Question 1

Monopolistically competitive firms,like monopoly firms,maximize their profits by charging a price that exceeds marginal cost.

Accepted Answer

A) True 
 B)False

Question 2

Critics of advertising argue that advertising

Accepted Answer

A)  creates desires that otherwise might not exist. 
B)  hinders competition. 
C)  often fails to convey substantive information. 
D)  All of the above are correct. 
A)  creates desires that otherwise might not exist. 
B)  hinders competition. 
C)  often fails to convey substantive information. 
D)  All of the above are correct.

Question 3

Table 16-2
The following table shows the total output produced by the top six firms as well as the total industry output for each industry.
  
-Refer to Table 16-2.What is the concentration ratio for Industry C?

Accepted Answer

A)  about 23% 
B)  about 34% 
C)  about 43% 
D)  about 52% 
A)  about 23% 
B)  about 34% 
C)  about 43% 
D)  about 52%

Question 4

Figure 16-1. The figure is drawn for a monopolistically competitive firm.
  
-Refer to Figure 16-1.If the average variable cost is $12 at the profit-maximizing quantity,and if the firm's fixed costs amount to $30,then the firm's maximum profit is

Accepted Answer

A)  $-30. 
B)  $22. 
C)  $36. 
D)  $42. 
A)  $-30. 
B)  $22. 
C)  $36. 
D)  $42.

Question 5

Economists who argue that advertising enhances market efficiency suggest that celebrity advertising signals inferior product quality.

Accepted Answer

A) True 
 B)False

Question 6

Joe's Juice Shop operates in a monopolistically competitive market.Joe's is currently producing where its average total cost is minimized.In the long run we would expect Joe's output to

Accepted Answer

A)  decrease and average total cost to increase. 
B)  decrease and average total cost to decrease. 
C)  remain unchanged as Joe's is doing the best it can. 
D)  increase and average total costs to decrease. 
A)  decrease and average total cost to increase. 
B)  decrease and average total cost to decrease. 
C)  remain unchanged as Joe's is doing the best it can. 
D)  increase and average total costs to decrease.

Question 7

The product-variety externality states the benefits to consumers from the introduction of a new product.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following statements is correct?

Accepted Answer

A)  In the long run, both perfectly competitive firms and monopolistically competitive firms operate with excess capacity. 
B)  A firm operates with excess capacity when, in the long run, its level of output is below the efficient scale. 
C)  For any firm, efficient scale is the level of output at which the average-total-cost curve is tangent to the demand curve. 
D)  All of the above are correct. 
A)  In the long run, both perfectly competitive firms and monopolistically competitive firms operate with excess capacity. 
B)  A firm operates with excess capacity when, in the long run, its level of output is below the efficient scale. 
C)  For any firm, efficient scale is the level of output at which the average-total-cost curve is tangent to the demand curve. 
D)  All of the above are correct.

Question 9

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Accepted Answer

A)  average revenue exceeds marginal revenue 
B)  marginal revenue exceeds average revenue 
C)  average revenue is equal to marginal revenue 
D)  revenue is always maximized along with profit 
A)  average revenue exceeds marginal revenue 
B)  marginal revenue exceeds average revenue 
C)  average revenue is equal to marginal revenue 
D)  revenue is always maximized along with profit

Question 10

Which of the following is not a characteristic of monopolistic competition?

Accepted Answer

A)  a large number of sellers 
B)  firms are price takers 
C)  free entry into the market 
D)  a differentiated product 
A)  a large number of sellers 
B)  firms are price takers 
C)  free entry into the market 
D)  a differentiated product

Question 11

When a firm operates with excess capacity,

Accepted Answer

A)  additional production would lower the average total cost. 
B)  additional production would increase the average total cost. 
C)  it must be a perfectly competitive firm. 
D)  it must be a monopolistically competitive firm. 
A)  additional production would lower the average total cost. 
B)  additional production would increase the average total cost. 
C)  it must be a perfectly competitive firm. 
D)  it must be a monopolistically competitive firm.

Question 12

Figure 16-1. The figure is drawn for a monopolistically competitive firm.
  
-Refer to Figure 16-1.Suppose that average total cost is $18 when Q=12.What is the profit-maximizing price and resulting profit?

Accepted Answer

A)  P=$12, profit=$0 
B)  P=$18, profit=$72 
C)  P=$18, profit=$24 
D)  P=$18, profit=$0 
A)  P=$12, profit=$0 
B)  P=$18, profit=$72 
C)  P=$18, profit=$24 
D)  P=$18, profit=$0

Question 13

The general term for market structures that fall somewhere between monopoly and perfect competition is

Accepted Answer

A)  incomplete markets. 
B)  imperfectly competitive markets. 
C)  oligopoly markets. 
D)  monopolistically competitive markets. 
A)  incomplete markets. 
B)  imperfectly competitive markets. 
C)  oligopoly markets. 
D)  monopolistically competitive markets.

Question 14

Table 16-7
A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to $10.
  
-Refer to Table 16-7.If the firm has a constant marginal cost of $5 per unit,how much profit will the firm earn at the profit-maximizing level of output?

Accepted Answer

A)  $4 
B)  $6 
C)  $8 
D)  $10 
A)  $4 
B)  $6 
C)  $8 
D)  $10

Question 15

The two types of imperfectly competitive markets are

Accepted Answer

A)  markets with differentiated products and monopoly. 
B)  markets with differentiated products and oligopoly. 
C)  oligopoly and monopoly. 
D)  monopolistic competition and oligopoly. 
A)  markets with differentiated products and monopoly. 
B)  markets with differentiated products and oligopoly. 
C)  oligopoly and monopoly. 
D)  monopolistic competition and oligopoly.

Question 16

The entry of new firms into a monopolistically competitive market is accompanied by

Accepted Answer

A)  both positive and negative externalities. 
B)  only positive externalities. 
C)  only negative externalities. 
D)  only private profit opportunities (no externalities). 
A)  both positive and negative externalities. 
B)  only positive externalities. 
C)  only negative externalities. 
D)  only private profit opportunities (no externalities).

Question 17

Oligopoly is characterized by a few sellers offering similar products,whereas monopolistic competition is characterized by many sellers offering differentiated products.

Accepted Answer

A) True 
 B)False

Question 18

Excess capacity characterizes firms in monopolistically competitive markets,even in situations of long-run equilibrium.

Accepted Answer

A) True 
 B)False

Question 19

Firms that spend a large amount of money on advertising a particular product are likely to be providing consumers with

Accepted Answer

A)  information about the availability of the product. 
B)  information about product price. 
C)  a signal of product quality. 
D)  a good example of wasted resources. 
A)  information about the availability of the product. 
B)  information about product price. 
C)  a signal of product quality. 
D)  a good example of wasted resources.

Question 20

An oligopoly

Accepted Answer

A)  has a concentration ratio of less than 50 percent. 
B)  is a price taker. 
C)  is a type of imperfectly competitive market. 
D)  has many firms rather than just one firm or a few firms. 
A)  has a concentration ratio of less than 50 percent. 
B)  is a price taker. 
C)  is a type of imperfectly competitive market. 
D)  has many firms rather than just one firm or a few firms.

Exam 16: Monopolistic Competition.

Monopolistically competitive firms,like monopoly firms,maximize their profits by charging a price that exceeds marginal cost.

Critics of advertising argue that advertising

Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2.What is the concentration ratio for Industry C?

Figure 16-1. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.If the average variable cost is $12 at the profit-maximizing quantity,and if the firm's fixed costs amount to $30,then the firm's maximum profit is

Economists who argue that advertising enhances market efficiency suggest that celebrity advertising signals inferior product quality.

Joe's Juice Shop operates in a monopolistically competitive market.Joe's is currently producing where its average total cost is minimized.In the long run we would expect Joe's output to

The product-variety externality states the benefits to consumers from the introduction of a new product.

Which of the following statements is correct?

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Which of the following is not a characteristic of monopolistic competition?

When a firm operates with excess capacity,

Figure 16-1. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.Suppose that average total cost is $18 when Q=12.What is the profit-maximizing price and resulting profit?

The general term for market structures that fall somewhere between monopoly and perfect competition is

The two types of imperfectly competitive markets are

The entry of new firms into a monopolistically competitive market is accompanied by

Oligopoly is characterized by a few sellers offering similar products,whereas monopolistic competition is characterized by many sellers offering differentiated products.

Excess capacity characterizes firms in monopolistically competitive markets,even in situations of long-run equilibrium.

Firms that spend a large amount of money on advertising a particular product are likely to be providing consumers with

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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