Question 1

The product-variety externality is associated with the

Accepted Answer

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

Question 2

In the long run,monopolistically competitive firms produce where demand equals average total cost.

Accepted Answer

A) True 
 B)False

Question 3

When consumers are exposed to additional choices that result from the introduction of a new product,

Accepted Answer

A)  their satisfaction is likely to be lowered as a result of their having to make additional choices. 
B)  a product-variety externality is said to occur. 
C)  an advertising externality is said to occur. 
D)  consumers are likely to experience negative consumption externalities. 
A)  their satisfaction is likely to be lowered as a result of their having to make additional choices. 
B)  a product-variety externality is said to occur. 
C)  an advertising externality is said to occur. 
D)  consumers are likely to experience negative consumption externalities.

Question 4

The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which

Accepted Answer

A)  marginal revenue is equal to marginal cost. 
B)  average total cost is equal to marginal revenue. 
C)  average total cost is equal to price. 
D)  average revenue exceeds average total cost. 
A)  marginal revenue is equal to marginal cost. 
B)  average total cost is equal to marginal revenue. 
C)  average total cost is equal to price. 
D)  average revenue exceeds average total cost.

Question 5

In markets where the government imposes an excise tax on unit sales,it also has a tendency to dabble with restrictions on advertising (for example,cigarettes and hard liquor).Do potential (or actual)restrictions on advertising in these markets serve the interest of a government that is interested in maximizing its tax revenue from the sale of these products? Explain your answer.

Accepted Answer

In the case of the examples given,demand

Question 6

Figure 16-3
  
-Refer to Figure 16-3.Assume the firm in the figure is currently producing 10 units of output and charging $600.The firm

Accepted Answer

A)  will increase its profits if it raises its price and reduces its production level. 
B)  will increase its profits if it lowers its price and expands its production level. 
C)  is maximizing profits. 
D)  will increase its profits if it raises its prices and expands its production level. 
A)  will increase its profits if it raises its price and reduces its production level. 
B)  will increase its profits if it lowers its price and expands its production level. 
C)  is maximizing profits. 
D)  will increase its profits if it raises its prices and expands its production level.

Question 7

Table 16-1
The following table shows the percentage of output supplied by the top eight firms in four different industries.
  
-Refer to Table 16-1.What is the concentration ratio in Industry W?

Accepted Answer

A)  26% 
B)  58% 
C)  72% 
D)  82% 
A)  26% 
B)  58% 
C)  72% 
D)  82%

Question 8

Figure 16-8
The figure is drawn for a monopolistically-competitive firm.
  
-Refer to Figure 16-8.In order to maximize its profit,the firm will choose to produce

Accepted Answer

A)  less than 100 units of output. 
B)  100 units of output. 
C)  between 100 and 133.33 units of output. 
D)  more than 133.33 units of output. 
A)  less than 100 units of output. 
B)  100 units of output. 
C)  between 100 and 133.33 units of output. 
D)  more than 133.33 units of output.

Question 9

Critics of markets that are characterized by firms that sell brand name products argue that brand names encourage consumers to pay more for branded products that

Accepted Answer

A)  have elastic demand curves. 
B)  are very different from generic products. 
C)  are indistinguishable from generic products. 
D)  consumer-advocate groups have found to be inferior. 
A)  have elastic demand curves. 
B)  are very different from generic products. 
C)  are indistinguishable from generic products. 
D)  consumer-advocate groups have found to be inferior.

Question 10

Which of the following statements is correct?

Accepted Answer

A)  Monopolistic competition is similar to monopoly because both market structures are characterized by patents. 
B)  Monopolistic competition is similar to perfect competition because both market structures are characterized by each seller being small compared to the market. 
C)  Monopolistic competition is similar to oligopoly because both market structures are characterized by free entry. 
D)  Monopolistic competition is similar to perfect competition because both market structures are characterized by excess capacity. 
A)  Monopolistic competition is similar to monopoly because both market structures are characterized by patents. 
B)  Monopolistic competition is similar to perfect competition because both market structures are characterized by each seller being small compared to the market. 
C)  Monopolistic competition is similar to oligopoly because both market structures are characterized by free entry. 
D)  Monopolistic competition is similar to perfect competition because both market structures are characterized by excess capacity.

Question 11

Which of the following statements regarding brand names in advertising is not correct?

Accepted Answer

A)  Brand names provide consumers with information about quality when quality cannot be easily judged in advance of purchase. 
B)  Brand names give firms an incentive to maintain high quality to maintain the reputation of the firm. 
C)  Brand names allow firms to produce and sell inferior products in the long run since people will continue to purchase the brand-name product. 
D)  Brand names can cause consumers to perceive differences in products that do not actually exist. 
A)  Brand names provide consumers with information about quality when quality cannot be easily judged in advance of purchase. 
B)  Brand names give firms an incentive to maintain high quality to maintain the reputation of the firm. 
C)  Brand names allow firms to produce and sell inferior products in the long run since people will continue to purchase the brand-name product. 
D)  Brand names can cause consumers to perceive differences in products that do not actually exist.

Question 12

Scenario 16-3
Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q.
-Refer to Scenario 16-3.If the marginal cost of producing this good is 0,what quantity would a profit-maximizing monopolist produce?

Accepted Answer

A)  Q = 0 
B)  Q = 2 
C)  Q = 5 
D)  Q = 10 
A)  Q = 0 
B)  Q = 2 
C)  Q = 5 
D)  Q = 10

Question 13

Figure 16-1. The figure is drawn for a monopolistically competitive firm.
  
-Refer to Figure 16-1.If the ATC=20 at the profit-maximizing level of output,which of the following will occur in the long run in this industry?

Accepted Answer

A)  Firms will exit this industry. 
B)  Firms will enter this industry. 
C)  This firm will continue to earn positive economic profits. 
D)  This firm will incur losses. 
A)  Firms will exit this industry. 
B)  Firms will enter this industry. 
C)  This firm will continue to earn positive economic profits. 
D)  This firm will incur losses.

Question 14

Firms in industries that have competitors but do not face so much competition that they are price takers are operating in either a(n)

Accepted Answer

A)  oligopoly or perfectly competitive market. 
B)  oligopoly or monopoly market. 
C)  oligopoly or monopolistically competitive market. 
D)  monopoly or monopolistically competitive market. 
A)  oligopoly or perfectly competitive market. 
B)  oligopoly or monopoly market. 
C)  oligopoly or monopolistically competitive market. 
D)  monopoly or monopolistically competitive market.

Question 15

Which of the following goods are not likely to be sold in monopolistically competitive markets?

Accepted Answer

A)  jeans 
B)  books 
C)  tap water 
D)  clocks 
A)  jeans 
B)  books 
C)  tap water 
D)  clocks

Question 16

In the short run,a firm operating in a monopolistically competitive market

Accepted Answer

A)  produces an output level where marginal revenue equals average total cost. 
B)  maximizes revenues as well as profits. 
C)  can earn zero economic profits. 
D)  sets price equal to marginal cost. 
A)  produces an output level where marginal revenue equals average total cost. 
B)  maximizes revenues as well as profits. 
C)  can earn zero economic profits. 
D)  sets price equal to marginal cost.

Question 17

Which of the following statements is correct?

Accepted Answer

A)  Cigarettes are likely to be produced in a monopolistically competitive industry. 
B)  Novels are likely to be produced in a monopoly industry. 
C)  Movies are likely to be produced in a monopolistically competitive industry. 
D)  Milk is likely to be produced in an oligopoly industry. 
A)  Cigarettes are likely to be produced in a monopolistically competitive industry. 
B)  Novels are likely to be produced in a monopoly industry. 
C)  Movies are likely to be produced in a monopolistically competitive industry. 
D)  Milk is likely to be produced in an oligopoly industry.

Question 18

The term excess capacity refers to the fact that a firm operates on the upward-sloping portion of its average-total-cost curve.

Accepted Answer

A) True 
 B)False

Question 19

Product differentiation causes the seller of a good to face what type of demand curve?

Accepted Answer

A)  downward sloping 
B)  vertical 
C)  horizontal 
D)  Any of the above could be correct since product differentiation does not affect the shape of the demand curve. 
A)  downward sloping 
B)  vertical 
C)  horizontal 
D)  Any of the above could be correct since product differentiation does not affect the shape of the demand curve.

Question 20

Firms can freely enter a market

Accepted Answer

A)  only when the market is a monopoly. 
B)  only when the market is a monopoly or monopolistically competitive. 
C)  only when the market is monopolistically competitive or perfectly competitive. 
D)  when the market is perfectly competitive, monopolistically competitive, or monopolistic. 
A)  only when the market is a monopoly. 
B)  only when the market is a monopoly or monopolistically competitive. 
C)  only when the market is monopolistically competitive or perfectly competitive. 
D)  when the market is perfectly competitive, monopolistically competitive, or monopolistic.

Exam 16: Monopolistic Competition.

The product-variety externality is associated with the

In the long run,monopolistically competitive firms produce where demand equals average total cost.

When consumers are exposed to additional choices that result from the introduction of a new product,

The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which

Figure 16-3 -Refer to Figure 16-3.Assume the firm in the figure is currently producing 10 units of output and charging $600.The firm

Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. -Refer to Table 16-1.What is the concentration ratio in Industry W?

Figure 16-8 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-8.In order to maximize its profit,the firm will choose to produce

Critics of markets that are characterized by firms that sell brand name products argue that brand names encourage consumers to pay more for branded products that

Which of the following statements is correct?

Which of the following statements regarding brand names in advertising is not correct?

Scenario 16-3 Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q. -Refer to Scenario 16-3.If the marginal cost of producing this good is 0,what quantity would a profit-maximizing monopolist produce?

Figure 16-1. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.If the ATC=20 at the profit-maximizing level of output,which of the following will occur in the long run in this industry?

Firms in industries that have competitors but do not face so much competition that they are price takers are operating in either a(n)

Which of the following goods are not likely to be sold in monopolistically competitive markets?

In the short run,a firm operating in a monopolistically competitive market

Which of the following statements is correct?

The term excess capacity refers to the fact that a firm operates on the upward-sloping portion of its average-total-cost curve.

Product differentiation causes the seller of a good to face what type of demand curve?

Firms can freely enter a market

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.

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.

Oligopoly.

The Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

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