Question 1

For a monopolistically competitive firm,

Accepted Answer

A) marginal revenue and price are the same. 
B) at the profit-maximizing quantity of output, marginal revenue equals marginal cost. 
C) at the profit-maximizing quantity of output, price equals marginal cost. 
D) at the profit-maximizing quantity of output, price equals the minimum of average total cost. 
A) marginal revenue and price are the same. 
B) at the profit-maximizing quantity of output, marginal revenue equals marginal cost. 
C) at the profit-maximizing quantity of output, price equals marginal cost. 
D) at the profit-maximizing quantity of output, price equals the minimum of average total cost.

Question 2

Discuss how brand names may enhance the efficiency of markets in a less developed country.

Accepted Answer

Recognizable brand names signal quality

Question 3

Figure 16-3  
-Refer to Figure 16-3. The maximum total short-run economic profit for the monopolistically competitive firm in this figure is

Accepted Answer

A) −$3,000. 
B) $3,000. 
C) $9,000. 
D) $24,000. 
A) −$3,000. 
B) $3,000. 
C) $9,000. 
D) $24,000.

Question 4

The relationship between advertising and product differentiation is

Accepted Answer

A) positive; the more differentiated the product, the more a firm is likely to spend on advertising. 
B) negative; the more differentiated the product, the less a firm is likely to spend on advertising. 
C) zero; there is no relationship between product differentiation and advertising. 
D) irrelevant; firms with differentiated products do not need to advertise. 
A) positive; the more differentiated the product, the more a firm is likely to spend on advertising. 
B) negative; the more differentiated the product, the less a firm is likely to spend on advertising. 
C) zero; there is no relationship between product differentiation and advertising. 
D) irrelevant; firms with differentiated products do not need to advertise.

Question 5

Figure 16-10
​   ​
-Refer to Figure 16-10. If this firm minimized cost, how much output will it produce?

Accepted Answer

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

Question 6

Evaluate the following statement in the context of business-stealing and product-variety externalities: "We have too many student apartments in this town already. Statistics show that vacancy rates average 15 percent during any given semester."

Accepted Answer

Business-stealing effect: if new entrant

Question 7

Figure 16-12
​   ​
-Refer to Figure 16-12. The difference between the price charged by the monopolistically competitive firm and the price that would be charged if this firm operated in a perfectly competitive market is represented by which line segment?

Accepted Answer

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

Question 8

In which of the following market structures can firms earn economic profits in the long run?

Accepted Answer

A) Perfect competition only 
B) Monopolistic competition only 
C) Monopoly only 
D) Monopolistic competition and monopoly 
A) Perfect competition only 
B) Monopolistic competition only 
C) Monopoly only 
D) Monopolistic competition and monopoly

Question 9

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, how much revenue does he earn per day?

Accepted Answer

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

Question 10

In the long run, a monopolistically competitive firm produces a quantity that is

Accepted Answer

A) equal to the efficient scale. 
B) less than the efficient scale. 
C) greater than the efficient scale. 
D) consistent with diseconomies of scale. 
A) equal to the efficient scale. 
B) less than the efficient scale. 
C) greater than the efficient scale. 
D) consistent with diseconomies of scale.

Question 11

Defenders of advertising argue that firms use advertising as a signal of quality, even if the advertising delivers little helpful information about the product.

Accepted Answer

A) True 
 B)False

Question 12

In monopolistically competitive markets, free entry and exit suggests that

Accepted Answer

A) the market structure will eventually be characterized by perfect competition in the long run. 
B) all firms earn zero economic profits in the long run. 
C) some firms will be able to earn economic profits in the long run. 
D) some firms will be forced to incur economic losses in the long run. 
A) the market structure will eventually be characterized by perfect competition in the long run. 
B) all firms earn zero economic profits in the long run. 
C) some firms will be able to earn economic profits in the long run. 
D) some firms will be forced to incur economic losses in the long run.

Question 13

Figure 16-5
The figure is drawn for a monopolistically competitive firm.  
-Refer to Figure 16-5. Given this firm's cost curves, if the firm were perfectly competitive rather than monopolistically competitive, then in a long-run equilibrium it would produce

Accepted Answer

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

Question 14

Figure 16-2
This figure depicts a situation in a monopolistically competitive market.  
-Refer to Figure 16-2. 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 15

Which of the following conditions is characteristic of a monopolistically competitive firm in both the short run and the long run?

Accepted Answer

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

Question 16

Brand names are rarely used to convey information about product quality.

Accepted Answer

A) True 
 B)False

Question 17

Figure 16-8   ​
-Refer to Figure 16-8. Assume a monopolistically competitive firm is currently producing the profit-maximizing level of output. Which of the following represents the excess capacity of this firm?

Accepted Answer

A) BJ 
B) GH 
C) LM 
D) There is no excess capacity. 
A) BJ 
B) GH 
C) LM 
D) There is no excess capacity.

Question 18

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. If the government forced Beatrice's to produce at the efficient scale of output, what is the maximum profit Beatrice's could earn?

Accepted Answer

A) $59 
B) $67 
C) $101 
D) $126 
A) $59 
B) $67 
C) $101 
D) $126

Question 19

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Accepted Answer

A) True 
 B)False

Question 20

Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e., on an average night, 80 percent of the hotel rooms are full). This kind of excess capacity is indicative of what kind of market?

Accepted Answer

A) Perfect competition and monopolistic competition 
B) Perfect competition only 
C) Monopolistic competition only 
D) Oligopoly 
A) Perfect competition and monopolistic competition 
B) Perfect competition only 
C) Monopolistic competition only 
D) Oligopoly

Exam 16: Monopolistic Competition

For a monopolistically competitive firm,

Discuss how brand names may enhance the efficiency of markets in a less developed country.

Figure 16-3 -Refer to Figure 16-3. The maximum total short-run economic profit for the monopolistically competitive firm in this figure is

The relationship between advertising and product differentiation is

Figure 16-10 ​ ​ -Refer to Figure 16-10. If this firm minimized cost, how much output will it produce?

Evaluate the following statement in the context of business-stealing and product-variety externalities: "We have too many student apartments in this town already. Statistics show that vacancy rates average 15 percent during any given semester."

Figure 16-12 ​ ​ -Refer to Figure 16-12. The difference between the price charged by the monopolistically competitive firm and the price that would be charged if this firm operated in a perfectly competitive market is represented by which line segment?

In which of the following market structures can firms earn economic profits in the long run?

In the long run, a monopolistically competitive firm produces a quantity that is

Defenders of advertising argue that firms use advertising as a signal of quality, even if the advertising delivers little helpful information about the product.

In monopolistically competitive markets, free entry and exit suggests that

Figure 16-5 The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-5. Given this firm's cost curves, if the firm were perfectly competitive rather than monopolistically competitive, then in a long-run equilibrium it would produce

Figure 16-2 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-2. Which of the following will occur in the long run in this industry?

Which of the following conditions is characteristic of a monopolistically competitive firm in both the short run and the long run?

Brand names are rarely used to convey information about product quality.

Figure 16-8 ​ -Refer to Figure 16-8. Assume a monopolistically competitive firm is currently producing the profit-maximizing level of output. Which of the following represents the excess capacity of this firm?

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e., on an average night, 80 percent of the hotel rooms are full). This kind of excess capacity is indicative of what kind of 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

Figure 16-10 -Refer to Figure 16-10. If this firm minimized cost, how much output will it produce?

Figure 16-12 -Refer to Figure 16-12. The difference between the price charged by the monopolistically competitive firm and the price that would be charged if this firm operated in a perfectly competitive market is represented by which line segment?

Figure 16-8 -Refer to Figure 16-8. Assume a monopolistically competitive firm is currently producing the profit-maximizing level of output. Which of the following represents the excess capacity of this firm?