Question 1

When a firm operates at efficient scale, it is producing at the minimum point on its average total cost curve.

Accepted Answer

A) True 
 B)False

Question 2

A monopolistically competitive firm chooses

Accepted Answer

A) the quantity of output to produce, but all firms in the market agree upon a single price. 
B) the price, but competition in the market determines the quantity. 
C) the price, but output is determined by a cartel production quota. 
D) the quantity of output to produce, but the price of its output is determined by demand. 
A) the quantity of output to produce, but all firms in the market agree upon a single price. 
B) the price, but competition in the market determines the quantity. 
C) the price, but output is determined by a cartel production quota. 
D) the quantity of output to produce, but the price of its output is determined by demand.

Question 3

If we observe a great deal more advertising for Mucinex, an over-the-counter drug, than for a Grainger drill press, we can infer that

Accepted Answer

A) more money is spent on Mucinex than on Grainger drill presses. 
B) the market for Mucinex is more highly differentiated than the market for Grainger drill presses. 
C) Grainger has lower costs of production than Mucinex. 
D) Mucinex operates in an oligopoly, while Grainger operates in a monopolistically competitive market. 
A) more money is spent on Mucinex than on Grainger drill presses. 
B) the market for Mucinex is more highly differentiated than the market for Grainger drill presses. 
C) Grainger has lower costs of production than Mucinex. 
D) Mucinex operates in an oligopoly, while Grainger operates in a monopolistically competitive market.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

A new Mexican restaurant opens in the city of Manchester. The residents are happy about this new restaurant because they are experiencing what externality?

Accepted Answer

product-va

Question 6

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. At the profit-maximizing quantity, what is Beatrice's total profit?

Accepted Answer

A) $43 
B) $89 
C) $101 
D) $144 
A) $43 
B) $89 
C) $101 
D) $144

Question 7

Scenario 16-1
Venya 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. Venya's demand and cost values for sales per day are given in the following table. (Everyone who purchases Venya's ice cream buys a double scoop cone because it's so delicious.)
​
​
   ​
-Refer to Scenario 16-1. How many double scoop ice cream cones should Venya sell per day to maximize his profit?

Accepted Answer

A) 60 
B) 40 
C) 80 
D) 180 
A) 60 
B) 40 
C) 80 
D) 180

Question 8

Economists are unanimous in their belief that advertising is socially inefficient.

Accepted Answer

A) True 
 B)False

Question 9

Figure 16-3  
-Refer to Figure 16-3. What price will the monopolistically competitive firm charge in this market?

Accepted Answer

A) $400 
B) $600 
C) $700 
D) $800 
A) $400 
B) $600 
C) $700 
D) $800

Question 10

To be considered an oligopoly, the market must have a concentration ratio below 50%.

Accepted Answer

A) True 
 B)False

Question 11

Figure 16-6
The figure is drawn for a monopolistically competitive firm.   ​
-Refer to Figure 16-6. In order to maximize its profit, the firm will choose to produce

Accepted Answer

A) 100 units of output. 
B) between 100 and 133.33 units of output. 
C) 133.33 units of output. 
D) 154.92 units of output. 
A) 100 units of output. 
B) between 100 and 133.33 units of output. 
C) 133.33 units of output. 
D) 154.92 units of output.

Question 12

Oligopoly and monopolistic competition are examples of a market structure called imperfect competition.

Accepted Answer

A) True 
 B)False

Question 13

Which market structure(s) include(s) many firms with differentiated products who can enter and exit the market freely?

Accepted Answer

monopolist

Question 14

Monopolistic competition and monopoly are examples of a market structure called imperfect competition.

Accepted Answer

A) True 
 B)False

Question 15

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, consumers 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 16

A monopolistically competitive firm is currently producing 25 units of output. At this level of output the firm is charging the highest price it can at $30, has marginal revenue equal to $21, has marginal cost equal to $21, and has average total cost equal to $22. From this information we can infer that

Accepted Answer

A) the firm is currently maximizing its profit. 
B) the firm is earning zero profit. 
C) increasing the quantity produced will raise per-unit costs. 
D) firms are likely to leave this market in the long run. 
A) the firm is currently maximizing its profit. 
B) the firm is earning zero profit. 
C) increasing the quantity produced will raise per-unit costs. 
D) firms are likely to leave this market in the long run.

Question 17

The term excess capacity refers to the fact that a firm produces a lower quantity than it would if it operated at the efficient scale.

Accepted Answer

A) True 
 B)False

Question 18

There are four basic types of market structure.

Accepted Answer

A) True 
 B)False

Question 19

Figure 16-9
​   ​
-Refer to Figure 16-9. If this firm profit-maximizes, how much revenue will it earn?

Accepted Answer

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

Question 20

Table 16-3
A monopolistically competitive firm has the following cost structure:
​
​
 $$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Output } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Total Cost } \
\text { (Dollars) }
\end{array} \
\hline 1 & 30 \
\hline 2 & 32 \
\hline 3 & 36 \
\hline 4 & 42 \
\hline 5 & 50 \
\hline 6 & 63 \
\hline 7 & 77 \
\hline
\end{array}$$ ​
-Refer to Table 16-3. The monopolistically competitive firm faces the following demand curve: ?
$$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (Units) }
\end{array} & \begin{array} { c } 
\text { Price } \
\text { (Dollars per unit) }
\end{array} \
\hline 1 & 20 \
\hline 2 & 18 \
\hline 3 & 15 \
\hline 4 & 12 \
\hline 5 & 9 \
\hline 6 & 7 \
\hline 7 & 4 \
\hline
\end{array}$$ If the government forces this firm to produce at its efficient scale, it will

Accepted Answer

A) produce 3 units and make $9. 
B) produce 4 units and make $6. 
C) produce 5 units and lose $5. 
D) produce 7 units and lose $49. 
A) produce 3 units and make $9. 
B) produce 4 units and make $6. 
C) produce 5 units and lose $5. 
D) produce 7 units and lose $49.

Exam 16: Monopolistic Competition

When a firm operates at efficient scale, it is producing at the minimum point on its average total cost curve.

A monopolistically competitive firm chooses

If we observe a great deal more advertising for Mucinex, an over-the-counter drug, than for a Grainger drill press, we can infer that

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

A new Mexican restaurant opens in the city of Manchester. The residents are happy about this new restaurant because they are experiencing what externality?

Economists are unanimous in their belief that advertising is socially inefficient.

Figure 16-3 -Refer to Figure 16-3. What price will the monopolistically competitive firm charge in this market?

To be considered an oligopoly, the market must have a concentration ratio below 50%.

Figure 16-6 The figure is drawn for a monopolistically competitive firm. ​ -Refer to Figure 16-6. In order to maximize its profit, the firm will choose to produce

Oligopoly and monopolistic competition are examples of a market structure called imperfect competition.

Which market structure(s) include(s) many firms with differentiated products who can enter and exit the market freely?

Monopolistic competition and monopoly are examples of a market structure called imperfect competition.

The term excess capacity refers to the fact that a firm produces a lower quantity than it would if it operated at the efficient scale.

There are four basic types of market structure.

Figure 16-9 ​ ​ -Refer to Figure 16-9. If this firm profit-maximizes, how much revenue will it earn?

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. In order to maximize its profit, the firm will choose to produce

Figure 16-9 -Refer to Figure 16-9. If this firm profit-maximizes, how much revenue will it earn?