Question 1

Figure 16-4
  
-Refer to Figure 16-4.Panel b is consistent with a firm in a monopolistically competitive market that is

Accepted Answer

A)  not in long-run equilibrium. 
B)  in long-run equilibrium. 
C)  producing its efficient scale of output. 
D)  earning a positive economic profit. 
A)  not in long-run equilibrium. 
B)  in long-run equilibrium. 
C)  producing its efficient scale of output. 
D)  earning a positive economic profit.

Question 2

Keebleco knows that it produces and sells very tasty crackers.Nabiscer knows that it produces and sell dull crackers.According to the signaling theory of advertising,

Accepted Answer

A)  both Keebleco and Nabiscer have incentives to spend large amounts of money on advertising their crackers. 
B)  Keebleco has an incentive to spend a large amount of money on advertising its crackers, but Nabiscer does not. 
C)  Nabiscer has an incentive to spend a large amount of money on advertising its crackers, but Keebleco does not. 
D)  neither Keebleco nor Nabiscer has an incentive to spend a large amount of money on advertising their crackers. 
A)  both Keebleco and Nabiscer have incentives to spend large amounts of money on advertising their crackers. 
B)  Keebleco has an incentive to spend a large amount of money on advertising its crackers, but Nabiscer does not. 
C)  Nabiscer has an incentive to spend a large amount of money on advertising its crackers, but Keebleco does not. 
D)  neither Keebleco nor Nabiscer has an incentive to spend a large amount of money on advertising their crackers.

Question 3

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 D?

Accepted Answer

A)  approximately 48% 
B)  approximately 54% 
C)  approximately 60% 
D)  approximately 66% 
A)  approximately 48% 
B)  approximately 54% 
C)  approximately 60% 
D)  approximately 66%

Question 4

Examples of monopolistically competitive markets include the markets for

Accepted Answer

A)  restaurants and furniture. 
B)  wheat and corn. 
C)  postage stamps and wooden pencils. 
D)  All of the above are correct. 
A)  restaurants and furniture. 
B)  wheat and corn. 
C)  postage stamps and wooden pencils. 
D)  All of the above are correct.

Question 5

Scenario 16-1
Escape Vacations has recently announced intentions to build a new hotel/resort complex in Phoenix, AZ. Assume that the hotel/resort market in Phoenix is characterized by monopolistic competition.
-Refer to Scenario 16-1.As a result of the new Escape Vacations hotel/resort,existing hotels,motels,and lodging facilities in Phoenix are likely to experience a

Accepted Answer

A)  product-variety externality, which harms producers. 
B)  product-variety externality, which benefits producers. 
C)  business-stealing externality, which harms producers. 
D)  business-stealing externality, which benefits producers. 
A)  product-variety externality, which harms producers. 
B)  product-variety externality, which benefits producers. 
C)  business-stealing externality, which harms producers. 
D)  business-stealing externality, which benefits producers.

Question 6

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,which of the following would you expect to occur in the long run in this market?

Accepted Answer

A)  New firms will enter the market and profits for firms in the market will fall. 
B)  New firms will enter the market and profits for firms in the market will rise. 
C)  Firms will leave the market and profits for firms that remain in the market will rise. 
D)  Firms will leave the market and profits for firms that remain in the market will fall. 
A)  New firms will enter the market and profits for firms in the market will fall. 
B)  New firms will enter the market and profits for firms in the market will rise. 
C)  Firms will leave the market and profits for firms that remain in the market will rise. 
D)  Firms will leave the market and profits for firms that remain in the market will fall.

Question 7

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 D?

Accepted Answer

A)  about 13% 
B)  about 35% 
C)  about 45% 
D)  about 63% 
A)  about 13% 
B)  about 35% 
C)  about 45% 
D)  about 63%

Question 8

Results of the study done by Lee Benham on advertising for eyeglasses would suggest that

Accepted Answer

A)  brand loyalty and market power in the eyeglass market was likely to be more pervasive in states that allowed advertising. 
B)  eyeglass sales were more profitable in states that allowed advertising. 
C)  optometrists would not be supportive of advertising restrictions. 
D)  optometrists would enthusiastically endorse advertising restrictions. 
A)  brand loyalty and market power in the eyeglass market was likely to be more pervasive in states that allowed advertising. 
B)  eyeglass sales were more profitable in states that allowed advertising. 
C)  optometrists would not be supportive of advertising restrictions. 
D)  optometrists would enthusiastically endorse advertising restrictions.

Question 9

Monopolistic competition is characterized by many buyers and sellers,product differentiation,and free entry.

Accepted Answer

A) True 
 B)False

Question 10

Professional organizations and producer groups have an incentive to

Accepted Answer

A)  restrict advertising in order to enhance competition on the basis of price. 
B)  restrict advertising in order to reduce competition on the basis of price. 
C)  encourage advertising in order to reduce competition on the basis of price. 
D)  encourage advertising in order to enhance competition on the basis of price. 
A)  restrict advertising in order to enhance competition on the basis of price. 
B)  restrict advertising in order to reduce competition on the basis of price. 
C)  encourage advertising in order to reduce competition on the basis of price. 
D)  encourage advertising in order to enhance competition on the basis of price.

Question 11

In which of the following market structures is(are)there a large number of sellers?
(i)monopolistic competition
(ii)perfect competition
(iii)oligopoly

Accepted Answer

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

Question 12

Scenario 16-3
Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q.
-Refer to Scenario 16-3.If the marginal cost of producing this good is 0,what price would a profit-maximizing monopolist charge for the product?

Accepted Answer

A)  P = 0 
B)  P = 5 
C)  P = 10 
D)  P = 20 
A)  P = 0 
B)  P = 5 
C)  P = 10 
D)  P = 20

Question 13

Evidence suggests that,in markets with differentiated products but little advertising,

Accepted Answer

A)  consumers are not confused by conflicting signals. 
B)  firms are generally less profitable. 
C)  markets are less efficient. 
D)  consumers make better choices. 
A)  consumers are not confused by conflicting signals. 
B)  firms are generally less profitable. 
C)  markets are less efficient. 
D)  consumers make better choices.

Question 14

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.
  
-Refer to Figure 16-9.At what quantity of output does average revenue exceed marginal revenue by $66.66?

Accepted Answer

A)  at 100 units of output 
B)  somewhere between 100 and 133.33 units of output 
C)  at 133.33 units of output 
D)  at 154.92 units of output 
A)  at 100 units of output 
B)  somewhere between 100 and 133.33 units of output 
C)  at 133.33 units of output 
D)  at 154.92 units of output

Question 15

Which of the following statements is correct?

Accepted Answer

A)  Firms in monopolistic competition and monopoly can earn economic profits in both the short run and the long run. 
B)  Both perfectly competitive and monopolistically competitive firms charge a price equal to marginal cost. 
C)  Firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost. 
D)  Both perfectly competitive and monopolistically competitive firms produce the welfare-maximizing level of output. 
A)  Firms in monopolistic competition and monopoly can earn economic profits in both the short run and the long run. 
B)  Both perfectly competitive and monopolistically competitive firms charge a price equal to marginal cost. 
C)  Firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost. 
D)  Both perfectly competitive and monopolistically competitive firms produce the welfare-maximizing level of output.

Question 16

When a monopolistically competitive firm raises its price,

Accepted Answer

A)  quantity demanded falls to zero. 
B)  quantity demanded declines but not to zero. 
C)  the market supply curve shifts outward. 
D)  quantity demanded remains constant. 
A)  quantity demanded falls to zero. 
B)  quantity demanded declines but not to zero. 
C)  the market supply curve shifts outward. 
D)  quantity demanded remains constant.

Question 17

A profit-maximizing firm operating in a monopolistically competitive market that is in a long-run equilibrium has

Accepted Answer

A)  minimized average total cost. 
B)  chosen to produce where demand is unitary elastic. 
C)  produced the efficient scale of output. 
D)  chosen a quantity of output where average revenue equals average total cost. 
A)  minimized average total cost. 
B)  chosen to produce where demand is unitary elastic. 
C)  produced the efficient scale of output. 
D)  chosen a quantity of output where average revenue equals average total cost.

Question 18

Figure 16-5
  
-Refer to Figure 16-5.Which of the graphs shown would be consistent with a profit maximizing firm in a monopolistically competitive market that is earning a positive profit?

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 19

In which of the following market structures do firms produce the welfare-maximizing level of output?

Accepted Answer

A)  perfect competition 
B)  monopolistic competition 
C)  monopoly 
D)  Both a and b are correct. 
A)  perfect competition 
B)  monopolistic competition 
C)  monopoly 
D)  Both a and b are correct.

Question 20

Monopolistic competition differs from perfect competition because in monopolistically competitive markets

Accepted Answer

A)  there are barriers to entry. 
B)  all firms can eventually earn economic profits. 
C)  each of the sellers offers a somewhat different product. 
D)  strategic interactions between firms are important. 
A)  there are barriers to entry. 
B)  all firms can eventually earn economic profits. 
C)  each of the sellers offers a somewhat different product. 
D)  strategic interactions between firms are important.

Figure 16-4 -Refer to Figure 16-4.Panel b is consistent with a firm in a monopolistically competitive market that is

Keebleco knows that it produces and sells very tasty crackers.Nabiscer knows that it produces and sell dull crackers.According to the signaling theory of advertising,

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 D?

Examples of monopolistically competitive markets include the markets for

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 D?

Results of the study done by Lee Benham on advertising for eyeglasses would suggest that

Monopolistic competition is characterized by many buyers and sellers,product differentiation,and free entry.

Professional organizations and producer groups have an incentive to

In which of the following market structures is(are)there a large number of sellers? (i)monopolistic competition (ii)perfect competition (iii)oligopoly

Scenario 16-3 Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q. -Refer to Scenario 16-3.If the marginal cost of producing this good is 0,what price would a profit-maximizing monopolist charge for the product?

Evidence suggests that,in markets with differentiated products but little advertising,

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9.At what quantity of output does average revenue exceed marginal revenue by $66.66?

Which of the following statements is correct?

When a monopolistically competitive firm raises its price,

A profit-maximizing firm operating in a monopolistically competitive market that is in a long-run equilibrium has

Figure 16-5 -Refer to Figure 16-5.Which of the graphs shown would be consistent with a profit maximizing firm in a monopolistically competitive market that is earning a positive profit?

In which of the following market structures do firms produce the welfare-maximizing level of output?

Monopolistic competition differs from perfect competition because in monopolistically competitive markets

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.

Filters

Exam 16: Monopolistic Competition.

Figure 16-4 -Refer to Figure 16-4.Panel b is consistent with a firm in a monopolistically competitive market that is

Keebleco knows that it produces and sells very tasty crackers.Nabiscer knows that it produces and sell dull crackers.According to the signaling theory of advertising,

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 D?

Examples of monopolistically competitive markets include the markets for

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 D?

Results of the study done by Lee Benham on advertising for eyeglasses would suggest that

Monopolistic competition is characterized by many buyers and sellers,product differentiation,and free entry.

Professional organizations and producer groups have an incentive to

In which of the following market structures is(are)there a large number of sellers? (i)monopolistic competition (ii)perfect competition (iii)oligopoly

Scenario 16-3 Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q. -Refer to Scenario 16-3.If the marginal cost of producing this good is 0,what price would a profit-maximizing monopolist charge for the product?

Evidence suggests that,in markets with differentiated products but little advertising,

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9.At what quantity of output does average revenue exceed marginal revenue by $66.66?

Which of the following statements is correct?

When a monopolistically competitive firm raises its price,

A profit-maximizing firm operating in a monopolistically competitive market that is in a long-run equilibrium has

Figure 16-5 -Refer to Figure 16-5.Which of the graphs shown would be consistent with a profit maximizing firm in a monopolistically competitive market that is earning a positive profit?

In which of the following market structures do firms produce the welfare-maximizing level of output?

Monopolistic competition differs from perfect competition because in monopolistically competitive markets

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.

Filters