Question 1

Figure 16-3  
-Refer to Figure 16-3. At the profit-maximizing, or loss-minimizing, output level, how many units of output will the firm in this figure produce?

Accepted Answer

A) 20 
B) 30 
C) 40 
D) This firm will choose not to produce. 
A) 20 
B) 30 
C) 40 
D) This firm will choose not to produce.

Question 2

The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

Accepted Answer

A) product-variety externality that is observed in monopolistically competitive markets. 
B) inefficiencies of the long-term losses earned by monopolistically copmetitive firms. 
C) business-stealing externality that is observed in monopolistically competitive markets. 
D) persistence of positive profits into the long run for monopolistically competitive firms. 
A) product-variety externality that is observed in monopolistically competitive markets. 
B) inefficiencies of the long-term losses earned by monopolistically copmetitive firms. 
C) business-stealing externality that is observed in monopolistically competitive markets. 
D) persistence of positive profits into the long run for monopolistically competitive firms.

Question 3

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product, the firm will

Accepted Answer

A) be able to increase its markup over marginal cost. 
B) eventually have to reduce price to remain competitive. 
C) increase the welfare of society. 
D) reduce its average total cost. 
A) be able to increase its markup over marginal cost. 
B) eventually have to reduce price to remain competitive. 
C) increase the welfare of society. 
D) reduce its average total cost.

Question 4

Free entry eliminates long-run profits for firms in competitive and monopolistic industries.

Accepted Answer

A) True 
 B)False

Question 5

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Accepted Answer

A) firms are more likely to operate at efficient scale. 
B) there are likely to be too many firms in a monopolistically competitive market. 
C) market efficiency is likely to be enhanced by the entry of new firms. 
D) all firms are earning negative economic profit. 
A) firms are more likely to operate at efficient scale. 
B) there are likely to be too many firms in a monopolistically competitive market. 
C) market efficiency is likely to be enhanced by the entry of new firms. 
D) all firms are earning negative economic profit.

Question 6

Figure 16-6
The figure is drawn for a monopolistically competitive firm.   ​
-Refer to Figure 16-6. The firm's maximum profit

Accepted Answer

A) is −$7,000. 
B) is −$5,000. 
C) is −$2,000. 
D) cannot be determined from the figure. 
A) is −$7,000. 
B) is −$5,000. 
C) is −$2,000. 
D) cannot be determined from the figure.

Question 7

Figure 16-9
​   ​
-Refer to Figure 16-9. If this firm profit-maximizes, what price will it charge?

Accepted Answer

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

Question 8

In the debate between the critics and defenders of advertising, what conclusion have policymakers come to regarding the effect of advertising on competition - advertising makes markets more competitive or less competitive?

Accepted Answer

The answer of In the debate between the critics and...

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. How many ice cream cones should Peter sell in one day to maximize his profits?

Accepted Answer

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

Question 10

The two types of imperfectly competitive markets are

Accepted Answer

A) monopoly and monopolistic competition. 
B) monopoly and oligopoly. 
C) monopolistic competition and oligopoly. 
D) monopolistic competition and cartels. 
A) monopoly and monopolistic competition. 
B) monopoly and oligopoly. 
C) monopolistic competition and oligopoly. 
D) monopolistic competition and cartels.

Question 11

In a market that is characterized by imperfect competition,

Accepted Answer

A) firms are price takers. 
B) there are always a large number of firms. 
C) there are at least a few firms that compete with one another. 
D) the actions of one firm in the market never have any impact on the other firms' profits. 
A) firms are price takers. 
B) there are always a large number of firms. 
C) there are at least a few firms that compete with one another. 
D) the actions of one firm in the market never have any impact on the other firms' profits.

Question 12

Scenario 16-6
​
Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products.
-Refer to Scenario 16-6. Which friend is a critic of brand names?

Accepted Answer

The answer of Scenario 16-6
​
Dean goes to the grocery store...

Question 13

Figure 16-4
​
​
 Graph (a)

Graph (b)

Graph (c)

Graph (d)
 
 ​
​
-Refer to Figure 16-4. Graph (b) is consistent with a firm in a monopolistically competitive market that is

Accepted Answer

A) not in long-run equilibrium. 
B) earning a positive economic profit. 
C) producing its efficient scale of output. 
D) in long-run equilibrium. 
A) not in long-run equilibrium. 
B) earning a positive economic profit. 
C) producing its efficient scale of output. 
D) in long-run equilibrium.

Question 14

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. Which industry has the lowest concentration ratio?

Accepted Answer

A) Industry C 
B) Industry B 
C) Industry A 
D) Industry D 
A) Industry C 
B) Industry B 
C) Industry A 
D) Industry D

Question 15

Monopolistic competition is the only market structure that features many sellers.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following industries has the highest concentration ratio?

Accepted Answer

A) Jeans 
B) Cheese 
C) Soda 
D) Restaurants 
A) Jeans 
B) Cheese 
C) Soda 
D) Restaurants

Question 17

In markets where the government imposes an excise tax on unit sales, it also has a tendency to dabble with restrictions on advertising (for example, cigarettes and hard liquor). Do potential (or actual) restrictions on advertising in these markets serve the interest of a government that is interested in maximizing its tax revenue from the sale of these products? Explain your answer.

Accepted Answer

In the case of the examples given, deman

Question 18

Entry of new firms in monopolistically competitive industries can convey a negative externality on producers because firms lose customers and profits from the entry of new competitors. This externality is called the

Accepted Answer

business-s

Question 19

Which of the following statements is correct?

Accepted Answer

A) The more similar Firm A's product is to Firm B's product, the more likely Firm A is to advertise. 
B) Monopolistically competitive firms advertise in order to increase the elasticity of the demand curve they face. 
C) According to the signaling theory, the more product information an advertisement contains the more effective it is. 
D) Brand names may help consumers if they provide information about the quality of a product when acquiring such information is difficult. 
A) The more similar Firm A's product is to Firm B's product, the more likely Firm A is to advertise. 
B) Monopolistically competitive firms advertise in order to increase the elasticity of the demand curve they face. 
C) According to the signaling theory, the more product information an advertisement contains the more effective it is. 
D) Brand names may help consumers if they provide information about the quality of a product when acquiring such information is difficult.

Question 20

One characteristic of an oligopoly market structure is

Accepted Answer

A) firms in the industry are typically characterized by very diverse product lines. 
B) firms in the industry have some degree of market power. 
C) products typically sell at a price equal to their marginal cost of production. 
D) the actions of one seller have no impact on the profitability of other sellers. 
A) firms in the industry are typically characterized by very diverse product lines. 
B) firms in the industry have some degree of market power. 
C) products typically sell at a price equal to their marginal cost of production. 
D) the actions of one seller have no impact on the profitability of other sellers.

Exam 16: Monopolistic Competition

Figure 16-3 -Refer to Figure 16-3. At the profit-maximizing, or loss-minimizing, output level, how many units of output will the firm in this figure produce?

The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product, the firm will

Free entry eliminates long-run profits for firms in competitive and monopolistic industries.

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Figure 16-6 The figure is drawn for a monopolistically competitive firm. ​ -Refer to Figure 16-6. The firm's maximum profit

Figure 16-9 ​ ​ -Refer to Figure 16-9. If this firm profit-maximizes, what price will it charge?

In the debate between the critics and defenders of advertising, what conclusion have policymakers come to regarding the effect of advertising on competition - advertising makes markets more competitive or less competitive?

The two types of imperfectly competitive markets are

In a market that is characterized by imperfect competition,

Figure 16-4 ​ ​ Graph (a) Graph (b) Graph (c) Graph (d) ​ ​ -Refer to Figure 16-4. Graph (b) is consistent with a firm in a monopolistically competitive market that is

Monopolistic competition is the only market structure that features many sellers.

Which of the following industries has the highest concentration ratio?

Entry of new firms in monopolistically competitive industries can convey a negative externality on producers because firms lose customers and profits from the entry of new competitors. This externality is called the

Which of the following statements is correct?

One characteristic of an oligopoly market structure is

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 16-6 The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-6. The firm's maximum profit

Figure 16-9 -Refer to Figure 16-9. If this firm profit-maximizes, what price will it charge?

Figure 16-4 Graph (a) Graph (b) Graph (c) Graph (d) -Refer to Figure 16-4. Graph (b) is consistent with a firm in a monopolistically competitive market that is