Question 1

Graph 17-4  
-Refer to Graph 17-4.Which of the panels shown depicts a firm in a monopolistically competitive market earning economic profits in the short run?

Accepted Answer

A) both panels c and d 
B) panel d 
C) panel c 
D) none of the above 
A) both panels c and d 
B) panel d 
C) panel c 
D) none of the above

Question 2

Refer to the information provided.On the basis of a theory that people buy a product because it is advertised, the content of advertisements for Firm B's product:

Accepted Answer

A) should focus on quality comparisons in order to be successful 
B) is critical to the success of the product in the market 
C) is irrelevant to the success of the advertisement 
D) should definitely include celebrity endorsements in order to be successful 
A) should focus on quality comparisons in order to be successful 
B) is critical to the success of the product in the market 
C) is irrelevant to the success of the advertisement 
D) should definitely include celebrity endorsements in order to be successful

Question 3

Advertisements that appear to convey no information at all:

Accepted Answer

A) are typically 'infomercials' 
B) may still be valuable by their mere existence and expense 
C) are often useless to consumers 
D) are general ignored by consumers 
A) are typically 'infomercials' 
B) may still be valuable by their mere existence and expense 
C) are often useless to consumers 
D) are general ignored by consumers

Question 4

Counterfeiting of goods is a rational market outcome of the success of a brand.

Accepted Answer

A) True 
 B)False

Question 5

Fill in the blank.Firms that sell ______ products are likely to spend the most on advertising.

Accepted Answer

A) homogenous 
B) expensive 
C) industrial 
D) highly differentiated 
A) homogenous 
B) expensive 
C) industrial 
D) highly differentiated

Question 6

If firms sell highly differentiated consumer goods, then one significant cost to all such firms is likely to be:

Accepted Answer

A) sales taxes 
B) advertising 
C) transport 
D) wages 
A) sales taxes 
B) advertising 
C) transport 
D) wages

Question 7

New firms will necessarily enter a monopolistically competitive market when price exceeds:

Accepted Answer

A) marginal cost 
B) marginal revenue 
C) average total cost 
D) average revenue 
A) marginal cost 
B) marginal revenue 
C) average total cost 
D) average revenue

Question 8

Regulation of a firm in a monopolistically competitive market:

Accepted Answer

A) will lower the firm's cost 
B) is unlikely to improve market efficiency 
C) is commonly used to enhance market efficiency 
D) usually implies a very small administrative burden 
A) will lower the firm's cost 
B) is unlikely to improve market efficiency 
C) is commonly used to enhance market efficiency 
D) usually implies a very small administrative burden

Question 9

If the principal effect of advertising is to convey information about the existence of new products, then this:

Accepted Answer

A) usually confuses consumers about market competition 
B) reveals information that is of little value to consumers 
C) enhances the ability of markets to allocate resources efficiently 
D) increases elasticity of demand 
A) usually confuses consumers about market competition 
B) reveals information that is of little value to consumers 
C) enhances the ability of markets to allocate resources efficiently 
D) increases elasticity of demand

Question 10

The administrative burden of regulating price in a monopolistically competitive market is:

Accepted Answer

A) large because there are a large number of firms that produce differentiated products 
B) small due to economies of scale 
C) large because price is usually below marginal cost 
D) small because firms produce at under-capacity 
A) large because there are a large number of firms that produce differentiated products 
B) small due to economies of scale 
C) large because price is usually below marginal cost 
D) small because firms produce at under-capacity

Question 11

According to the information provided, as a result of this new advertising strategy, economists would be likely to predict that the Computer Hardware Manufacturers Association will:

Accepted Answer

A) vow to fight any restrictions on the right to advertise 
B) seek to dismantle the 'gentleman's agreement' through aggressive price competition 
C) do nothing 
D) encourage the Premier to ban billboard advertising of computer hardware 
A) vow to fight any restrictions on the right to advertise 
B) seek to dismantle the 'gentleman's agreement' through aggressive price competition 
C) do nothing 
D) encourage the Premier to ban billboard advertising of computer hardware

Question 12

When a firm exits a monopolistically competitive market, the individual demand curves faced by all existing firms in that market will:

Accepted Answer

A) shift in an unpredictable direction 
B) shift to the right 
C) shift to the left 
D) remain unchanged; only the supply curve will shift 
A) shift in an unpredictable direction 
B) shift to the right 
C) shift to the left 
D) remain unchanged; only the supply curve will shift

Question 13

Graph 17-2  
-Refer to Graph 17-2.Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is minimising its losses?

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 14

In a monopolistically competitive market, equilibrium is characterised by:

Accepted Answer

A) the average total cost curve being tangent to the demand curve 
B) marginal cost crossing the demand curve 
C) price being equal to the minimum of average total cost 
D) firms making a positive economic profit 
A) the average total cost curve being tangent to the demand curve 
B) marginal cost crossing the demand curve 
C) price being equal to the minimum of average total cost 
D) firms making a positive economic profit

Question 15

The business-stealing externality associated with monopolistic competition arises because in monopolistically competitive markets:

Accepted Answer

A) profit-maximising firms charge a price higher than marginal cost 
B) profit-maximising firms produce differentiated products 
C) there are few barriers to entry 
D) profit-maximising firms produce at a less-than-efficient scale 
A) profit-maximising firms charge a price higher than marginal cost 
B) profit-maximising firms produce differentiated products 
C) there are few barriers to entry 
D) profit-maximising firms produce at a less-than-efficient scale

Question 16

Given that firms in monopolistically competitive markets share the attribute of many sellers with firms in perfect competition, it follows that firms in both markets face horizontal demand curves.

Accepted Answer

A) True 
 B)False

Question 17

The 'competition' in monopolistically competitive markets is most likely a result of:

Accepted Answer

A) free entry 
B) product differentiation 
C) strategic interactions among sellers 
D) firms facing a downward-sloping demand curve 
A) free entry 
B) product differentiation 
C) strategic interactions among sellers 
D) firms facing a downward-sloping demand curve

Question 18

Celebrities who endorse a product quality should ensure that the product meets its specifications, as a risk may exist of a fall in reputation.They should not leave this to the firm.

Accepted Answer

A) True 
 B)False

Question 19

Graph 17-4  
-Refer to Graph 17-4.Which of the panels shown could not characterise a short-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 20

Trademarks are a form of branding products in communist countries.This was deemed necessary so that there was:

Accepted Answer

A) a way to ensure accountability for quality 
B) a clear signal of market quality, in the absence of markets 
C) a way for customers to select the goods they preferred 
D) all of the above are true 
A) a way to ensure accountability for quality 
B) a clear signal of market quality, in the absence of markets 
C) a way for customers to select the goods they preferred 
D) all of the above are true

Exam 16: Monopolistic Competition

Graph 17-4 -Refer to Graph 17-4.Which of the panels shown depicts a firm in a monopolistically competitive market earning economic profits in the short run?

Refer to the information provided.On the basis of a theory that people buy a product because it is advertised, the content of advertisements for Firm B's product:

Advertisements that appear to convey no information at all:

Counterfeiting of goods is a rational market outcome of the success of a brand.

Fill in the blank.Firms that sell ______ products are likely to spend the most on advertising.

If firms sell highly differentiated consumer goods, then one significant cost to all such firms is likely to be:

New firms will necessarily enter a monopolistically competitive market when price exceeds:

Regulation of a firm in a monopolistically competitive market:

If the principal effect of advertising is to convey information about the existence of new products, then this:

The administrative burden of regulating price in a monopolistically competitive market is:

According to the information provided, as a result of this new advertising strategy, economists would be likely to predict that the Computer Hardware Manufacturers Association will:

When a firm exits a monopolistically competitive market, the individual demand curves faced by all existing firms in that market will:

Graph 17-2 -Refer to Graph 17-2.Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is minimising its losses?

In a monopolistically competitive market, equilibrium is characterised by:

The business-stealing externality associated with monopolistic competition arises because in monopolistically competitive markets:

Given that firms in monopolistically competitive markets share the attribute of many sellers with firms in perfect competition, it follows that firms in both markets face horizontal demand curves.

The 'competition' in monopolistically competitive markets is most likely a result of:

Celebrities who endorse a product quality should ensure that the product meets its specifications, as a risk may exist of a fall in reputation.They should not leave this to the firm.

Graph 17-4 -Refer to Graph 17-4.Which of the panels shown could not characterise a short-run equilibrium for a firm in a monopolistically competitive market?

Trademarks are a form of branding products in communist countries.This was deemed necessary so that there was:

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

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