Question 1

The use of celebrity endorsements in advertising has enabled firms to differentiate their products.

Accepted Answer

A) True 
 B)False  True

Question 2

In markets where restrictions on advertising have been used to curtail competition, the US courts have generally:

Accepted Answer

A) referred the matters of advertising restrictions to executive regulators 
B) overturned laws that prohibit advertising 
C) enforced industry-wide agreements to restrict advertising 
D) been silent on the effect of explicit advertising restrictions 
A) referred the matters of advertising restrictions to executive regulators 
B) overturned laws that prohibit advertising 
C) enforced industry-wide agreements to restrict advertising 
D) been silent on the effect of explicit advertising restrictions B

Question 3

Fill in the blanks.A monopolistically competitive firm, unlike a ________, could increase the quantity it produces and lower the ____________:

Accepted Answer

A) perfectly competitive firm, average total cost 
B) monopoly firm, average total cost 
C) perfectly competitive firm, average fixed cost 
D) monopoly firm, average fixed cost 
A) perfectly competitive firm, average total cost 
B) monopoly firm, average total cost 
C) perfectly competitive firm, average fixed cost 
D) monopoly firm, average fixed cost A

Question 4

When the gain from a product-variety externality exceeds the loss from a business stealing externality in a monopolistically competitive market:

Accepted Answer

A) market efficiency is likely to be enhanced by the entrance of new firms in the market 
B) the market structure is likely to be in transition 
C) firms are more likely to operate at efficient scale 
D) there are likely to be too many firms in the market 
A) market efficiency is likely to be enhanced by the entrance of new firms in the market 
B) the market structure is likely to be in transition 
C) firms are more likely to operate at efficient scale 
D) there are likely to be too many firms in the market

Question 5

Graph 17-4  
-Refer to Graph 17-4.Which of the panels shown reflects a long-run equilibrium for a firm in a monopolistically competitive market?

Accepted Answer

A) panel a 
B) panel b 
C) panel c 
D) panel d 
A) panel a 
B) panel b 
C) panel c 
D) panel d

Question 6

Graph 17-1  
-Refer to Graph 17-1.The firm depicted in panel b faces a horizontal demand curve.If panel b depicts a profit-maximising firm:

Accepted Answer

A) it would not be operating in a monopolistically competitive market 
B) it would not have excess capacity in its production as long as it is earning zero economic profit 
C) it is not able to choose the price at which it sells its product 
D) all of the above are true 
A) it would not be operating in a monopolistically competitive market 
B) it would not have excess capacity in its production as long as it is earning zero economic profit 
C) it is not able to choose the price at which it sells its product 
D) all of the above are true

Question 7

Advertising as a signal of quality is an example of:

Accepted Answer

A) profit maximising behaviour by firms 
B) gullibility on behalf of consumers 
C) firms attempting to manipulate consumer tastes 
D) inefficient market practices 
A) profit maximising behaviour by firms 
B) gullibility on behalf of consumers 
C) firms attempting to manipulate consumer tastes 
D) inefficient market practices

Question 8

If advertising decreases the elasticity of demand for specific brand names of hard liquor, we would expect firms to be more able to exercise market power.

Accepted Answer

A) True 
 B)False

Question 9

In relation to the branding of products, which of the following statement(s) are correct?
(i) brand names can cause consumers to perceive differences in products that do not really exist
(i) brand names can be a useful way for consumers to ensure the product they are buying is of high quality
(i) brand names give firms an incentive to maintain a high product quality

Accepted Answer

A) (i) and (ii) only 
B) (i) and (iii) only 
C) (ii) and (iii) only 
D) (i), (ii), and (iii) 
A) (i) and (ii) only 
B) (i) and (iii) only 
C) (ii) and (iii) only 
D) (i), (ii), and (iii)

Question 10

Economic losses are in a monopolistically competitive markets:

Accepted Answer

A) a signal to some incumbent firms to exit the market 
B) are never possible in the short run 
C) a signal for new firms to enter the market 
D) only possible if collusion between the firms cannot be maintained 
A) a signal to some incumbent firms to exit the market 
B) are never possible in the short run 
C) a signal for new firms to enter the market 
D) only possible if collusion between the firms cannot be maintained

Question 11

A downward-sloping demand curve:

Accepted Answer

A) is common to all monopolistically competitive firms 
B) is common to all monopoly firms 
C) causes price to exceed marginal revenue 
D) all of the above are true 
A) is common to all monopolistically competitive firms 
B) is common to all monopoly firms 
C) causes price to exceed marginal revenue 
D) all of the above are true

Question 12

The product-variety externality is associated with:

Accepted Answer

A) the producer surplus that accrues to incumbent firms in a monopolistically competitive industry 
B) loss of consumer surplus from exposure to additional advertising 
C) the opportunity cost of firms exiting a monopolistically competitive industry 
D) the consumer surplus that is generated from introduction of a new product 
A) the producer surplus that accrues to incumbent firms in a monopolistically competitive industry 
B) loss of consumer surplus from exposure to additional advertising 
C) the opportunity cost of firms exiting a monopolistically competitive industry 
D) the consumer surplus that is generated from introduction of a new product

Question 13

According to the information provided, advertising of computer hardware on billboards will most likely:

Accepted Answer

A) increase the profitability of existing firms and increase barriers to entry 
B) increase the incidence of computer-related addictions in middle-aged professionals 
C) reduce market efficiency 
D) reduce the collective profitability of firms that manufacture computer hardware 
A) increase the profitability of existing firms and increase barriers to entry 
B) increase the incidence of computer-related addictions in middle-aged professionals 
C) reduce market efficiency 
D) reduce the collective profitability of firms that manufacture computer hardware

Question 14

Eunice consumes Coke exclusively.She claims that there is a clear taste difference and that competing brands of cola leave an unsavoury residual taste in her mouth.However, in a blind taste test, Eunice is found to prefer generic store-brand cola to Coke eight out of 10 times.The results of Eunice's taste test would reinforce claims by critics of brand names that:

Accepted Answer

A) consumers are always willing to pay more for brand names 
B) brand names cause consumers to perceive differences that do not really exist 
C) brand names are a form of socially efficient advertising 
D) brand names cause consumers to be more sensitive to product differences 
A) consumers are always willing to pay more for brand names 
B) brand names cause consumers to perceive differences that do not really exist 
C) brand names are a form of socially efficient advertising 
D) brand names cause consumers to be more sensitive to product differences

Question 15

If regulators required firms in monopolistically competitive markets to set price equal to marginal cost:

Accepted Answer

A) monopolistically competitive firms would respond by lowering their costs 
B) new firms that enter the market would use better technology 
C) many firms will experience increased profits 
D) many firms would require a subsidy to stay in business 
A) monopolistically competitive firms would respond by lowering their costs 
B) new firms that enter the market would use better technology 
C) many firms will experience increased profits 
D) many firms would require a subsidy to stay in business

Question 16

Firms in monopolistic competition sell products that are identical to those produced by other firms.

Accepted Answer

A) True 
 B)False

Question 17

Movies that prominently display name-brand consumer products are most likely sending a message about:

Accepted Answer

A) subliminal satisfaction from consumption 
B) psychological manipulation 
C) product quality 
D) product price 
A) subliminal satisfaction from consumption 
B) psychological manipulation 
C) product quality 
D) product price

Question 18

The efficient scale occurs when the firm's:

Accepted Answer

A) average total cost curve must be falling 
B) average total cost curve must be rising 
C) average revenue must be equal to the minimum of average total cost 
D) average revenue must exceed the minimum of average total cost 
A) average total cost curve must be falling 
B) average total cost curve must be rising 
C) average revenue must be equal to the minimum of average total cost 
D) average revenue must exceed the minimum of average total cost

Question 19

The entry of new firms into a monopolistically competitive market is characterised by:

Accepted Answer

A) only private profit opportunities (no externalities) 
B) both positive and negative externalities 
C) only positive externalities 
D) only negative externalities 
A) only private profit opportunities (no externalities) 
B) both positive and negative externalities 
C) only positive externalities 
D) only negative externalities

Question 20

Fill in the blanks.The deadweight loss that is associated with a ___________ market is a result of ___________:

Accepted Answer

A) monopoly, pricing above marginal cost 
B) monopoly and monopolistically competitive, pricing above marginal cost 
C) monopoly, operating at inefficient scale 
D) monopoly and monopolistically competitive, operating at inefficient scale 
A) monopoly, pricing above marginal cost 
B) monopoly and monopolistically competitive, pricing above marginal cost 
C) monopoly, operating at inefficient scale 
D) monopoly and monopolistically competitive, operating at inefficient scale

Exam 16: Monopolistic Competition

The use of celebrity endorsements in advertising has enabled firms to differentiate their products.

In markets where restrictions on advertising have been used to curtail competition, the US courts have generally:

Fill in the blanks.A monopolistically competitive firm, unlike a ________, could increase the quantity it produces and lower the ____________:

When the gain from a product-variety externality exceeds the loss from a business stealing externality in a monopolistically competitive market:

Graph 17-4 -Refer to Graph 17-4.Which of the panels shown reflects a long-run equilibrium for a firm in a monopolistically competitive market?

Graph 17-1 -Refer to Graph 17-1.The firm depicted in panel b faces a horizontal demand curve.If panel b depicts a profit-maximising firm:

Advertising as a signal of quality is an example of:

If advertising decreases the elasticity of demand for specific brand names of hard liquor, we would expect firms to be more able to exercise market power.

Economic losses are in a monopolistically competitive markets:

A downward-sloping demand curve:

The product-variety externality is associated with:

According to the information provided, advertising of computer hardware on billboards will most likely:

If regulators required firms in monopolistically competitive markets to set price equal to marginal cost:

Firms in monopolistic competition sell products that are identical to those produced by other firms.

Movies that prominently display name-brand consumer products are most likely sending a message about:

The efficient scale occurs when the firm's:

The entry of new firms into a monopolistically competitive market is characterised by:

Fill in the blanks.The deadweight loss that is associated with a ___________ market is a result of ___________:

Ten Lessons From 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

Application: 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

Business Strategy and Oligopoly

Competition Policy

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

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 Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

Filters

Fill in the blanks.A monopolistically competitive firm, unlike a , could increase the quantity it produces and lower the ____:

Fill in the blanks.The deadweight loss that is associated with a _ market is a result of _: