Question 1

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

Accepted Answer

A)  shift in a direction that is unpredictable without further information. 
B)  shift to the right. 
C)  shift to the left. 
D)  remain unchanged. It is the supply curve that will shift. 
A)  shift in a direction that is unpredictable without further information. 
B)  shift to the right. 
C)  shift to the left. 
D)  remain unchanged. It is the supply curve that will shift.

Question 2

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

Accepted Answer

A)  small due to economies of scale. 
B)  large because price is usually below marginal cost. 
C)  large because of the large number of firms that produce differentiated products. 
D)  small because firms produce with excess capacity. 
A)  small due to economies of scale. 
B)  large because price is usually below marginal cost. 
C)  large because of the large number of firms that produce differentiated products. 
D)  small because firms produce with excess capacity.

Question 3

In many college towns,private independent bookstores typically locate on the periphery of the college campus.However,in some college towns,the university has used political power to restrict private bookstores near campus through community zoning laws.Use your knowledge of markets to predict the price and quality of service differences in the market for college textbooks under the two different market regimes.

Accepted Answer

In monopoly markets,price will

Question 4

When a monopolistically competitive firm is in long-run equilibrium,

Accepted Answer

A)  price is equal to average total cost. 
B)  price is equal to marginal cost. 
C)  price is equal to marginal revenue. 
D)  the firm operates at its efficient scale. 
A)  price is equal to average total cost. 
B)  price is equal to marginal cost. 
C)  price is equal to marginal revenue. 
D)  the firm operates at its efficient scale.

Question 5

A monopolistically competitive market is like both a competitive market and a monopoly in that

Accepted Answer

A)  all three market structures feature easy entry by new firms in the long run. 
B)  firms in all three market structures maximize profit by producing an output level where marginal revenue equals marginal cost. 
C)  firms in all three market structures produce the welfare-maximizing level of output. 
D)  All of the above are correct. 
A)  all three market structures feature easy entry by new firms in the long run. 
B)  firms in all three market structures maximize profit by producing an output level where marginal revenue equals marginal cost. 
C)  firms in all three market structures produce the welfare-maximizing level of output. 
D)  All of the above are correct.

Question 6

The higher the concentration ratio,the

Accepted Answer

A)  more control an individual firm has to set prices. 
B)  more competitive the industry. 
C)  less competitive the industry. 
D)  Both a and c are correct. 
A)  more control an individual firm has to set prices. 
B)  more competitive the industry. 
C)  less competitive the industry. 
D)  Both a and c are correct.

Question 7

Although monopolistically competitive markets offer consumers a wide variety of differentiated products,there may still be insufficient variety if

Accepted Answer

A)  there are large fixed costs in the market. 
B)  there are no barriers to entry in the market. 
C)  the business-stealing externality is present in the market. 
D)  the government does not impose regulations on the market. 
A)  there are large fixed costs in the market. 
B)  there are no barriers to entry in the market. 
C)  the business-stealing externality is present in the market. 
D)  the government does not impose regulations on the market.

Question 8

Suppose for some firm that average total cost is minimized at Q₁ units of output.For a monopolistically competitive firm in long-run equilibrium,Q₁

Accepted Answer

A)  is also the level of output at which marginal cost equals average total cost. 
B)  exceeds the level of output at which there is a point of tangency between the demand curve and the average total cost curve. 
C)  exceeds the level of output at which marginal revenue equals marginal cost. 
D)  All of the above are correct. 
A)  is also the level of output at which marginal cost equals average total cost. 
B)  exceeds the level of output at which there is a point of tangency between the demand curve and the average total cost curve. 
C)  exceeds the level of output at which marginal revenue equals marginal cost. 
D)  All of the above are correct.

Question 9

Which of the following is not a key feature of monopolistic competition?

Accepted Answer

A)  Excess capacity 
B)  A markup of price over marginal cost 
C)  Positive economic profits for firms in the long run 
D)  Differentiated products among firms in the market 
A)  Excess capacity 
B)  A markup of price over marginal cost 
C)  Positive economic profits for firms in the long run 
D)  Differentiated products among firms in the market

Question 10

Figure 16-4
  
-Refer to Figure 16-4.Panel a shows a profit-maximizing monopolistically competitive firm that is

Accepted Answer

A)  earning zero economic profit. 
B)  likely to exit the market in the long run. 
C)  producing its efficient scale of output. 
D)  not maximizing its profit. 
A)  earning zero economic profit. 
B)  likely to exit the market in the long run. 
C)  producing its efficient scale of output. 
D)  not maximizing its profit.

Question 11

In some countries,brand name fast-food restaurants are not allowed to operate.Such restrictions are likely to

Accepted Answer

A)  enhance the social welfare of society. 
B)  increase the number of fast-food restaurants. 
C)  reduce barriers to entry in imperfect markets. 
D)  reduce the competitive nature of local fast-food markets. 
A)  enhance the social welfare of society. 
B)  increase the number of fast-food restaurants. 
C)  reduce barriers to entry in imperfect markets. 
D)  reduce the competitive nature of local fast-food markets.

Question 12

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

Accepted Answer

A)  strategic interactions among sellers are important. 
B)  there are a small number of sellers. 
C)  sellers are price makers rather than price takers. 
D)  there are only a few buyers but many sellers. 
A)  strategic interactions among sellers are important. 
B)  there are a small number of sellers. 
C)  sellers are price makers rather than price takers. 
D)  there are only a few buyers but many sellers.

Question 13

Monopolistic competition is characterized by which of the following attributes?
(i)free entry
(ii)product differentiation
(iii)many sellers

Accepted Answer

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

Question 14

To maximize its profit,a monopolistically competitive firm

Accepted Answer

A)  takes the price as given and chooses its quantity, just as a competitive firm does. 
B)  takes the price as given and chooses its quantity, just as a colluding oligopolist does. 
C)  chooses its quantity and price, just as a competitive firm does. 
D)  chooses its quantity and price, just as a monopoly does. 
A)  takes the price as given and chooses its quantity, just as a competitive firm does. 
B)  takes the price as given and chooses its quantity, just as a colluding oligopolist does. 
C)  chooses its quantity and price, just as a competitive firm does. 
D)  chooses its quantity and price, just as a monopoly does.

Question 15

For a monopolistically competitive firm,at the profit-maximizing quantity of output,

Accepted Answer

A)  price exceeds marginal cost. 
B)  marginal revenue exceeds marginal cost. 
C)  marginal cost exceeds average revenue. 
D)  price equals marginal revenue. 
A)  price exceeds marginal cost. 
B)  marginal revenue exceeds marginal cost. 
C)  marginal cost exceeds average revenue. 
D)  price equals marginal revenue.

Question 16

In his 1958 book,The Affluent Society,John Kenneth Galbraith argued that

Accepted Answer

A)  brand names give firms an incentive to produce and sell high-quality products. 
B)  consumers' tastes cannot, in any real sense, be "determined" by advertising. 
C)  firms use advertising to create demand for products that people otherwise do not want or need. 
D)  firms use advertising to send a signal to consumers about the quality of their products. 
A)  brand names give firms an incentive to produce and sell high-quality products. 
B)  consumers' tastes cannot, in any real sense, be "determined" by advertising. 
C)  firms use advertising to create demand for products that people otherwise do not want or need. 
D)  firms use advertising to send a signal to consumers about the quality of their products.

Question 17

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.Which industry has the lowest concentration ratio?

Accepted Answer

A)  Industry W 
B)  Industry X 
C)  Industry Y 
D)  Industry Z 
A)  Industry W 
B)  Industry X 
C)  Industry Y 
D)  Industry Z

Question 18

A recent outbreak of hepatitis was linked to a national fast-food restaurant chain.This is an example of a case in which

Accepted Answer

A)  brand name identity increases the effectiveness of markets. 
B)  brand name identity can be detrimental to the profitability of a firm. 
C)  advertising is ineffective in salvaging perceptions of product quality. 
D)  advertising cannot be used to establish brand loyalty. 
A)  brand name identity increases the effectiveness of markets. 
B)  brand name identity can be detrimental to the profitability of a firm. 
C)  advertising is ineffective in salvaging perceptions of product quality. 
D)  advertising cannot be used to establish brand loyalty.

Question 19

Defenders of advertising

Accepted Answer

A)  concede that advertising increases firms' market power. 
B)  concede that advertising makes entry by new firms more difficult. 
C)  contend that firms use advertising to provide useful information to consumers. 
D)  All of the above are correct. 
A)  concede that advertising increases firms' market power. 
B)  concede that advertising makes entry by new firms more difficult. 
C)  contend that firms use advertising to provide useful information to consumers. 
D)  All of the above are correct.

Question 20

In monopolistically competitive markets,free entry and exit suggests that

Accepted Answer

A)  the market structure will eventually be characterized by perfect competition in the long run. 
B)  all firms earn zero economic profits in the long run. 
C)  some firms will be able to earn economic profits in the long run. 
D)  some firms will be forced to incur economic losses in the long run. 
A)  the market structure will eventually be characterized by perfect competition in the long run. 
B)  all firms earn zero economic profits in the long run. 
C)  some firms will be able to earn economic profits in the long run. 
D)  some firms will be forced to incur economic losses in the long run.

Exam 16: Monopolistic Competition.

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

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

When a monopolistically competitive firm is in long-run equilibrium,

A monopolistically competitive market is like both a competitive market and a monopoly in that

The higher the concentration ratio,the

Although monopolistically competitive markets offer consumers a wide variety of differentiated products,there may still be insufficient variety if

Suppose for some firm that average total cost is minimized at Q₁ units of output.For a monopolistically competitive firm in long-run equilibrium,Q₁

Which of the following is not a key feature of monopolistic competition?

Figure 16-4 -Refer to Figure 16-4.Panel a shows a profit-maximizing monopolistically competitive firm that is

In some countries,brand name fast-food restaurants are not allowed to operate.Such restrictions are likely to

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

Monopolistic competition is characterized by which of the following attributes? (i)free entry (ii)product differentiation (iii)many sellers

To maximize its profit,a monopolistically competitive firm

For a monopolistically competitive firm,at the profit-maximizing quantity of output,

In his 1958 book,The Affluent Society,John Kenneth Galbraith argued that

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.Which industry has the lowest concentration ratio?

A recent outbreak of hepatitis was linked to a national fast-food restaurant chain.This is an example of a case in which

Defenders of advertising

In monopolistically competitive markets,free entry and exit suggests that

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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