Question 1

A profit-maximizing firm in a monopolistically competitive market can earn positive,negative,or zero profits in the short run.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is an example of a monopolistically competitive industry?

Accepted Answer

A)  computer operating systems 
B)  tennis balls 
C)  movies 
D)  cable television 
A)  computer operating systems 
B)  tennis balls 
C)  movies 
D)  cable television

Question 3

Your company has recently requested that you travel to Dhaka,Bangladesh,to work on negotiations for a new factory to be located in one of the port cities.Your travel agent provides a list of several hundred local hotels and a Sheraton.In this case,the Sheraton brand-name is likely to be used as a signal of

Accepted Answer

A)  perceived differences that are not likely to exist among your various options. 
B)  quality when quality cannot be easily judged. 
C)  inefficiency in markets characterized by recognizable brand names. 
D)  the quality of general lodging accommodations in Dhaka. 
A)  perceived differences that are not likely to exist among your various options. 
B)  quality when quality cannot be easily judged. 
C)  inefficiency in markets characterized by recognizable brand names. 
D)  the quality of general lodging accommodations in Dhaka.

Question 4

If firms in a monopolistically competitive market are earning positive profits,then

Accepted Answer

A)  firms will likely be subject to regulation. 
B)  barriers to entry will be strengthened. 
C)  some firms will exit the market. 
D)  new firms will enter the market. 
A)  firms will likely be subject to regulation. 
B)  barriers to entry will be strengthened. 
C)  some firms will exit the market. 
D)  new firms will enter the market.

Question 5

As developing countries make a transition to market-based economies,one of the first major capital investments is in "Western-quality" hotels.Explain why brand-name hotel accommodations are a critical step in attracting foreign investment.

Accepted Answer

Brand-name hotels are a critic

Question 6

A monopolistically competitive firm faces the following demand curve for its product:  
The firm has total fixed costs of $40 and a constant marginal cost of $2 per unit.We can conclude that

Accepted Answer

A)  firms will exit this market. 
B)  firms will enter this market. 
C)  this market is in long-run equilibrium. 
D)  this firm is operating at its efficient scale. 
A)  firms will exit this market. 
B)  firms will enter this market. 
C)  this market is in long-run equilibrium. 
D)  this firm is operating at its efficient scale.

Question 7

The theory of monopolistic competition is somewhat disappointing in that it fails to

Accepted Answer

A)  pinpoint a profit-maximizing level of output for monopolistically competitive firms. 
B)  yield simple and compelling advice for public policy. 
C)  explain why product differentiation is observed in monopolistically competitive markets. 
D)  explain why monopolistically competitive firms have excess capacity. 
A)  pinpoint a profit-maximizing level of output for monopolistically competitive firms. 
B)  yield simple and compelling advice for public policy. 
C)  explain why product differentiation is observed in monopolistically competitive markets. 
D)  explain why monopolistically competitive firms have excess capacity.

Question 8

Defenders of advertising argue that it is not rational for profit-maximizing firms to spend money on advertising for products that have

Accepted Answer

A)  superior quality. 
B)  inferior or mediocre quality. 
C)  low prices. 
D)  limited availability. 
A)  superior quality. 
B)  inferior or mediocre quality. 
C)  low prices. 
D)  limited availability.

Question 9

Use a graph to demonstrate why a profit-maximizing monopolistically competitive firm must operate at excess capacity.Explain why a perfectly competitive firm is not subject to the same constraint.

Accepted Answer

@#IMG-DLM& Competitive firms do not face downward-

Question 10

Figure 16-2
This figure depicts a situation in a monopolistically competitive market.
  
-Refer to Figure 16-2.What price will the monopolistically competitive firm charge in this market?

Accepted Answer

A)  $60 
B)  $70 
C)  $75 
D)  $80 
A)  $60 
B)  $70 
C)  $75 
D)  $80

Question 11

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

Accepted Answer

A)  produces an output level where marginal revenue equals average total cost. 
B)  sets price equal to demand where marginal revenue equals marginal cost. 
C)  must earn zero economic profits. 
D)  maximizes revenues as well as profits. 
A)  produces an output level where marginal revenue equals average total cost. 
B)  sets price equal to demand where marginal revenue equals marginal cost. 
C)  must earn zero economic profits. 
D)  maximizes revenues as well as profits.

Question 12

Defenders of advertising argue that firms use advertising as a signal of quality,even if the advertising delivers little helpful information about the product.

Accepted Answer

A) True 
 B)False

Question 13

Critics of advertising argue that advertising

Accepted Answer

A)  creates demand for products that people otherwise do not want or need. 
B)  lowers barriers to entry into an industry because new firms can more easily establish themselves as competitors. 
C)  increases competition by providing information about prices. 
D)  encourages monopolization of markets by raising entry barriers. 
A)  creates demand for products that people otherwise do not want or need. 
B)  lowers barriers to entry into an industry because new firms can more easily establish themselves as competitors. 
C)  increases competition by providing information about prices. 
D)  encourages monopolization of markets by raising entry barriers.

Question 14

Consider monopoly,monopolistic competition,and perfect competition.In which of these three market structures does a profit-maximizing firm charge a price that exceeds marginal cost?

Accepted Answer

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

Question 15

Which of the following correctly lists the products in order from most advertised to least advertised?

Accepted Answer

A)  soft drinks, breakfast cereals, dog food 
B)  corn, dog food, communication satellites 
C)  dog food, communication satellites, corn 
D)  wheat, corn, crude oil 
A)  soft drinks, breakfast cereals, dog food 
B)  corn, dog food, communication satellites 
C)  dog food, communication satellites, corn 
D)  wheat, corn, crude oil

Question 16

Figure 16-4
  
-Refer to Figure 16-4.Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into a monopolistically competitive industry?

Accepted Answer

A)  panel a 
B)  panel b 
C)  panel c 
D)  panel d 
A)  panel a 
B)  panel b 
C)  panel c 
D)  panel d

Question 17

Consider a monopolistically competitive firm in a market in long-run equilibrium.This firm is likely earning

Accepted Answer

A)  a positive economic profit since it is charging a price above marginal cost. 
B)  no economic profit since it is charging a price equal to its marginal cost. 
C)  a positive economic profit since it is charging a price above its average total cost. 
D)  no economic profit since it is charging a price equal to it average total cost. 
A)  a positive economic profit since it is charging a price above marginal cost. 
B)  no economic profit since it is charging a price equal to its marginal cost. 
C)  a positive economic profit since it is charging a price above its average total cost. 
D)  no economic profit since it is charging a price equal to it average total cost.

Question 18

In comparison to perfect competition,monopolistic competition is characterized by

Accepted Answer

A)  efficient scale. 
B)  pricing at marginal cost. 
C)  excess capacity. 
D)  All of the above are correct. 
A)  efficient scale. 
B)  pricing at marginal cost. 
C)  excess capacity. 
D)  All of the above are correct.

Question 19

Suppose that monopolistically competitive firms in a certain market are earning positive profits.In the transition from this initial situation to a long-run equilibrium,

Accepted Answer

A)  the number of firms in the market decreases. 
B)  each existing firm experiences a decrease in demand for its product. 
C)  each existing firm experiences a rightward shift of its marginal revenue curve. 
D)  each existing firm experiences an upward shift in its average total cost curve. 
A)  the number of firms in the market decreases. 
B)  each existing firm experiences a decrease in demand for its product. 
C)  each existing firm experiences a rightward shift of its marginal revenue curve. 
D)  each existing firm experiences an upward shift in its average total cost curve.

Question 20

Figure 16-2
This figure depicts a situation in a monopolistically competitive market.
  
-Refer to Figure 16-2.At the profit-maximizing level of output,what is this firm's total cost of production?

Accepted Answer

A)  $1,200 
B)  $1,400 
C)  $1,600 
D)  $1,875 
A)  $1,200 
B)  $1,400 
C)  $1,600 
D)  $1,875

Exam 16: Monopolistic Competition.

A profit-maximizing firm in a monopolistically competitive market can earn positive,negative,or zero profits in the short run.

Which of the following is an example of a monopolistically competitive industry?

If firms in a monopolistically competitive market are earning positive profits,then

As developing countries make a transition to market-based economies,one of the first major capital investments is in "Western-quality" hotels.Explain why brand-name hotel accommodations are a critical step in attracting foreign investment.

A monopolistically competitive firm faces the following demand curve for its product: The firm has total fixed costs of $40 and a constant marginal cost of $2 per unit.We can conclude that

The theory of monopolistic competition is somewhat disappointing in that it fails to

Defenders of advertising argue that it is not rational for profit-maximizing firms to spend money on advertising for products that have

Use a graph to demonstrate why a profit-maximizing monopolistically competitive firm must operate at excess capacity.Explain why a perfectly competitive firm is not subject to the same constraint.

Figure 16-2 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-2.What price will the monopolistically competitive firm charge in this market?

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

Defenders of advertising argue that firms use advertising as a signal of quality,even if the advertising delivers little helpful information about the product.

Critics of advertising argue that advertising

Consider monopoly,monopolistic competition,and perfect competition.In which of these three market structures does a profit-maximizing firm charge a price that exceeds marginal cost?

Which of the following correctly lists the products in order from most advertised to least advertised?

Figure 16-4 -Refer to Figure 16-4.Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into a monopolistically competitive industry?

Consider a monopolistically competitive firm in a market in long-run equilibrium.This firm is likely earning

In comparison to perfect competition,monopolistic competition is characterized by

Suppose that monopolistically competitive firms in a certain market are earning positive profits.In the transition from this initial situation to a long-run equilibrium,

Figure 16-2 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-2.At the profit-maximizing level of output,what is this firm's total cost of production?

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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