Question 1

​A monopolistically competitive firm cannot earn an economic profit in the long run.

Accepted Answer

A) True 
 B)False

Question 2

Table 16-1
The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries.
​
​
 $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Firm } & \text { Industry A } & \text { Industry B } & \text { Industry C } & \text { Industry D } \
\hline 1 & 50,000 & 18,000 & 37,000 & 40,000 \
\hline 2 & 47,000 & 17,750 & 36,500 & 39,000 \
\hline 3 & 43,000 & 17,250 & 35,500 & 37,000 \
\hline 4 & 38,000 & 16,500 & 34,000 & 34,000 \
\hline 5 & 32,000 & 15,500 & 32,000 & 30,000 \
\hline 6 & 25,000 & 14,250 & 29,500 & 25,000 \
\hline 7 & 17,000 & 12,750 & 26,500 & 19,000 \
\hline 8 & 8,000 & 11,000 & 23,000 & 12,000 \
\hline \text { Total } & \mathbf { 2 7 0 , 0 0 0 } & \mathbf { 1 3 0 , 0 0 0 } & \mathbf { 3 0 0 , 0 0 0 } & \mathbf { 2 5 0 , 0 0 0 } \
\hline
\end{array}$$ ​
-Refer to Table 16-1. What is the concentration ratio for Industry C?

Accepted Answer

A) Approximately 25% 
B) Approximately 36% 
C) Approximately 48% 
D) Approximately 58% 
A) Approximately 25% 
B) Approximately 36% 
C) Approximately 48% 
D) Approximately 58%

Question 3

​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 4

Economists who argue that advertising enhances market efficiency suggest that celebrity advertising signals inferior product quality.

Accepted Answer

A) True 
 B)False

Question 5

Figure 16-11
​   ​
-Refer to Figure 16-11. Which letter represents the profit-maximizing price?

Accepted Answer

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

Question 6

The government may not be able to improve the inefficiencies of a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 7

Why does a typical monopolistically competitive firm face a downward-sloping demand curve?

Accepted Answer

Because its product

Question 8

​In the long run, a monopolistically competitive firm produces at efficient scale.

Accepted Answer

A) True 
 B)False

Question 9

Figure 16-4
​
​
 Graph (a)

Graph (b)

Graph (c)

Graph (d)
 
 ​
​
-Refer to Figure 16-4. Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into this monopolistically competitive industry?

Accepted Answer

A) Graph (a) 
B) Graph (b) 
C) Graph (c) 
D) Graph (d) 
A) Graph (a) 
B) Graph (b) 
C) Graph (c) 
D) Graph (d)

Question 10

A firm in a monopolistically competitive market can earn both short-run and long-run profits.

Accepted Answer

A) True 
 B)False

Question 11

A firm in a monopolistically competitive market can earn short-run profits but not long-run profits.

Accepted Answer

A) True 
 B)False

Question 12

Consider two industries in which firms hold the following market shares:
Industry A: 25%, 20%, 18%, 15%, 8%, 7%, 4%, 2%, 1%
Industry B: 30%, 10%, 9%, 8%, 8%, 8%, 8%, 6%, 6%, 5%, 2%
What are the concentration ratios for each industry? Which is more competitive?

Accepted Answer

The answer of Consider two industries in which firms hold...

Question 13

Figure 16-3  
-Refer to Figure 16-3. Which of the following will occur in the long run in this industry?

Accepted Answer

A) Firms will exit this industry. 
B) Firms will enter this industry. 
C) This firm will continue to earn positive economic profits. 
D) This firm will incur losses. 
A) Firms will exit this industry. 
B) Firms will enter this industry. 
C) This firm will continue to earn positive economic profits. 
D) This firm will incur losses.

Question 14

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

Accepted Answer

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

Question 15

The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.

Accepted Answer

A) True 
 B)False

Question 16

Figure 16-8   ​
-Refer to Figure 16-8. If this firm were operating in a perfectly competitive market in the long run, it would charge a price equal to point

Accepted Answer

A) I but in a monopolistically competitive market, the profit-maximizing price is C. 
B) E but in a monopolistically competitive market, the profit-maximizing price is C. 
C) C but in a monopolistically competitive market, the profit-maximizing price is G. 
D) G but in a monopolistically competitive market, the profit-maximizing price is J. 
A) I but in a monopolistically competitive market, the profit-maximizing price is C. 
B) E but in a monopolistically competitive market, the profit-maximizing price is C. 
C) C but in a monopolistically competitive market, the profit-maximizing price is G. 
D) G but in a monopolistically competitive market, the profit-maximizing price is J.

Question 17

Evaluate the following statement: "Advertisements that use celebrity endorsements are devoid of any value and do not enhance the efficient functioning of markets."

Accepted Answer

Some people argue that celebrity endorse

Question 18

A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

Accepted Answer

A) no change in profits for all hotels/motels. 
B) reduced efficiency of local lodging markets. 
C) a request by consumers to increase the number of billboards. 
D) increased price competition among hotels/motels in the community. 
A) no change in profits for all hotels/motels. 
B) reduced efficiency of local lodging markets. 
C) a request by consumers to increase the number of billboards. 
D) increased price competition among hotels/motels in the community.

Question 19

Assume the role of a defender of advertising. Describe the characteristics of advertising that enhance the effectiveness of markets and increase the social welfare of society.

Accepted Answer

Advertising provides information to cons

Question 20

Figure 16-10
​   ​
-Refer to Figure 16-10. Compare the price and marginal cost in this market with price and marginal cost if this were a perfectly competitive market.

Accepted Answer

Monopolistic competi

Exam 16: Monopolistic Competition

​A monopolistically competitive firm cannot earn an economic profit in the long run.

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

Economists who argue that advertising enhances market efficiency suggest that celebrity advertising signals inferior product quality.

Figure 16-11 ​ ​ -Refer to Figure 16-11. Which letter represents the profit-maximizing price?

The government may not be able to improve the inefficiencies of a monopolistically competitive market.

Why does a typical monopolistically competitive firm face a downward-sloping demand curve?

​In the long run, a monopolistically competitive firm produces at efficient scale.

Figure 16-4 ​ ​ Graph (a) Graph (b) Graph (c) Graph (d) ​ ​ -Refer to Figure 16-4. Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into this monopolistically competitive industry?

A firm in a monopolistically competitive market can earn both short-run and long-run profits.

A firm in a monopolistically competitive market can earn short-run profits but not long-run profits.

Consider two industries in which firms hold the following market shares: Industry A: 25%, 20%, 18%, 15%, 8%, 7%, 4%, 2%, 1% Industry B: 30%, 10%, 9%, 8%, 8%, 8%, 8%, 6%, 6%, 5%, 2% What are the concentration ratios for each industry? Which is more competitive?

Figure 16-3 -Refer to Figure 16-3. Which of the following will occur in the long run in this industry?

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

The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.

Figure 16-8 ​ -Refer to Figure 16-8. If this firm were operating in a perfectly competitive market in the long run, it would charge a price equal to point

Evaluate the following statement: "Advertisements that use celebrity endorsements are devoid of any value and do not enhance the efficient functioning of markets."

A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

Assume the role of a defender of advertising. Describe the characteristics of advertising that enhance the effectiveness of markets and increase the social welfare of society.

Figure 16-10 ​ ​ -Refer to Figure 16-10. Compare the price and marginal cost in this market with price and marginal cost if this were a perfectly competitive market.

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

A monopolistically competitive firm cannot earn an economic profit in the long run.

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

Figure 16-11 -Refer to Figure 16-11. Which letter represents the profit-maximizing price?

In the long run, a monopolistically competitive firm produces at efficient scale.

Figure 16-4 Graph (a) Graph (b) Graph (c) Graph (d) -Refer to Figure 16-4. Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into this monopolistically competitive industry?

Figure 16-8 -Refer to Figure 16-8. If this firm were operating in a perfectly competitive market in the long run, it would charge a price equal to point

Figure 16-10 -Refer to Figure 16-10. Compare the price and marginal cost in this market with price and marginal cost if this were a perfectly competitive market.