Question 1

Figure 16-5
The figure is drawn for a monopolistically competitive firm.  
-Refer to Figure 16-5. The firm's maximum profit is

Accepted Answer

A) −$5,000.00. 
B) $0. 
C) $5,000.00. 
D) $8,887.78. 
A) −$5,000.00. 
B) $0. 
C) $5,000.00. 
D) $8,887.78.

Question 2

Scenario 16-5
​
Burger Bonanza, a major national burger chain, recently decided to spend $4 million on an advertising campaign featuring a world famous actor to promote its new Bomber Burger.
-Refer to Scenario 16-5. What can consumers conclude from Burger Bonanza's willingness to spend $4 million on an advertising campaign?

Accepted Answer

high quali

Question 3

The market for wheat is most likely considered a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 4

Figure 16-10
​   ​
-Refer to Figure 16-10. If this firm profit-maximizes, what price will it charge?

Accepted Answer

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

Question 5

Firms that sell highly differentiated consumer goods, such as over-the-counter drugs, soft drinks, breakfast cereals, and dog food, typically spend between 10 and 20 percent of revenue for

Accepted Answer

The answer of Firms that sell highly differentiated consumer goods,...

Question 6

Monopolistically competitive firms could reduce the average total cost of producing by increasing output; therefore, these firms have

Accepted Answer

The answer of Monopolistically competitive firms could reduce the average...

Question 7

Scenario 16-5
​
Burger Bonanza, a major national burger chain, recently decided to spend $4 million on an advertising campaign featuring a world famous actor to promote its new Bomber Burger.
-Refer to Scenario 16-5. What two benefits are conveyed by the brand name Burger Bonanza?

Accepted Answer

information about qu

Question 8

When advertising is used to relay information about price, each firm is able to enhance market power.

Accepted Answer

A) True 
 B)False

Question 9

A monopolistically competitive industry is characterized by

Accepted Answer

A) many firms, differentiated products, and barriers to entry. 
B) many firms, differentiated products, and free entry. 
C) a few firms, identical products, and free entry. 
D) a few firms, differentiated products, and barriers to entry. 
A) many firms, differentiated products, and barriers to entry. 
B) many firms, differentiated products, and free entry. 
C) a few firms, identical products, and free entry. 
D) a few firms, differentiated products, and barriers to entry.

Question 10

For a profit-maximizing firm in a monopolistically competitive market, when price is equal to average total cost, price must lie above marginal cost.

Accepted Answer

A) True 
 B)False

Question 11

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. What price should Peter charge to maximize his profits?

Accepted Answer

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

Question 12

Scenario 16-2
Delish, a moderately priced restaurant, has recently announced intentions to open a restaurant in Boston, MA. Assume that the restaurant market in Boston is characterized by monopolistic competition.
-Refer to Scenario 16-2. As a result of the new restaurant, existing restaurant owners in Boston are likely to experience a

Accepted Answer

A) product-variety externality, which is a negative externality. 
B) product-variety externality, which is a positive externality. 
C) business-stealing externality, which is a negative externality. 
D) business-stealing externality, which is a positive externality. 
A) product-variety externality, which is a negative externality. 
B) product-variety externality, which is a positive externality. 
C) business-stealing externality, which is a negative externality. 
D) business-stealing externality, which is a positive externality.

Question 13

Excess capacity characterizes firms in monopolistically competitive markets, even in situations of long-run equilibrium.

Accepted Answer

A) True 
 B)False

Question 14

Scenario 16-3
Consider the problem facing two firms, YumYum and Bertollini, in the frozen food market. Each firm has just come up with an idea for a new "frozen meal for two" which it would sell for $9. Assume that the marginal cost for each new product is a constant $2, and the only fixed cost is for advertising. Each company knows that if it spends $12 million on advertising it will get 1.5 million consumers to try its new product. YumYum has done market research which suggests that its product does not have any "staying" power in the market. Even though it could get 1.5 million consumers to buy the product once, it is unlikely that they will continue to buy the product in the future. Bertollini's market research suggests that its product is very good, and consumers who try the product will continue to be consumers over the ensuing year. On the basis of its market research, Bertollini estimates that its initial 1.5 million customers will buy one unit of the product each month in the coming year, for a total of 18 million units.
-Refer to Scenario 16-3. On the basis of a theory that people buy a product because it is advertised, the content of advertisements for Bertollini's product

Accepted Answer

A) must show a consumer taste-test to be successful. 
B) must include celebrity endorsements to be successful. 
C) is less important than the fact that they are willing to spend money on advertising. 
D) is only important if the quality of the product is high. 
A) must show a consumer taste-test to be successful. 
B) must include celebrity endorsements to be successful. 
C) is less important than the fact that they are willing to spend money on advertising. 
D) is only important if the quality of the product is high.

Question 15

Figure 16-11
​   ​
-Refer to Figure 16-11. Use the letters to identify the area of profit for this firm.

Accepted Answer

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

Question 16

Suppose there is a market in which the firms hold the following market shares: 25%, 20%, 18%, 15%, 8%, 7%, 4%, 2%, 1%. What is the concentration ratio for this market?

Accepted Answer

The answer of Suppose there is a market in which...

Question 17

A similarity between monopoly and monopolistic competition is that in both market structures

Accepted Answer

A) there are a large number of sellers. 
B) strategic interactions among sellers are important. 
C) each firm faces a downward-sloping demand curve. 
D) there are only a few buyers but many sellers. 
A) there are a large number of sellers. 
B) strategic interactions among sellers are important. 
C) each firm faces a downward-sloping demand curve. 
D) there are only a few buyers but many sellers.

Question 18

Figure 16-2
This figure depicts a situation in a monopolistically competitive market.  
-Refer to Figure 16-2. How much profit will the monopolistically competitive firm earn in this situation?

Accepted Answer

A) $0 
B) $1,600 
C) $200 
D) $400 
A) $0 
B) $1,600 
C) $200 
D) $400

Question 19

Defenders of advertising argue that in some markets advertising may

Accepted Answer

A) decrease elasticity of demand allowing firms to charge a larger markup over marginal cost. 
B) impede competition. 
C) signal quality to consumers, because advertising is expensive. 
D) reduce the deadweight loss associated with monopolistic competition. 
A) decrease elasticity of demand allowing firms to charge a larger markup over marginal cost. 
B) impede competition. 
C) signal quality to consumers, because advertising is expensive. 
D) reduce the deadweight loss associated with monopolistic competition.

Question 20

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. Martina offers two reasons for agreeing with Dean's decision. What are they?

Accepted Answer

brand names provide informatio

Exam 16: Monopolistic Competition

Figure 16-5 The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-5. The firm's maximum profit is

The market for wheat is most likely considered a monopolistically competitive market.

Figure 16-10 ​ ​ -Refer to Figure 16-10. If this firm profit-maximizes, what price will it charge?

Firms that sell highly differentiated consumer goods, such as over-the-counter drugs, soft drinks, breakfast cereals, and dog food, typically spend between 10 and 20 percent of revenue for

Monopolistically competitive firms could reduce the average total cost of producing by increasing output; therefore, these firms have

Scenario 16-5 ​ Burger Bonanza, a major national burger chain, recently decided to spend $4 million on an advertising campaign featuring a world famous actor to promote its new Bomber Burger. -Refer to Scenario 16-5. What two benefits are conveyed by the brand name Burger Bonanza?

When advertising is used to relay information about price, each firm is able to enhance market power.

A monopolistically competitive industry is characterized by

For a profit-maximizing firm in a monopolistically competitive market, when price is equal to average total cost, price must lie above marginal cost.

Excess capacity characterizes firms in monopolistically competitive markets, even in situations of long-run equilibrium.

Figure 16-11 ​ ​ -Refer to Figure 16-11. Use the letters to identify the area of profit for this firm.

Suppose there is a market in which the firms hold the following market shares: 25%, 20%, 18%, 15%, 8%, 7%, 4%, 2%, 1%. What is the concentration ratio for this market?

A similarity between monopoly and monopolistic competition is that in both market structures

Figure 16-2 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-2. How much profit will the monopolistically competitive firm earn in this situation?

Defenders of advertising argue that in some markets advertising may

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 profit-maximizes, what price will it charge?

Scenario 16-5 Burger Bonanza, a major national burger chain, recently decided to spend $4 million on an advertising campaign featuring a world famous actor to promote its new Bomber Burger. -Refer to Scenario 16-5. What two benefits are conveyed by the brand name Burger Bonanza?

Figure 16-11 -Refer to Figure 16-11. Use the letters to identify the area of profit for this firm.