Question 1

Which of the following statements is not correct?

Accepted Answer

A) Monopolistic competition is different from monopoly because monopolistic competition is characterized by free entry, whereas monopoly is characterized by barriers to entry. 
B) Both monopolistic competition and oligopoly fall in between the more extreme market structures of competition and monopoly. 
C) Monopolistic competition is different from oligopoly because each seller in monopolistic competition is small relative to the market, whereas each seller can affect the actions of other sellers in an oligopoly. 
D) Both monopolistic competition and perfect competition are characterized by product differentiation. 
A) Monopolistic competition is different from monopoly because monopolistic competition is characterized by free entry, whereas monopoly is characterized by barriers to entry. 
B) Both monopolistic competition and oligopoly fall in between the more extreme market structures of competition and monopoly. 
C) Monopolistic competition is different from oligopoly because each seller in monopolistic competition is small relative to the market, whereas each seller can affect the actions of other sellers in an oligopoly. 
D) Both monopolistic competition and perfect competition are characterized by product differentiation.

Question 2

Professional organizations and producer groups have an incentive to

Accepted Answer

A) restrict advertising in order to enhance competition on the basis of price. 
B) restrict advertising in order to reduce competition on the basis of price. 
C) encourage advertising in order to reduce competition on the basis of price. 
D) encourage advertising in order to enhance competition on the basis of price. 
A) restrict advertising in order to enhance competition on the basis of price. 
B) restrict advertising in order to reduce competition on the basis of price. 
C) encourage advertising in order to reduce competition on the basis of price. 
D) encourage advertising in order to enhance competition on the basis of price.

Question 3

There is general disagreement among economists about the role of advertising, but there is widespread agreement about the role of brand names on market efficiency.

Accepted Answer

A) True 
 B)False

Question 4

Figure 16-5
The figure is drawn for a monopolistically competitive firm.  
-Refer to Figure 16-5. As the figure is drawn, the firm is in

Accepted Answer

A) a short-run equilibrium but it is not in a long-run equilibrium. 
B) a long-run equilibrium but it is not in a short-run equilibrium. 
C) a short-run equilibrium as well as a long-run equilibrium. 
D) neither a short-run equilibrium nor a long-run equilibrium. 
A) a short-run equilibrium but it is not in a long-run equilibrium. 
B) a long-run equilibrium but it is not in a short-run equilibrium. 
C) a short-run equilibrium as well as a long-run equilibrium. 
D) neither a short-run equilibrium nor a long-run equilibrium.

Question 5

When a firm operates with excess capacity, it must be in a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 6

If advertising decreases the elasticity of demand for specific brand names of hard liquor, we would expect firms to be able to charge a larger markup over marginal cost.

Accepted Answer

A) True 
 B)False

Question 7

A profit-maximizing firm in a monopolistically competitive market charges a price equal to marginal cost.

Accepted Answer

A) True 
 B)False

Question 8

Figure 16-2
This figure depicts a situation in a monopolistically competitive market.  
-Refer to Figure 16-2. What price will the monopolistically competitive firm charge in this market?

Accepted Answer

A) $70 
B) $60 
C) $90 
D) $80 
A) $70 
B) $60 
C) $90 
D) $80

Question 9

Economists measure a market's domination by a small number of firms with a statistic called the

Accepted Answer

concentrat

Question 10

In the short run, a firm in a monopolistically competitive market operates much like a

Accepted Answer

A) firm in a perfectly competitive market. 
B) firm in an oligopoly. 
C) monopolist. 
D) nonprofit firm. 
A) firm in a perfectly competitive market. 
B) firm in an oligopoly. 
C) monopolist. 
D) nonprofit firm.

Question 11

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. Based on the concentration ratio, which industry is the most competitive?

Accepted Answer

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

Question 12

Figure 16-11
​   ​
-Refer to Figure 16-11. Use the letters to identify the deadweight loss associated with this firm's profit-maximizing production.

Accepted Answer

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

Question 13

Figure 16-5
The figure is drawn for a monopolistically competitive firm.  
-Refer to Figure 16-5. Efficient scale is reached

Accepted Answer

A) at 100 units. 
B) between 100 and 133.33 units. 
C) at 133.33 units. 
D) beyond 133.33 units. 
A) at 100 units. 
B) between 100 and 133.33 units. 
C) at 133.33 units. 
D) beyond 133.33 units.

Question 14

Figure 16-1
​
​
 Graph (a)

Graph (b)

Graph (c)
 
 ​
​
​
​
-Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?

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 15

The product-variety externality and the business-stealing externality are both spillover costs of new firms entering a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 16

Figure 16-12
​   ​
-Refer to Figure 16-12. Which letter identifies the profit-maximizing level of output for this firm?

Accepted Answer

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

Question 17

Use a graph to demonstrate why a profit-maximizing monopolistically competitive firm must operate at excess capacity. Explain why a perfectly competitive firm is not subject to the same constraint.

Accepted Answer

@#IMG-DLM& ​
Competitive firms do not face downwar

Question 18

In monopolistically competitive markets, positive economic profits

Accepted Answer

A) suggest that new firms will enter the market. 
B) suggest that some existing firms will exit the market. 
C) are minimized through government-imposed barriers to entry. 
D) are never possible. 
A) suggest that new firms will enter the market. 
B) suggest that some existing firms will exit the market. 
C) are minimized through government-imposed barriers to entry. 
D) are never possible.

Question 19

According to one theory, advertising sends a signal to consumers about the quality of the product being offered. An implication of this theory is that

Accepted Answer

A) the actual quality of the product is irrelevant. 
B) the existence of an expensive advertisement is more important than the content of the advertisement. 
C) advertising is not in the best interest of society. 
D) it is irrational for firms to pay famous people large amounts of money to appear in their advertisements. 
A) the actual quality of the product is irrelevant. 
B) the existence of an expensive advertisement is more important than the content of the advertisement. 
C) advertising is not in the best interest of society. 
D) it is irrational for firms to pay famous people large amounts of money to appear in their advertisements.

Question 20

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

Accepted Answer

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

Exam 16: Monopolistic Competition

Which of the following statements is not correct?

Professional organizations and producer groups have an incentive to

There is general disagreement among economists about the role of advertising, but there is widespread agreement about the role of brand names on market efficiency.

Figure 16-5 The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-5. As the figure is drawn, the firm is in

When a firm operates with excess capacity, it must be in a monopolistically competitive market.

If advertising decreases the elasticity of demand for specific brand names of hard liquor, we would expect firms to be able to charge a larger markup over marginal cost.

A profit-maximizing firm in a monopolistically competitive market charges a price equal to marginal cost.

Figure 16-2 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-2. What price will the monopolistically competitive firm charge in this market?

Economists measure a market's domination by a small number of firms with a statistic called the

In the short run, a firm in a monopolistically competitive market operates much like a

Figure 16-11 ​ ​ -Refer to Figure 16-11. Use the letters to identify the deadweight loss associated with this firm's profit-maximizing production.

Figure 16-5 The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-5. Efficient scale is reached

Figure 16-1 ​ ​ Graph (a) Graph (b) Graph (c) ​ ​ ​ ​ -Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?

The product-variety externality and the business-stealing externality are both spillover costs of new firms entering a monopolistically competitive market.

Figure 16-12 ​ ​ -Refer to Figure 16-12. Which letter identifies the profit-maximizing level of output for this firm?

Use a graph to demonstrate why a profit-maximizing monopolistically competitive firm must operate at excess capacity. Explain why a perfectly competitive firm is not subject to the same constraint.

In monopolistically competitive markets, positive economic profits

According to one theory, advertising sends a signal to consumers about the quality of the product being offered. An implication of this theory is that

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

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 16-11 -Refer to Figure 16-11. Use the letters to identify the deadweight loss associated with this firm's profit-maximizing production.

Figure 16-1 Graph (a) Graph (b) Graph (c) -Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?

Figure 16-12 -Refer to Figure 16-12. Which letter identifies the profit-maximizing level of output for this firm?

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