Question 1

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)  100 units of output, and its profit will be positive. 
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 positive. 
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 2

A monopolistically competitive firm

Accepted Answer

A)  charges a price that is equal to marginal cost. 
B)  experiences a zero profit in the long run. 
C)  produces at the efficient scale in the long run. 
D)  All of the above are correct. 
A)  charges a price that is equal to marginal cost. 
B)  experiences a zero profit in the long run. 
C)  produces at the efficient scale in the long run. 
D)  All of the above are correct.

Question 3

Firms that sell highly differentiated consumer goods,such as soft drinks,breakfast cereals,and dog food,typically spend what percent of their revenues on advertising?

Accepted Answer

A)  0-1 
B)  2-4 
C)  10-20 
D)  over 50 
A)  0-1 
B)  2-4 
C)  10-20 
D)  over 50

Question 4

If advertising reduces a consumer's price sensitivity between identical goods,it is likely to

Accepted Answer

A)  increase the elasticity of demand for differentiated products. 
B)  enhance competition and encourage more product diversity. 
C)  reduce competition and reduce social welfare. 
D)  encourage the consumption of all homogenous goods. 
A)  increase the elasticity of demand for differentiated products. 
B)  enhance competition and encourage more product diversity. 
C)  reduce competition and reduce social welfare. 
D)  encourage the consumption of all homogenous goods.

Question 5

One way in which monopolistic competition differs from oligopoly is that

Accepted Answer

A)  there are no barriers to entry in oligopolies. 
B)  in oligopoly markets there are only a few sellers. 
C)  all firms in an oligopoly eventually earn zero economic profits. 
D)  strategic interactions between firms are rare in oligopolies. 
A)  there are no barriers to entry in oligopolies. 
B)  in oligopoly markets there are only a few sellers. 
C)  all firms in an oligopoly eventually earn zero economic profits. 
D)  strategic interactions between firms are rare in oligopolies.

Question 6

Free entry eliminates long-run profits for firms in competitive and monopolistic industries.

Accepted Answer

A) True 
 B)False

Question 7

Figure 16-5
  
-Refer to Figure 16-5.Which of the graphs depicts a monopolistically competitive firm in long-run equilibrium?

Accepted Answer

A)  panel a 
B)  panel b 
C)  panel c 
D)  None of the above is correct. 
A)  panel a 
B)  panel b 
C)  panel c 
D)  None of the above is correct.

Question 8

Discuss how brand names may enhance the efficiency of markets in a less developed country.

Accepted Answer

Recognizable brand names signal quality

Question 9

Consider monopoly,monopolistic competition,and perfect competition.In which of these three market structures does a profit-maximizing firm experience zero economic profit?

Accepted Answer

A)  perfect competition only 
B)  perfect competition and monopolistic competition only 
C)  perfect competition, monopolistic competition, and monopoly 
D)  The answer cannot be determined without knowing whether the market is in the long run or short run. 
A)  perfect competition only 
B)  perfect competition and monopolistic competition only 
C)  perfect competition, monopolistic competition, and monopoly 
D)  The answer cannot be determined without knowing whether the market is in the long run or short run.

Question 10

Advertisements that appear to convey no information at all

Accepted Answer

A)  are usually associated with "infomercials." 
B)  are useless to consumers but valuable to firms. 
C)  are useless to firms but valuable to consumers for their entertainment quality alone. 
D)  may convey information to consumers by providing them with a signal that firms are willing to spend significant amounts of money to advertise. 
A)  are usually associated with "infomercials." 
B)  are useless to consumers but valuable to firms. 
C)  are useless to firms but valuable to consumers for their entertainment quality alone. 
D)  may convey information to consumers by providing them with a signal that firms are willing to spend significant amounts of money to advertise.

Question 11

Figure 16-7
The lines in the figures below illustrate the potential effect of entry and exit in a monopolistically competitive market on either the demand curve or the marginal cost curve of existing firms.
  
-Refer to Figure 16-7.Panel (d)illustrates the change that would occur if existing firms faced

Accepted Answer

A)  long-run economic losses. 
B)  a decrease in the diversity of products offered in the market. 
C)  new entrants in the market. 
D)  firms exiting the market. 
A)  long-run economic losses. 
B)  a decrease in the diversity of products offered in the market. 
C)  new entrants in the market. 
D)  firms exiting the market.

Question 12

Among the following situations,which one is least likely to apply to a monopolistically competitive firm?

Accepted Answer

A)  profit is positive in the short run 
B)  total cost exceeds total revenue in the short run 
C)  profit is positive in the long run 
D)  total revenue equals total cost in the long run 
A)  profit is positive in the short run 
B)  total cost exceeds total revenue in the short run 
C)  profit is positive in the long run 
D)  total revenue equals total cost in the long run

Question 13

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

Accepted Answer

A)  positive economic profits. 
B)  economic losses. 
C)  zero economic profits. 
D)  All of the above are possible. 
A)  positive economic profits. 
B)  economic losses. 
C)  zero economic profits. 
D)  All of the above are possible.

Question 14

In Lee Benham's 1972 article examining the impact of advertising on the average price paid for a pair of eyeglasses,Benham found that

Accepted Answer

A)  the average price paid for eyeglasses was nearly 20% higher in the states that did not restrict advertising. 
B)  the average price paid for eyeglasses was nearly 20% lower in the states that did not restrict advertising. 
C)  there was no difference in the average price paid between states that restricted advertising and those that did not. 
D)  the average price paid for eyeglasses was almost 5 times higher in the states that did not restrict advertising. 
A)  the average price paid for eyeglasses was nearly 20% higher in the states that did not restrict advertising. 
B)  the average price paid for eyeglasses was nearly 20% lower in the states that did not restrict advertising. 
C)  there was no difference in the average price paid between states that restricted advertising and those that did not. 
D)  the average price paid for eyeglasses was almost 5 times higher in the states that did not restrict advertising.

Question 15

One thing that both critics of advertising and defenders of advertising agree on is that advertising fosters competition.

Accepted Answer

A) True 
 B)False

Question 16

Edward Chamberlin argued that brand names

Accepted Answer

A)  hampered market efficiency. 
B)  were instrumental in enhancing market efficiency. 
C)  were useful in enhancing market efficiency when the government enforced the use of exclusive trademarks. 
D)  were likely to be more socially efficient when used in conjunction with advertising. 
A)  hampered market efficiency. 
B)  were instrumental in enhancing market efficiency. 
C)  were useful in enhancing market efficiency when the government enforced the use of exclusive trademarks. 
D)  were likely to be more socially efficient when used in conjunction with advertising.

Question 17

A firm can signal the high quality of its product by

Accepted Answer

A)  spending nothing on advertising to convey that the product is so good that the firm does not even need to advertise. 
B)  spending a large amount of money on advertising. 
C)  getting a patent for the product. 
D)  not worrying about getting a patent for the product. 
A)  spending nothing on advertising to convey that the product is so good that the firm does not even need to advertise. 
B)  spending a large amount of money on advertising. 
C)  getting a patent for the product. 
D)  not worrying about getting a patent for the product.

Question 18

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Accepted Answer

A)  industrial products. 
B)  homogeneous products. 
C)  consumer goods for which there are no close substitutes. 
D)  highly-differentiated consumer goods. 
A)  industrial products. 
B)  homogeneous products. 
C)  consumer goods for which there are no close substitutes. 
D)  highly-differentiated consumer goods.

Question 19

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.What is this firm's profit maximizing level of output?

Accepted Answer

A)  0 units of output 
B)  1 unit of output 
C)  2 units of output 
D)  3 units of output 
A)  0 units of output 
B)  1 unit of output 
C)  2 units of output 
D)  3 units of output

Question 20

If firms in a particular market similar or sell identical products,then the market is
(i)perfectly competitive.
(ii)monopolistically competitive.
(iii)an oligopoly.

Accepted Answer

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

Exam 16: Monopolistic Competition.

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

A monopolistically competitive firm

Firms that sell highly differentiated consumer goods,such as soft drinks,breakfast cereals,and dog food,typically spend what percent of their revenues on advertising?

If advertising reduces a consumer's price sensitivity between identical goods,it is likely to

One way in which monopolistic competition differs from oligopoly is that

Free entry eliminates long-run profits for firms in competitive and monopolistic industries.

Figure 16-5 -Refer to Figure 16-5.Which of the graphs depicts a monopolistically competitive firm in long-run equilibrium?

Discuss how brand names may enhance the efficiency of markets in a less developed country.

Consider monopoly,monopolistic competition,and perfect competition.In which of these three market structures does a profit-maximizing firm experience zero economic profit?

Advertisements that appear to convey no information at all

Among the following situations,which one is least likely to apply to a monopolistically competitive firm?

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

In Lee Benham's 1972 article examining the impact of advertising on the average price paid for a pair of eyeglasses,Benham found that

One thing that both critics of advertising and defenders of advertising agree on is that advertising fosters competition.

Edward Chamberlin argued that brand names

A firm can signal the high quality of its product by

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

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.What is this firm's profit maximizing level of output?

If firms in a particular market similar or sell identical products,then the market is (i)perfectly competitive. (ii)monopolistically competitive. (iii)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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