Question 1

In a monopolistically competitive industry,firms set price

Accepted Answer

A)  equal to marginal cost since each firm is a price taker. 
B)  below marginal cost since each firm is a price taker. 
C)  above marginal cost since each firm is a price setter. 
D)  always a fraction of marginal cost since each firm is a price setter. 
A)  equal to marginal cost since each firm is a price taker. 
B)  below marginal cost since each firm is a price taker. 
C)  above marginal cost since each firm is a price setter. 
D)  always a fraction of marginal cost since each firm is a price setter.

Question 2

Senator Hubris wants to pass a law that would require all monopolistically competitive firms to operate at their efficient scale.If this law were to pass and be enforced,we would expect that monopolistically competitive firms would

Accepted Answer

A)  see their profits increase. 
B)  break even. 
C)  lose money. 
D)  not really be affected by the law. 
A)  see their profits increase. 
B)  break even. 
C)  lose money. 
D)  not really be affected by the law.

Question 3

Figure 16-3
  
-Refer to Figure 16-3.At the profit-maximizing,or loss-minimizing,output level,the firm in this figure has total costs of approximately

Accepted Answer

A)  $600. 
B)  $6,000. 
C)  $9,000. 
D)  $12,500. 
A)  $600. 
B)  $6,000. 
C)  $9,000. 
D)  $12,500.

Question 4

In a monopolistically competitive market,

Accepted Answer

A)  strategic interactions among the firms are very important. 
B)  the threat of entry by new firms is not an important consideration. 
C)  the attainment of a Nash equilibrium is an important objective. 
D)  firms may enter even though they will earn zero economic profit in the long run. 
A)  strategic interactions among the firms are very important. 
B)  the threat of entry by new firms is not an important consideration. 
C)  the attainment of a Nash equilibrium is an important objective. 
D)  firms may enter even though they will earn zero economic profit in the long run.

Question 5

For a profit-maximizing monopolistically competitive firm,price exceeds marginal cost in

Accepted Answer

A)  the short run but not in the long run. 
B)  the long run but not in the short run. 
C)  both the short run and the long run. 
D)  neither the short run nor the long run. 
A)  the short run but not in the long run. 
B)  the long run but not in the short run. 
C)  both the short run and the long run. 
D)  neither the short run nor the long run.

Question 6

Excess capacity is

Accepted Answer

A)  an example of the inefficiencies of monopolistically competitive markets. 
B)  a short-run problem but not a long-run problem. 
C)  a characteristic of rising average total cost curves. 
D)  Both a and b are correct. 
A)  an example of the inefficiencies of monopolistically competitive markets. 
B)  a short-run problem but not a long-run problem. 
C)  a characteristic of rising average total cost curves. 
D)  Both a and b are correct.

Question 7

Monopolistically competitive markets differ from perfectly competitive markets due to
(i)the number of sellers.
(ii)the barriers to entry.
(iii)the product differentiation among the sellers.

Accepted Answer

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

Question 8

Table 16-5
This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm.
  
-Refer to Table 16-5.What is this firm's total cost at the profit-maximizing quantity?

Accepted Answer

A)  $12 
B)  $18 
C)  $32 
D)  $36 
A)  $12 
B)  $18 
C)  $32 
D)  $36

Question 9

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

Accepted Answer

A)  highly-differentiated consumer goods. 
B)  goods produced by natural monopolies. 
C)  agricultural products. 
D)  products with a limited shelf life such as milk and lettuce. 
A)  highly-differentiated consumer goods. 
B)  goods produced by natural monopolies. 
C)  agricultural products. 
D)  products with a limited shelf life such as milk and lettuce.

Question 10

Which of the following market structures is considered a differentiated products market?

Accepted Answer

A)  Perfect competition 
B)  Monopolistic competition 
C)  Monopoly 
D)  Both a and b are differentiated products markets. 
A)  Perfect competition 
B)  Monopolistic competition 
C)  Monopoly 
D)  Both a and b are differentiated products markets.

Question 11

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.
  
-Refer to Figure 16-9.If the firm were to produce 154.92 units of output,

Accepted Answer

A)  efficient scale would be realized. 
B)  ATC would be at its minimum value. 
C)  the firm would sustain a loss of more than $2,000. 
D)  All of the above are correct. 
A)  efficient scale would be realized. 
B)  ATC would be at its minimum value. 
C)  the firm would sustain a loss of more than $2,000. 
D)  All of the above are correct.

Question 12

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 output will this firm produce?

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 13

Which of the following statements regarding monopolistic competition is not correct?

Accepted Answer

A)  In the long-run equilibrium, price equals average total cost. 
B)  In the long-run equilibrium, firms earn zero economic profit. 
C)  In the long-run equilibrium, firms charge a price above marginal cost. 
D)  In the long-run equilibrium, firms produce a quantity in excess of their efficient scale. 
A)  In the long-run equilibrium, price equals average total cost. 
B)  In the long-run equilibrium, firms earn zero economic profit. 
C)  In the long-run equilibrium, firms charge a price above marginal cost. 
D)  In the long-run equilibrium, firms produce a quantity in excess of their efficient scale.

Question 14

A firm in a monopolistically competitive market is usually indifferent to an additional customer walking through the door,since a sale to that customer will not increase the firm's profit.

Accepted Answer

A) True 
 B)False

Question 15

Why does a typical monopolistically competitive firm face a downward-sloping demand curve?

Accepted Answer

Because its product

Question 16

Table 16-3
The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries.
  
-Refer to Table 16-3.What is the concentration ratio for Industry C?

Accepted Answer

A)  approximately 44% 
B)  approximately 48% 
C)  approximately 53% 
D)  approximately 56% 
A)  approximately 44% 
B)  approximately 48% 
C)  approximately 53% 
D)  approximately 56%

Question 17

A monopolistically competitive industry is characterized by

Accepted Answer

A)  many firms, differentiated products, and barriers to entry. 
B)  many firms, differentiated products, and free entry. 
C)  a few firms, identical products, and free entry. 
D)  a few firms, differentiated products, and barriers to entry. 
A)  many firms, differentiated products, and barriers to entry. 
B)  many firms, differentiated products, and free entry. 
C)  a few firms, identical products, and free entry. 
D)  a few firms, differentiated products, and barriers to entry.

Question 18

In the long run,

Accepted Answer

A)  monopolistically competitive firms earn a higher profit than perfectly competitive firms because monopolistically competitive firms have some monopoly power. 
B)  monopolistically competitive firms produce a higher output than perfectly competitive firms because competition drives the perfectly competitive firms' output down. 
C)  both monopolistically competitive and perfectly competitive firms produce where P = MC. 
D)  both monopolistically competitive and perfectly competitive firms produce where P = ATC. 
A)  monopolistically competitive firms earn a higher profit than perfectly competitive firms because monopolistically competitive firms have some monopoly power. 
B)  monopolistically competitive firms produce a higher output than perfectly competitive firms because competition drives the perfectly competitive firms' output down. 
C)  both monopolistically competitive and perfectly competitive firms produce where P = MC. 
D)  both monopolistically competitive and perfectly competitive firms produce where P = ATC.

Question 19

Figure 16-8
The figure is drawn for a monopolistically-competitive firm.
  
-Refer to Figure 16-8.Given this firm's cost curves,if the firm were perfectly competitive rather than monopolistically competitive,then in a long-run equilibrium it would produce

Accepted Answer

A)  less than 100 units of output. 
B)  between 100 and 133.33 units of output. 
C)  133.33 units of output. 
D)  more than 133.33 units of output. 
A)  less than 100 units of output. 
B)  between 100 and 133.33 units of output. 
C)  133.33 units of output. 
D)  more than 133.33 units of output.

Question 20

In a small college town,four microbreweries have opened in the last two years.Demonstrate the effect of new market entrants on demand for existing firms (microbreweries)that already served this market.Assume that the local community now places a moratorium on new liquor licenses for microbreweries.How will this moratorium affect the long-run profitability of incumbent firms?

Accepted Answer

@#IMG-DLM& The arrival of a new entrant should be

Exam 16: Monopolistic Competition.

In a monopolistically competitive industry,firms set price

Senator Hubris wants to pass a law that would require all monopolistically competitive firms to operate at their efficient scale.If this law were to pass and be enforced,we would expect that monopolistically competitive firms would

Figure 16-3 -Refer to Figure 16-3.At the profit-maximizing,or loss-minimizing,output level,the firm in this figure has total costs of approximately

In a monopolistically competitive market,

For a profit-maximizing monopolistically competitive firm,price exceeds marginal cost in

Excess capacity is

Monopolistically competitive markets differ from perfectly competitive markets due to (i)the number of sellers. (ii)the barriers to entry. (iii)the product differentiation among the sellers.

Table 16-5 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-5.What is this firm's total cost at the profit-maximizing quantity?

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

Which of the following market structures is considered a differentiated products market?

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9.If the firm were to produce 154.92 units of output,

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 output will this firm produce?

Which of the following statements regarding monopolistic competition is not correct?

A firm in a monopolistically competitive market is usually indifferent to an additional customer walking through the door,since a sale to that customer will not increase the firm's profit.

Why does a typical monopolistically competitive firm face a downward-sloping demand curve?

Table 16-3 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. -Refer to Table 16-3.What is the concentration ratio for Industry C?

A monopolistically competitive industry is characterized by

In the long run,

Figure 16-8 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-8.Given this firm's cost curves,if the firm were perfectly competitive rather than monopolistically competitive,then in a long-run equilibrium it would produce

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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