Question 1

Monopolistic competition is characterized by many buyers and sellers,product differentiation,and barriers to entry.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is an example of a monopolistically competitive industry?

Accepted Answer

A)  breakfast cereals 
B)  cigarettes 
C)  restaurants in New York City 
D)  milk 
A)  breakfast cereals 
B)  cigarettes 
C)  restaurants in New York City 
D)  milk

Question 3

When quality cannot be easily judged in advance,what provides consumers with information about the quality of a product?

Accepted Answer

A)  a brand name 
B)  a tie-in 
C)  the quantity available for sale 
D)  the amount of deadweight loss 
A)  a brand name 
B)  a tie-in 
C)  the quantity available for sale 
D)  the amount of deadweight loss

Question 4

Table 16-4
This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm.
  
-Refer to Table 16-4.If the government forces this firm to produce at its efficient output level,how much profit will this firm earn?

Accepted Answer

A)  a $4 loss 
B)  a $6 loss 
C)  a $6 profit 
D)  a $12 profit 
A)  a $4 loss 
B)  a $6 loss 
C)  a $6 profit 
D)  a $12 profit

Question 5

When a profit-maximizing firm in a monopolistically competitive market charges a price higher than marginal cost,

Accepted Answer

A)  the firm must be earning a positive economic profit. 
B)  the firm may be incurring economic losses 
C)  there is a deadweight loss to society, but it is exactly offset by the benefit of excess capacity. 
D)  new firms will enter the market in the long run. 
A)  the firm must be earning a positive economic profit. 
B)  the firm may be incurring economic losses 
C)  there is a deadweight loss to society, but it is exactly offset by the benefit of excess capacity. 
D)  new firms will enter the market in the long run.

Question 6

Roberto consumes Coke exclusively.He claims that there is a clear taste difference and that competing brands of cola leave an unsavory taste in his mouth.In a blind taste test,Roberto is found to prefer Coke to store-brand cola eight out of ten times.The results of Roberto's taste test would refute 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)  consumers with the lowest levels of income are the most likely to be influenced by brand name advertising. 
D)  brand names are a form of socially efficient advertising. 
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)  consumers with the lowest levels of income are the most likely to be influenced by brand name advertising. 
D)  brand names are a form of socially efficient advertising.

Question 7

Economists are unanimous in their belief that advertising is socially inefficient.

Accepted Answer

A) True 
 B)False

Question 8

Monopolistic competition and monopoly are examples of a market structure called imperfect competition.

Accepted Answer

A) True 
 B)False

Question 9

Product differentiation in monopolistically competitive markets ensures that,for profit-maximizing firms,

Accepted Answer

A)  marginal revenue will equal average total cost. 
B)  price will exceed marginal cost. 
C)  marginal cost will exceed average revenue. 
D)  average variable cost will be declining. 
A)  marginal revenue will equal average total cost. 
B)  price will exceed marginal cost. 
C)  marginal cost will exceed average revenue. 
D)  average variable cost will be declining.

Question 10

In a long-run equilibrium,

Accepted Answer

A)  only a perfectly competitive firm operates at its efficient scale. 
B)  only a monopolistically competitive firm operates at its efficient scale. 
C)  neither a competitive firm nor a monopolistically competitive firm charges a markup over marginal cost. 
D)  both a perfectly competitive firm and a monopolistically competitive firm operate at their efficient scale of production. 
A)  only a perfectly competitive firm operates at its efficient scale. 
B)  only a monopolistically competitive firm operates at its efficient scale. 
C)  neither a competitive firm nor a monopolistically competitive firm charges a markup over marginal cost. 
D)  both a perfectly competitive firm and a monopolistically competitive firm operate at their efficient scale of production.

Question 11

When a market is monopolistically competitive,the typical firm in the market can earn

Accepted Answer

A)  losses in the short run and profits in the long run. 
B)  profits in the short run and the long run. 
C)  losses in the short run and zero profit in the long run. 
D)  zero profit in the short run and losses in the long run. 
A)  losses in the short run and profits in the long run. 
B)  profits in the short run and the long run. 
C)  losses in the short run and zero profit in the long run. 
D)  zero profit in the short run and losses in the long run.

Question 12

Two bottles of body wash sit side-by-side in a grocery store: Olay (a brand name)sells for $6.00,while Up and Up (not a brand name)sells for $3.00.Even defenders of brand names would have to admit that

Accepted Answer

A)  no rational consumer would spend twice as much for Olay as she would for Up and Up. 
B)  the side-by-side presence of these two body washes conveys no useful information to consumers. 
C)  Olay has no incentive to maintain the quality of its product just because of the Olay brand name. 
D)  None of the above is correct. 
A)  no rational consumer would spend twice as much for Olay as she would for Up and Up. 
B)  the side-by-side presence of these two body washes conveys no useful information to consumers. 
C)  Olay has no incentive to maintain the quality of its product just because of the Olay brand name. 
D)  None of the above is correct.

Question 13

Figure 16-4
  
-Refer to Figure 16-4.Which of the graphs depicts a short-run equilibrium that will encourage the exit of some firms from a monopolistically competitive industry?

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

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 is the most competitive?

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 15

The traditional view of monopolistic competition holds that this type of industrial structure is inefficient because

Accepted Answer

A)  there are too few firms to reach an efficient level of production. 
B)  firms do not operate at the output that minimizes average costs. 
C)  more advertising is needed to inform customers about product differences. 
D)  consumers do not have enough choice among the product varieties available. 
A)  there are too few firms to reach an efficient level of production. 
B)  firms do not operate at the output that minimizes average costs. 
C)  more advertising is needed to inform customers about product differences. 
D)  consumers do not have enough choice among the product varieties available.

Question 16

A monopolistically competitive market

Accepted Answer

A)  usually has too many firms, reducing the economic profit of each firm to zero. 
B)  usually has too few firms, reducing the product variety for consumers. 
C)  may have too many or too few firms, and the government can intervene to achieve the optimal number of firms. 
D)  may have too many or too few firms, but the government can do little to rectify the situation. 
A)  usually has too many firms, reducing the economic profit of each firm to zero. 
B)  usually has too few firms, reducing the product variety for consumers. 
C)  may have too many or too few firms, and the government can intervene to achieve the optimal number of firms. 
D)  may have too many or too few firms, but the government can do little to rectify the situation.

Question 17

In which of the following market structures can firms earn economic profits in the long run?

Accepted Answer

A)  perfect competition 
B)  monopolistic competition 
C)  monopoly 
D)  Both b and c are correct. 
A)  perfect competition 
B)  monopolistic competition 
C)  monopoly 
D)  Both b and c are correct.

Question 18

Table 16-4
This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm.
  
-Refer to Table 16-4.How much profit will this firm earn when it chooses its output to maximize profit?

Accepted Answer

A)  a $4 loss 
B)  a $2 loss 
C)  a $6 profit 
D)  a $16 profit 
A)  a $4 loss 
B)  a $2 loss 
C)  a $6 profit 
D)  a $16 profit

Question 19

Which of the following goods are likely to be sold in a monopolistically competitive market?

Accepted Answer

A)  sweaters 
B)  cola 
C)  corn 
D)  postage stamps 
A)  sweaters 
B)  cola 
C)  corn 
D)  postage stamps

Question 20

Which of the following is unique to a monopolistically competitive firm when compared to an oligopoly?

Accepted Answer

A)  The monopolistically competitive firm advertises. 
B)  The monopolistically competitive firm produces a quantity of output that falls short of the socially optimal level. 
C)  Monopolistic competition features many buyers. 
D)  Monopolistic competition features many sellers. 
A)  The monopolistically competitive firm advertises. 
B)  The monopolistically competitive firm produces a quantity of output that falls short of the socially optimal level. 
C)  Monopolistic competition features many buyers. 
D)  Monopolistic competition features many sellers.

Exam 16: Monopolistic Competition.

Monopolistic competition is characterized by many buyers and sellers,product differentiation,and barriers to entry.

Which of the following is an example of a monopolistically competitive industry?

When quality cannot be easily judged in advance,what provides consumers with information about the quality of a product?

Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-4.If the government forces this firm to produce at its efficient output level,how much profit will this firm earn?

When a profit-maximizing firm in a monopolistically competitive market charges a price higher than marginal cost,

Economists are unanimous in their belief that advertising is socially inefficient.

Monopolistic competition and monopoly are examples of a market structure called imperfect competition.

Product differentiation in monopolistically competitive markets ensures that,for profit-maximizing firms,

In a long-run equilibrium,

When a market is monopolistically competitive,the typical firm in the market can earn

Two bottles of body wash sit side-by-side in a grocery store: Olay (a brand name)sells for $6.00,while Up and Up (not a brand name)sells for $3.00.Even defenders of brand names would have to admit that

Figure 16-4 -Refer to Figure 16-4.Which of the graphs depicts a short-run equilibrium that will encourage the exit of some firms from a monopolistically competitive industry?

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 is the most competitive?

The traditional view of monopolistic competition holds that this type of industrial structure is inefficient because

A monopolistically competitive market

In which of the following market structures can firms earn economic profits in the long run?

Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-4.How much profit will this firm earn when it chooses its output to maximize profit?

Which of the following goods are likely to be sold in a monopolistically competitive market?

Which of the following is unique to a monopolistically competitive firm when compared to an oligopoly?

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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