Question 1

Evidence from the market for eyeglasses suggests that advertising leads to

Accepted Answer

A)  lower-quality products for consumers. 
B)  lower prices for consumers. 
C)  higher prices for consumers. 
D)  less concern on the part of consumers about price differences among similar goods. 
A)  lower-quality products for consumers. 
B)  lower prices for consumers. 
C)  higher prices for consumers. 
D)  less concern on the part of consumers about price differences among similar goods.

Question 2

Scenario 16-4
Consider the problem facing two firms, Burger Prince and McDaniel's, in the fast-food restaurant market. Each firm has just come up with an idea for a new fast-food menu item which it would sell for $5. Assume that the marginal cost for each new menu item is a constant $3, and the only fixed cost is for advertising. Each company knows that if it spends $16 million on advertising it will get 2 million consumers to try its new product. Burger Prince has done market research which suggests that its product does not have any "staying" power in the market. Even though it could get 2 million consumers to buy the product once, it is unlikely that they will continue to buy the product in the future. McDaniel's's market research suggests that its product is very good, and consumers who try the product will continue to be consumers over the ensuing year. On the basis of its market research, McDaniel's estimates that its initial 2 million customers will buy one unit of the product each month in the coming year, for a total of 32 million units.
-Refer to Scenario 16-4.If McDaniel's decides to advertise its product it can expect to

Accepted Answer

A)  earn a profit of $48 million per year. 
B)  earn a profit of $36 million per year. 
C)  earn a profit of $16 million per year. 
D)  incur a loss of $16 million per year. 
A)  earn a profit of $48 million per year. 
B)  earn a profit of $36 million per year. 
C)  earn a profit of $16 million per year. 
D)  incur a loss of $16 million per year.

Question 3

Advertising during the Super Bowl is an example of information about quality contained primarily in the existence and expense of the advertising.

Accepted Answer

A) True 
 B)False

Question 4

New firms will likely enter a monopolistically competitive market when price exceeds

Accepted Answer

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

Question 5

Figure 16-2
This figure depicts a situation in a monopolistically competitive market.
  
-Refer to Figure 16-2.How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

Accepted Answer

A)  $200 
B)  $312.50 
C)  $400 
D)  $800 
A)  $200 
B)  $312.50 
C)  $400 
D)  $800

Question 6

A monopolistically competitive firm's choice of output level is virtually identical to the choice made by

Accepted Answer

A)  a perfectly competitive firm. 
B)  a duopolist. 
C)  a monopolist. 
D)  an oligopolist. 
A)  a perfectly competitive firm. 
B)  a duopolist. 
C)  a monopolist. 
D)  an oligopolist.

Question 7

When an industry has many firms,the industry is

Accepted Answer

A)  an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. 
B)  an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
C)  monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
D)  perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. 
A)  an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. 
B)  an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
C)  monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
D)  perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products.

Question 8

On a vacation to China,you find yourself eating every meal at the local Burger King rather than buying a meal from one of the street vendors.Your traveling companion claims that you are irrational,since you never eat Burger King hamburgers when you are home,and Burger King's hamburgers cost more than the meals prepared and sold by China's street vendors.An economist would most likely explain your behavior by suggesting that

Accepted Answer

A)  your behavior is rational, but your friend's behavior is clearly irrational. 
B)  you are clearly irrational, but your friend's behavior is rational. 
C)  the Burger King brand name suggests consistent quality. 
D)  the advertising by Burger King in China is more persuasive than the advertising by Burger King in your home town. 
A)  your behavior is rational, but your friend's behavior is clearly irrational. 
B)  you are clearly irrational, but your friend's behavior is rational. 
C)  the Burger King brand name suggests consistent quality. 
D)  the advertising by Burger King in China is more persuasive than the advertising by Burger King in your home town.

Question 9

A typical firm in the US economy would be classified as

Accepted Answer

A)  perfectly competitive. 
B)  imperfectly competitive. 
C)  a duopolist. 
D)  an oligopolist. 
A)  perfectly competitive. 
B)  imperfectly competitive. 
C)  a duopolist. 
D)  an oligopolist.

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 Y?

Accepted Answer

A)  29% 
B)  39% 
C)  44% 
D)  58% 
A)  29% 
B)  39% 
C)  44% 
D)  58%

Question 11

Scenario 16-4
Consider the problem facing two firms, Burger Prince and McDaniel's, in the fast-food restaurant market. Each firm has just come up with an idea for a new fast-food menu item which it would sell for $5. Assume that the marginal cost for each new menu item is a constant $3, and the only fixed cost is for advertising. Each company knows that if it spends $16 million on advertising it will get 2 million consumers to try its new product. Burger Prince has done market research which suggests that its product does not have any "staying" power in the market. Even though it could get 2 million consumers to buy the product once, it is unlikely that they will continue to buy the product in the future. McDaniel's's market research suggests that its product is very good, and consumers who try the product will continue to be consumers over the ensuing year. On the basis of its market research, McDaniel's estimates that its initial 2 million customers will buy one unit of the product each month in the coming year, for a total of 32 million units.
-Refer to Scenario 16-4.If Burger Prince decides to advertise its product it can expect to

Accepted Answer

A)  incur a loss of $12 million. 
B)  incur a loss of $5 million. 
C)  earn a profit of $5 million. 
D)  earn a profit of $12 million. 
A)  incur a loss of $12 million. 
B)  incur a loss of $5 million. 
C)  earn a profit of $5 million. 
D)  earn a profit of $12 million.

Question 12

In a monopolistically competitive market,

Accepted Answer

A)  there are only a few sellers. 
B)  each firm takes the price of its product as given. 
C)  firms can enter or exit the market without restrictions. 
D)  each firm produces a product that is essentially identical to the products of other firms in the market. 
A)  there are only a few sellers. 
B)  each firm takes the price of its product as given. 
C)  firms can enter or exit the market without restrictions. 
D)  each firm produces a product that is essentially identical to the products of other firms in the market.

Question 13

In his 1944 book,The Road to Serfdom,Friedrich Hayek argued that

Accepted Answer

A)  the market system should not be applauded for satisfying desires that it has itself created. 
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)  too much advertising would result in "private opulence and public squalor." 
A)  the market system should not be applauded for satisfying desires that it has itself created. 
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)  too much advertising would result in "private opulence and public squalor."

Question 14

If regulators required firms in monopolistically competitive markets to set price equal to marginal cost,

Accepted Answer

A)  firms would respond by lowering their costs. 
B)  firms would require a subsidy to stay in business 
C)  new firms that enter the market would operate at efficient scale. 
D)  the most efficient firms would not be affected. 
A)  firms would respond by lowering their costs. 
B)  firms would require a subsidy to stay in business 
C)  new firms that enter the market would operate at efficient scale. 
D)  the most efficient firms would not be affected.

Question 15

Figure 16-3
  
-Refer to Figure 16-3.What price will the monopolistically competitive firm charge in this market?

Accepted Answer

A)  $15 
B)  $400 
C)  $500 
D)  $700 
A)  $15 
B)  $400 
C)  $500 
D)  $700

Question 16

Which of the following conditions is characteristic of a monopolistically competitive firm in both the short-run and the long run?

Accepted Answer

A) P > MC B) MC = ATC C) P < MR D) All of the above are correct. A) P > MC B) MC = ATC C) P < MR D) All of the above are correct.

Question 17

A monopolistically competitive market

Accepted Answer

A)  is imperfectly competitive, and all imperfectly competitive markets are monopolistically competitive. 
B)  is imperfectly competitive, but not all imperfectly competitive markets are monopolistically competitive. 
C)  is imperfectly competitive, whereas an oligopolistic market is not imperfectly competitive. 
D)  is not imperfectly competitive. 
A)  is imperfectly competitive, and all imperfectly competitive markets are monopolistically competitive. 
B)  is imperfectly competitive, but not all imperfectly competitive markets are monopolistically competitive. 
C)  is imperfectly competitive, whereas an oligopolistic market is not imperfectly competitive. 
D)  is not imperfectly competitive.

Question 18

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Accepted Answer

A)  firms are more likely to operate at efficient scale. 
B)  there are likely to be too many firms in a monopolistically competitive market. 
C)  market efficiency is likely to be enhanced by the entry of new firms. 
D)  all firms are earning zero economic profit. 
A)  firms are more likely to operate at efficient scale. 
B)  there are likely to be too many firms in a monopolistically competitive market. 
C)  market efficiency is likely to be enhanced by the entry of new firms. 
D)  all firms are earning zero economic profit.

Question 19

When a firm's demand curve is tangent to its average total cost curve,the

Accepted Answer

A)  firm's economic profit is zero. 
B)  firm must be earning economic profits. 
C)  firm must be incurring economic losses. 
D)  firm must be operating at its efficient scale. 
A)  firm's economic profit is zero. 
B)  firm must be earning economic profits. 
C)  firm must be incurring economic losses. 
D)  firm must be operating at its efficient scale.

Question 20

Which of the following pairs illustrates the two extreme examples of market structures?

Accepted Answer

A)  competition and oligopoly 
B)  competition and monopoly 
C)  monopoly and monopolistic competition 
D)  oligopoly and monopolistic competition 
A)  competition and oligopoly 
B)  competition and monopoly 
C)  monopoly and monopolistic competition 
D)  oligopoly and monopolistic competition

Evidence from the market for eyeglasses suggests that advertising leads to

Advertising during the Super Bowl is an example of information about quality contained primarily in the existence and expense of the advertising.

New firms will likely enter a monopolistically competitive market when price exceeds

Figure 16-2 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-2.How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

A monopolistically competitive firm's choice of output level is virtually identical to the choice made by

When an industry has many firms,the industry is

A typical firm in the US economy would be classified as

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 Y?

In a monopolistically competitive market,

In his 1944 book,The Road to Serfdom,Friedrich Hayek argued that

If regulators required firms in monopolistically competitive markets to set price equal to marginal cost,

Figure 16-3 -Refer to Figure 16-3.What price will the monopolistically competitive firm charge in this market?

Which of the following conditions is characteristic of a monopolistically competitive firm in both the short-run and the long run?

A monopolistically competitive market

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

When a firm's demand curve is tangent to its average total cost curve,the

Which of the following pairs illustrates the two extreme examples of market structures?

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.

Filters

Exam 16: Monopolistic Competition.

Evidence from the market for eyeglasses suggests that advertising leads to

Advertising during the Super Bowl is an example of information about quality contained primarily in the existence and expense of the advertising.

New firms will likely enter a monopolistically competitive market when price exceeds

Figure 16-2 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-2.How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

A monopolistically competitive firm's choice of output level is virtually identical to the choice made by

When an industry has many firms,the industry is

A typical firm in the US economy would be classified as

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 Y?

In a monopolistically competitive market,

In his 1944 book,The Road to Serfdom,Friedrich Hayek argued that

If regulators required firms in monopolistically competitive markets to set price equal to marginal cost,

Figure 16-3 -Refer to Figure 16-3.What price will the monopolistically competitive firm charge in this market?

Which of the following conditions is characteristic of a monopolistically competitive firm in both the short-run and the long run?

A monopolistically competitive market

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

When a firm's demand curve is tangent to its average total cost curve,the

Which of the following pairs illustrates the two extreme examples of market structures?

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.

Filters