Question 1

Figure 16-4
  
-Refer to Figure 16-4.Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm?

Accepted Answer

A)  panel a 
B)  panel b 
C)  panel c 
D)  All of the above are correct. 
A)  panel a 
B)  panel b 
C)  panel c 
D)  All of the above are correct.

Question 2

In a long-run equilibrium,firms in both perfectly competitive markets and monopolistically competitive markets produce a quantity below the efficient scale of production.

Accepted Answer

A) True 
 B)False

Question 3

A firm charges a price that exceeds marginal cost

Accepted Answer

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

Question 4

Which of the following represents the best government policy to reduce the deadweight loss associated with a monopolistically competitive market?

Accepted Answer

A)  The government should regulate firms in a manner similar to natural monopolies. 
B)  The government should encourage more firms to enter the industry because without government intervention, there are likely to be "too few" firms. 
C)  The government should encourage some firms to exit the industry because without government intervention, there are likely to be "too many" firms. 
D)  There is no government policy that can reduce deadweight loss without creating other problems. 
A)  The government should regulate firms in a manner similar to natural monopolies. 
B)  The government should encourage more firms to enter the industry because without government intervention, there are likely to be "too few" firms. 
C)  The government should encourage some firms to exit the industry because without government intervention, there are likely to be "too many" firms. 
D)  There is no government policy that can reduce deadweight loss without creating other problems.

Question 5

A monopolistically competitive industry is characterized by

Accepted Answer

A)  many firms selling products that are similar but not identical. 
B)  many firms selling identical products. 
C)  a few firms selling products that are similar but not identical. 
D)  a few firms selling highly different products. 
A)  many firms selling products that are similar but not identical. 
B)  many firms selling identical products. 
C)  a few firms selling products that are similar but not identical. 
D)  a few firms selling highly different products.

Question 6

An oligopoly is a market in which

Accepted Answer

A)  there are only a few sellers, each offering a product similar or identical to the products offered by other firms in the market. 
B)  firms are price takers. 
C)  the actions of one seller in the market have no impact on the other sellers' profits. 
D)  there are many price-taking firms, each offering a product similar or identical to the products offered by other firms in the market. 
A)  there are only a few sellers, each offering a product similar or identical to the products offered by other firms in the market. 
B)  firms are price takers. 
C)  the actions of one seller in the market have no impact on the other sellers' profits. 
D)  there are many price-taking firms, each offering a product similar or identical to the products offered by other firms in the market.

Question 7

Which of the following markets impose deadweight losses on society?
(i)perfect competition
(ii)monopolistic competition
(iii)monopoly

Accepted Answer

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

Question 8

Figure 16-1. The figure is drawn for a monopolistically competitive firm.
  
-Refer to Figure 16-1.If the average total cost is $15 at the profit-maximizing quantity,then the firm's maximum profit is

Accepted Answer

A)  $18. 
B)  $24. 
C)  $36. 
D)  $45. 
A)  $18. 
B)  $24. 
C)  $36. 
D)  $45.

Question 9

With respect to monopolistic competition,

Accepted Answer

A)  both the business-stealing externality and the product-variety externality are positive externalities. 
B)  the business-stealing externality is a positive externality, while the product-variety externality is a negative externality. 
C)  the business-stealing externality is a negative externality, while the product-variety externality is a positive externality. 
D)  both the business-stealing externality and the product-variety externality are negative externalities. 
A)  both the business-stealing externality and the product-variety externality are positive externalities. 
B)  the business-stealing externality is a positive externality, while the product-variety externality is a negative externality. 
C)  the business-stealing externality is a negative externality, while the product-variety externality is a positive externality. 
D)  both the business-stealing externality and the product-variety externality are negative externalities.

Question 10

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 X?

Accepted Answer

A)  6% 
B)  44% 
C)  90% 
D)  99% 
A)  6% 
B)  44% 
C)  90% 
D)  99%

Question 11

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.
  
-Refer to Figure 16-9.In order to maximize its profit,the firm will choose to produce

Accepted Answer

A)  100 units of output, and its profit will be negative. 
B)  100 units of output, and its profit will be zero. 
C)  133.33 units of output, and its profit will be negative. 
D)  133.33 units of output, and its profit will be zero. 
A)  100 units of output, and its profit will be negative. 
B)  100 units of output, and its profit will be zero. 
C)  133.33 units of output, and its profit will be negative. 
D)  133.33 units of output, and its profit will be zero.

Question 12

Which of the following statements is not correct?

Accepted Answer

A)  Firms in monopolistic competition and monopoly can earn economic profits in the short run. 
B)  Firms in monopolistic competition and perfect competition produce the welfare-maximizing level of output. 
C)  Monopolistically competitive firms price above marginal cost, whereas competitive firms price at marginal cost. 
D)  Firms wishing to enter a monopolistically competitive market can do so freely, whereas firms wishing to enter a monopoly market will face barriers. 
A)  Firms in monopolistic competition and monopoly can earn economic profits in the short run. 
B)  Firms in monopolistic competition and perfect competition produce the welfare-maximizing level of output. 
C)  Monopolistically competitive firms price above marginal cost, whereas competitive firms price at marginal cost. 
D)  Firms wishing to enter a monopolistically competitive market can do so freely, whereas firms wishing to enter a monopoly market will face barriers.

Question 13

Assume the role of a critic of advertising.Describe the characteristics of advertising that reduce the effectiveness of markets and decrease the social welfare of society.

Accepted Answer

Advertising manipulates people's tastes

Question 14

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.
  
-Refer to Figure 16-9.As the figure is drawn,the firm is in

Accepted Answer

A)  a short-run equilibrium but it is not in a long-run equilibrium. 
B)  a long-run equilibrium but it is not in a short-run equilibrium. 
C)  a short-run equilibrium as well as a long-run equilibrium. 
D)  neither a short-run equilibrium nor a long-run equilibrium. 
A)  a short-run equilibrium but it is not in a long-run equilibrium. 
B)  a long-run equilibrium but it is not in a short-run equilibrium. 
C)  a short-run equilibrium as well as a long-run equilibrium. 
D)  neither a short-run equilibrium nor a long-run equilibrium.

Question 15

Monopolistic competition is a type of

Accepted Answer

A)  oligopoly. 
B)  market structure. 
C)  price discrimination. 
D)  advertising strategy. 
A)  oligopoly. 
B)  market structure. 
C)  price discrimination. 
D)  advertising strategy.

Question 16

Compared to other firms,firms that sell highly differentiated products likely incur significant costs associated with

Accepted Answer

A)  advertising. 
B)  the product-variety externality. 
C)  intermediate materials. 
D)  taxes and regulation. 
A)  advertising. 
B)  the product-variety externality. 
C)  intermediate materials. 
D)  taxes and regulation.

Question 17

For a monopolistically competitive firm,

Accepted Answer

A)  marginal revenue and price are the same. 
B)  average revenue and price are the same. 
C)  at the profit-maximizing quantity of output, price equals marginal cost. 
D)  at the profit-maximizing quantity of output, price equals the minimum of average total cost. 
A)  marginal revenue and price are the same. 
B)  average revenue and price are the same. 
C)  at the profit-maximizing quantity of output, price equals marginal cost. 
D)  at the profit-maximizing quantity of output, price equals the minimum of average total cost.

Question 18

When a firm operates with excess capacity,it must be in a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 19

A markup of price over marginal cost is inconsistent with free entry and zero profit.

Accepted Answer

A) True 
 B)False

Question 20

One key difference between an oligopoly market and a competitive market is that oligopolistic firms

Accepted Answer

A)  are price takers while competitive firms are not. 
B)  can affect the profit of other firms in the market by the choices they make while firms in competitive markets do not affect each other by the choices they make. 
C)  sell completely unrelated products while competitive firms do not. 
D)  sell their product at a price equal to marginal cost while competitive firms do not. 
A)  are price takers while competitive firms are not. 
B)  can affect the profit of other firms in the market by the choices they make while firms in competitive markets do not affect each other by the choices they make. 
C)  sell completely unrelated products while competitive firms do not. 
D)  sell their product at a price equal to marginal cost while competitive firms do not.

Exam 16: Monopolistic Competition.

Figure 16-4 -Refer to Figure 16-4.Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm?

In a long-run equilibrium,firms in both perfectly competitive markets and monopolistically competitive markets produce a quantity below the efficient scale of production.

A firm charges a price that exceeds marginal cost

Which of the following represents the best government policy to reduce the deadweight loss associated with a monopolistically competitive market?

A monopolistically competitive industry is characterized by

An oligopoly is a market in which

Which of the following markets impose deadweight losses on society? (i)perfect competition (ii)monopolistic competition (iii)monopoly

Figure 16-1. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.If the average total cost is $15 at the profit-maximizing quantity,then the firm's maximum profit is

With respect to monopolistic competition,

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 X?

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9.In order to maximize its profit,the firm will choose to produce

Which of the following statements is not correct?

Assume the role of a critic of advertising.Describe the characteristics of advertising that reduce the effectiveness of markets and decrease the social welfare of society.

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9.As the figure is drawn,the firm is in

Monopolistic competition is a type of

Compared to other firms,firms that sell highly differentiated products likely incur significant costs associated with

For a monopolistically competitive firm,

When a firm operates with excess capacity,it must be in a monopolistically competitive market.

A markup of price over marginal cost is inconsistent with free entry and zero profit.

One key difference between an oligopoly market and a competitive market is that oligopolistic firms

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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