Question 1

The two types of imperfectly competitive markets are

Accepted Answer

A)  monopoly and monopolistic competition. 
B)  monopoly and oligopoly. 
C)  monopolistic competition and oligopoly. 
D)  monopolistic competition and cartels. 
A)  monopoly and monopolistic competition. 
B)  monopoly and oligopoly. 
C)  monopolistic competition and oligopoly. 
D)  monopolistic competition and cartels.

Question 2

Table 16-1
The following table shows the percentage of output supplied by the top eight firms in four different industries.
  
-Refer to Table 16-1.What is the concentration ratio in Industry Z?

Accepted Answer

A)  36% 
B)  51% 
C)  62% 
D)  67% 
A)  36% 
B)  51% 
C)  62% 
D)  67%

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.Which industry has the highest concentration ratio?

Accepted Answer

A)  Industry A 
B)  Industry B 
C)  Industry C 
D)  Industry D 
A)  Industry A 
B)  Industry B 
C)  Industry C 
D)  Industry D

Question 4

For a profit-maximizing monopolistically competitive firm,marginal revenue equals 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 5

Figure 16-2
This figure depicts a situation in a monopolistically competitive market.
  
-Refer to Figure 16-2.How much output will the monopolistically competitive firm produce in this situation?

Accepted Answer

A)  20 units 
B)  25 units 
C)  40 units 
D)  80 units 
A)  20 units 
B)  25 units 
C)  40 units 
D)  80 units

Question 6

Scenario 16-4
Consider the problem facing two firms, Burger Prince and McDaniel's, in the fast-food restaurant market. Each firm has just come up with an idea for a new fast-food menu item which it would sell for $5. Assume that the marginal cost for each new menu item is a constant $3, and the only fixed cost is for advertising. Each company knows that if it spends $16 million on advertising it will get 2 million consumers to try its new product. Burger Prince has done market research which suggests that its product does not have any "staying" power in the market. Even though it could get 2 million consumers to buy the product once, it is unlikely that they will continue to buy the product in the future. McDaniel's's market research suggests that its product is very good, and consumers who try the product will continue to be consumers over the ensuing year. On the basis of its market research, McDaniel's estimates that its initial 2 million customers will buy one unit of the product each month in the coming year, for a total of 32 million units.
-Refer to Scenario 16-4.On the basis of a theory that people buy a product because it is advertised,the content of advertisements for McDaniel's product

Accepted Answer

A)  should focus on quality comparisons in order to be successful. 
B)  must include celebrity endorsements in order to be successful. 
C)  is critical to the success of the product in the market. 
D)  is irrelevant to the success of the advertisement. 
A)  should focus on quality comparisons in order to be successful. 
B)  must include celebrity endorsements in order to be successful. 
C)  is critical to the success of the product in the market. 
D)  is irrelevant to the success of the advertisement.

Question 7

Suppose that monopolistically competitive firms in a certain market are experiencing losses.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 firm experiences an upward shift of its marginal cost and average total cost curves. 
D)  each existing firm's average total cost falls to bring economic profit back to zero. 
A)  the number of firms in the market decreases. 
B)  each existing firm experiences a decrease in demand for its product. 
C)  each firm experiences an upward shift of its marginal cost and average total cost curves. 
D)  each existing firm's average total cost falls to bring economic profit back to zero.

Question 8

Figure 16-1. The figure is drawn for a monopolistically competitive firm.
  
-Refer to Figure 16-1.In order to maximize profit,the firm will charge a price of

Accepted Answer

A)  $8. 
B)  $12. 
C)  $16. 
D)  $18. 
A)  $8. 
B)  $12. 
C)  $16. 
D)  $18.

Question 9

To be considered an oligopoly,the market must have a concentration ratio below 50%.

Accepted Answer

A) True 
 B)False

Question 10

There is general disagreement among economists about the role of advertising,but there is widespread agreement about the role of brand names on market efficiency.

Accepted Answer

A) True 
 B)False

Question 11

A monopolistically competitive firm has the following cost structure:  
The firm faces the following demand curve:
 
To maximize profit (or minimize losses),the firm will produce

Accepted Answer

A)  2 units. 
B)  3 units. 
C)  4 units. 
D)  5 units. 
A)  2 units. 
B)  3 units. 
C)  4 units. 
D)  5 units.

Question 12

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.Which industry is the most competitive?

Accepted Answer

A)  Industry A 
B)  Industry B 
C)  Industry C 
D)  Industry D 
A)  Industry A 
B)  Industry B 
C)  Industry C 
D)  Industry D

Question 13

A profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competitive market because the firm in the monopolistically competitive market

Accepted Answer

A)  is characterized by market-share maximization. 
B)  has no barriers to entry. 
C)  faces a downward-sloping demand curve for its product. 
D)  faces a horizontal demand curve at the market clearing price. 
A)  is characterized by market-share maximization. 
B)  has no barriers to entry. 
C)  faces a downward-sloping demand curve for its product. 
D)  faces a horizontal demand curve at the market clearing price.

Question 14

The debate over whether advertising serves a valuable purpose in society is definitively answered by economists who study the tastes and preferences of individuals.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is not correct?

Accepted Answer

A)  Monopolistic competition is different from monopoly because monopolistic competition is characterized by free entry, whereas monopoly is characterized by barriers to entry. 
B)  Both monopolistic competition and oligopoly fall in between the more extreme market structures of competition and monopoly. 
C)  Monopolistic competition is different from oligopoly because each seller in monopolistic competition is small relative to the market, whereas each seller can affect the actions of other sellers in an oligopoly. 
D)  Both monopolistic competition and perfect competition are characterized by product differentiation. 
A)  Monopolistic competition is different from monopoly because monopolistic competition is characterized by free entry, whereas monopoly is characterized by barriers to entry. 
B)  Both monopolistic competition and oligopoly fall in between the more extreme market structures of competition and monopoly. 
C)  Monopolistic competition is different from oligopoly because each seller in monopolistic competition is small relative to the market, whereas each seller can affect the actions of other sellers in an oligopoly. 
D)  Both monopolistic competition and perfect competition are characterized by product differentiation.

Question 16

When a new firm enters a monopolistically competitive market,the individual demand curves faced by all existing firms in that market will

Accepted Answer

A)  shift to the left. 
B)  shift to the right. 
C)  shift in a direction that is unpredictable without further information. 
D)  remain unchanged. It is the supply curve that will shift. 
A)  shift to the left. 
B)  shift to the right. 
C)  shift in a direction that is unpredictable without further information. 
D)  remain unchanged. It is the supply curve that will shift.

Question 17

Scenario 16-2
McDonald's restaurants has recently announced intentions to open a new restaurant in Smalltown, Indiana. Assume that the fast-food restaurant market in Smalltown is characterized by monopolistic competition.
-Refer to Scenario 16-2.As a result of the new McDonald's,residents of Smalltown are likely to benefit from

Accepted Answer

A)  a product-variety externality. 
B)  a business-stealing externality. 
C)  the fact that McDonald's will increase its production to achieve the efficient scale. 
D)  Both b and c are correct. 
A)  a product-variety externality. 
B)  a business-stealing externality. 
C)  the fact that McDonald's will increase its production to achieve the efficient scale. 
D)  Both b and c are correct.

Question 18

The claim that advertising reduces the elasticity of demand is likely to be made by a defender of advertising.

Accepted Answer

A) True 
 B)False

Question 19

Figure 16-4
  
-Refer to Figure 16-4.Which of the panels depicts a firm in a monopolistically competitive market earning positive economic profits?

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 20

One theory of advertising suggests that

Accepted Answer

A)  information on price is important to make advertising effective. 
B)  the content of advertising may be irrelevant to product success in the market. 
C)  celebrity advertising is not effective in retail food markets. 
D)  Post and Kellogg should not advertise new cereals. 
A)  information on price is important to make advertising effective. 
B)  the content of advertising may be irrelevant to product success in the market. 
C)  celebrity advertising is not effective in retail food markets. 
D)  Post and Kellogg should not advertise new cereals.

The two types of imperfectly competitive markets are

Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. -Refer to Table 16-1.What is the concentration ratio in Industry Z?

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.Which industry has the highest concentration ratio?

For a profit-maximizing monopolistically competitive firm,marginal revenue equals marginal cost in

Figure 16-2 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-2.How much output will the monopolistically competitive firm produce in this situation?

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

Figure 16-1. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.In order to maximize profit,the firm will charge a price of

To be considered an oligopoly,the market must have a concentration ratio below 50%.

There is general disagreement among economists about the role of advertising,but there is widespread agreement about the role of brand names on market efficiency.

A monopolistically competitive firm has the following cost structure: The firm faces the following demand curve: To maximize profit (or minimize losses),the firm will produce

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.Which industry is the most competitive?

A profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competitive market because the firm in the monopolistically competitive market

The debate over whether advertising serves a valuable purpose in society is definitively answered by economists who study the tastes and preferences of individuals.

Which of the following statements is not correct?

When a new firm enters a monopolistically competitive market,the individual demand curves faced by all existing firms in that market will

The claim that advertising reduces the elasticity of demand is likely to be made by a defender of advertising.

Figure 16-4 -Refer to Figure 16-4.Which of the panels depicts a firm in a monopolistically competitive market earning positive economic profits?

One theory of advertising suggests that

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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Exam 16: Monopolistic Competition.

The two types of imperfectly competitive markets are

Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. -Refer to Table 16-1.What is the concentration ratio in Industry Z?

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.Which industry has the highest concentration ratio?

For a profit-maximizing monopolistically competitive firm,marginal revenue equals marginal cost in

Figure 16-2 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-2.How much output will the monopolistically competitive firm produce in this situation?

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

Figure 16-1. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.In order to maximize profit,the firm will charge a price of

To be considered an oligopoly,the market must have a concentration ratio below 50%.

There is general disagreement among economists about the role of advertising,but there is widespread agreement about the role of brand names on market efficiency.

A monopolistically competitive firm has the following cost structure: The firm faces the following demand curve: To maximize profit (or minimize losses),the firm will produce

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.Which industry is the most competitive?

A profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competitive market because the firm in the monopolistically competitive market

The debate over whether advertising serves a valuable purpose in society is definitively answered by economists who study the tastes and preferences of individuals.

Which of the following statements is not correct?

When a new firm enters a monopolistically competitive market,the individual demand curves faced by all existing firms in that market will

The claim that advertising reduces the elasticity of demand is likely to be made by a defender of advertising.

Figure 16-4 -Refer to Figure 16-4.Which of the panels depicts a firm in a monopolistically competitive market earning positive economic profits?

One theory of advertising suggests that

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