Question 1

A study of the market for optometrists' services in the 1960s showed that

Accepted Answer

A)  all states in the United States prohibited advertising by optometrists. 
B)  almost all professional optometrists opposed legal restrictions on their rights to advertise. 
C)  the average price of eyeglasses would decrease if the legal restrictions on advertising by optometrists were removed. 
D)  advertising on eyeglasses limited competition among optometrists. 
A)  all states in the United States prohibited advertising by optometrists. 
B)  almost all professional optometrists opposed legal restrictions on their rights to advertise. 
C)  the average price of eyeglasses would decrease if the legal restrictions on advertising by optometrists were removed. 
D)  advertising on eyeglasses limited competition among optometrists.

Question 2

When a monopolistically competitive firm is in long-run equilibrium,

Accepted Answer

A)  marginal revenue is equal to marginal cost. 
B)  price is equal to average total cost. 
C)  demand is equal to average total cost. 
D)  All of the above are correct. 
A)  marginal revenue is equal to marginal cost. 
B)  price is equal to average total cost. 
C)  demand is equal to average total cost. 
D)  All of the above are correct.

Question 3

A monopolistically competitive market is characterized by barriers to entry.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is a commonly-cited benefit of advertising?

Accepted Answer

A)  Advertising can be a signal of the quality of a product. 
B)  Advertising impedes competition. 
C)  Advertising reduces the deadweight loss associated with monopolistic competition. 
D)  Advertising encourages free entry, which increases profits. 
A)  Advertising can be a signal of the quality of a product. 
B)  Advertising impedes competition. 
C)  Advertising reduces the deadweight loss associated with monopolistic competition. 
D)  Advertising encourages free entry, which increases profits.

Question 5

In the long run,a profit-maximizing firm in a monopolistically competitive market operates at

Accepted Answer

A)  efficient scale. 
B)  a level of output at which average total cost is rising. 
C)  a level of output at which average total cost is falling. 
D)  the level of output at which total revenue is maximized. 
A)  efficient scale. 
B)  a level of output at which average total cost is rising. 
C)  a level of output at which average total cost is falling. 
D)  the level of output at which total revenue is maximized.

Question 6

Figure 16-8
The figure is drawn for a monopolistically-competitive firm.
  
-Refer to Figure 16-8.In response to the situation represented by the figure,we would expect

Accepted Answer

A)  new firms to enter the market. 
B)  some of the firms that are currently in the market to exit. 
C)  this firm's profit to move from its current value toward a positive value. 
D)  None of the above are correct. 
A)  new firms to enter the market. 
B)  some of the firms that are currently in the market to exit. 
C)  this firm's profit to move from its current value toward a positive value. 
D)  None of the above are correct.

Question 7

Figure 16-6
  
-Refer to Figure 16-6.Suppose a firm is operating in the situation depicted in panela.Which of the following statements is correct?

Accepted Answer

A)  The firm is earning positive short-run profits. 
B)  The firm is earning negative short-run profits. 
C)  The firm is earning zero short-run profits. 
D)  We cannot determine profits because we do not know the firm's average total costs. 
A)  The firm is earning positive short-run profits. 
B)  The firm is earning negative short-run profits. 
C)  The firm is earning zero short-run profits. 
D)  We cannot determine profits because we do not know the firm's average total costs.

Question 8

Product differentiation always leads to some measure of market power.

Accepted Answer

A) True 
 B)False

Question 9

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product,the firm will

Accepted Answer

A)  be able to increase its markup over marginal cost. 
B)  eventually have to reduce price to remain competitive. 
C)  increase the welfare of society. 
D)  reduce its average total cost. 
A)  be able to increase its markup over marginal cost. 
B)  eventually have to reduce price to remain competitive. 
C)  increase the welfare of society. 
D)  reduce its average total cost.

Question 10

Advertising that uses celebrity endorsements is most likely intended to

Accepted Answer

A)  increase elasticity of demand for the advertised product. 
B)  reduce the ability of markets to allocate resources efficiently. 
C)  provide a signal of product quality. 
D)  be useful only for psychological effects. 
A)  increase elasticity of demand for the advertised product. 
B)  reduce the ability of markets to allocate resources efficiently. 
C)  provide a signal of product quality. 
D)  be useful only for psychological effects.

Question 11

One characteristic of an oligopoly market structure is:

Accepted Answer

A)  firms in the industry are typically characterized by very diverse product lines. 
B)  firms in the industry have some degree of market power. 
C)  products typically sell at a price equal to their marginal cost of production. 
D)  the actions of one seller have no impact on the profitability of other sellers. 
A)  firms in the industry are typically characterized by very diverse product lines. 
B)  firms in the industry have some degree of market power. 
C)  products typically sell at a price equal to their marginal cost of production. 
D)  the actions of one seller have no impact on the profitability of other sellers.

Question 12

Firms in a monopolistically competitive market

Accepted Answer

A)  are price takers. 
B)  produce an output level that minimizes average total cost in the long run. 
C)  maximize profits by producing where price equals marginal cost. 
D)  cannot earn economic profits in the long run. 
A)  are price takers. 
B)  produce an output level that minimizes average total cost in the long run. 
C)  maximize profits by producing where price equals marginal cost. 
D)  cannot earn economic profits in the long run.

Question 13

A monopolistically competitive firm faces a downward-sloping demand curve because there are few firms in the market.

Accepted Answer

A) True 
 B)False

Question 14

If advertising decreases the elasticity of demand for specific brand names of hard liquor,we would expect firms to be able to charge a larger markup over marginal cost.

Accepted Answer

A) True 
 B)False

Question 15

If we observe a great deal of advertising of men's shaving products,we can infer that

Accepted Answer

A)  the market for those products is perfectly competitive. 
B)  it costs firms very little to produce those products. 
C)  those products are highly differentiated. 
D)  firms are irrational in their decisions to advertise. 
A)  the market for those products is perfectly competitive. 
B)  it costs firms very little to produce those products. 
C)  those products are highly differentiated. 
D)  firms are irrational in their decisions to advertise.

Question 16

When a firm in a monopolistically competitive market earns zero economic profit,its product price must equal marginal cost.

Accepted Answer

A) True 
 B)False

Question 17

A monopolistically competitive firm is currently earning a positive economic profit.If other firms enter the market,we would expect that the added competition will cause this firm to adjust its output such that it

Accepted Answer

A)  will operate closer to its efficient scale. 
B)  will operate further from its efficient scale. 
C)  will no longer be at its efficient scale. 
D)  might move either closer to or further from its efficient scale. 
A)  will operate closer to its efficient scale. 
B)  will operate further from its efficient scale. 
C)  will no longer be at its efficient scale. 
D)  might move either closer to or further from its efficient scale.

Question 18

Which of these types of firms can earn a positive economic profit in the long run?

Accepted Answer

A)  monopolies, but not competitive firms or monopolistically competitive firms 
B)  monopolies and monopolistically competitive firms, but not competitive firms 
C)  monopolies, monopolistically competitive firms, and competitive firms 
D)  No firms earn positive economic profit in the long run. Entry will reduce all firms' economic profit to zero in the long run. 
A)  monopolies, but not competitive firms or monopolistically competitive firms 
B)  monopolies and monopolistically competitive firms, but not competitive firms 
C)  monopolies, monopolistically competitive firms, and competitive firms 
D)  No firms earn positive economic profit in the long run. Entry will reduce all firms' economic profit to zero in the long run.

Question 19

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

Accepted Answer

A)  marginal cost exceeds marginal revenue 
B)  average revenue equals marginal cost 
C)  price exceeds marginal cost 
D)  All of the above are correct. 
A)  marginal cost exceeds marginal revenue 
B)  average revenue equals marginal cost 
C)  price exceeds marginal cost 
D)  All of the above are correct.

Question 20

When a firm operates at efficient scale,it is producing at the minimum point on its average total cost curve.

Accepted Answer

A) True 
 B)False

Exam 16: Monopolistic Competition.

A study of the market for optometrists' services in the 1960s showed that

When a monopolistically competitive firm is in long-run equilibrium,

A monopolistically competitive market is characterized by barriers to entry.

Which of the following is a commonly-cited benefit of advertising?

In the long run,a profit-maximizing firm in a monopolistically competitive market operates at

Figure 16-8 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-8.In response to the situation represented by the figure,we would expect

Figure 16-6 -Refer to Figure 16-6.Suppose a firm is operating in the situation depicted in panela.Which of the following statements is correct?

Product differentiation always leads to some measure of market power.

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product,the firm will

Advertising that uses celebrity endorsements is most likely intended to

One characteristic of an oligopoly market structure is:

Firms in a monopolistically competitive market

A monopolistically competitive firm faces a downward-sloping demand curve because there are few firms in the market.

If advertising decreases the elasticity of demand for specific brand names of hard liquor,we would expect firms to be able to charge a larger markup over marginal cost.

If we observe a great deal of advertising of men's shaving products,we can infer that

When a firm in a monopolistically competitive market earns zero economic profit,its product price must equal marginal cost.

A monopolistically competitive firm is currently earning a positive economic profit.If other firms enter the market,we would expect that the added competition will cause this firm to adjust its output such that it

Which of these types of firms can earn a positive economic profit in the long run?

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

When a firm operates at efficient scale,it is producing at the minimum point on its average total cost curve.

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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