A monopolistically competitive firm is a price-taker.