Question 1

In perfect competition as well as in monopolistic competition,

Accepted Answer

A)  marginal revenue is equal to price for each firm. 
B)  profit is positive in a long-run equilibrium for each firm. 
C)  entry and exit by firms are restricted. 
D)  there are many firms in a single market. 
A)  marginal revenue is equal to price for each firm. 
B)  profit is positive in a long-run equilibrium for each firm. 
C)  entry and exit by firms are restricted. 
D)  there are many firms in a single market.

Question 2

Television advertisements aired during major sporting events are very expensive.A theory asserting that people buy a product simply because it is advertised would suggest that information on the high cost of advertising

Accepted Answer

A)  enhances the effectiveness of the advertisement. 
B)  reduces people's willingness to purchase advertised products. 
C)  is leaked to discredit the firms that spend so much on advertising. 
D)  reduces the effective staying power of a product. 
A)  enhances the effectiveness of the advertisement. 
B)  reduces people's willingness to purchase advertised products. 
C)  is leaked to discredit the firms that spend so much on advertising. 
D)  reduces the effective staying power of a product.

Question 3

Figure 16-6
  
-Refer to Figure 16-6.The firm depicted in panel b faces a horizontal demand curve.If panel b depicts a profit-maximizing firm,

Accepted Answer

A)  it could be operating in either a perfectly competitive market or in a monopolistically competitive market. 
B)  it would not have excess capacity in its production as long as it is earning zero economic profit. 
C)  it is able to choose the price at which it sells its product. 
D)  the firm can always raise its profit by increasing production since consumers will buy as much as the firm can produce. 
A)  it could be operating in either a perfectly competitive market or in a monopolistically competitive market. 
B)  it would not have excess capacity in its production as long as it is earning zero economic profit. 
C)  it is able to choose the price at which it sells its product. 
D)  the firm can always raise its profit by increasing production since consumers will buy as much as the firm can produce.

Question 4

A firm maximizes its profit by producing output up to the point where marginal revenue equals marginal cost

Accepted Answer

A)  only when the market is a monopoly. 
B)  only when the market is a monopoly or monopolistically competitive. 
C)  only when the market is monopolistically competitive or perfectly competitive. 
D)  when the market is perfectly competitive, monopolistically competitive, or monopolistic. 
A)  only when the market is a monopoly. 
B)  only when the market is a monopoly or monopolistically competitive. 
C)  only when the market is monopolistically competitive or perfectly competitive. 
D)  when the market is perfectly competitive, monopolistically competitive, or monopolistic.

Question 5

Figure 16-3
  
-Refer to Figure 16-3.The firm in this figure is monopolistically competitive.It illustrates

Accepted Answer

A)  the shut-down case. 
B)  a long-run economic profit. 
C)  a short-run economic profit. 
D)  a short-run loss. 
A)  the shut-down case. 
B)  a long-run economic profit. 
C)  a short-run economic profit. 
D)  a short-run loss.

Question 6

Which of the following markets is not likely characterized by a monopolistically competitive market?

Accepted Answer

A)  piano lessons 
B)  corn 
C)  cookies 
D)  clothing 
A)  piano lessons 
B)  corn 
C)  cookies 
D)  clothing

Question 7

A firm in a monopolistically competitive market is similar to a monopoly in the sense that
(i)they both face downward-sloping demand curves.
(ii)they both charge a price that exceeds marginal cost.
(iii)free entry and exit determines the long-run equilibrium.

Accepted Answer

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

Question 8

If there are many firms participating in a market,the market is either

Accepted Answer

A)  an oligopoly or monopolistically competitive. 
B)  perfectly competitive or monopolistically competitive. 
C)  an oligopoly or perfectly competitive. 
D)  an oligopoly or a cartel. 
A)  an oligopoly or monopolistically competitive. 
B)  perfectly competitive or monopolistically competitive. 
C)  an oligopoly or perfectly competitive. 
D)  an oligopoly or a cartel.

Question 9

A downward-sloping demand curve

Accepted Answer

A)  is a feature of all monopolistically competitive firms. 
B)  means that the firm in question will never experience a zero profit. 
C)  causes marginal revenue to exceed price. 
D)  prohibits firms from earning positive economic profits in the long run. 
A)  is a feature of all monopolistically competitive firms. 
B)  means that the firm in question will never experience a zero profit. 
C)  causes marginal revenue to exceed price. 
D)  prohibits firms from earning positive economic profits in the long run.

Question 10

A monopolistically competitive market could be considered inefficient because

Accepted Answer

A)  marginal revenue exceeds average revenue. 
B)  price exceeds marginal cost. 
C)  the efficient scale of production is only achieved in the long run, not in the short run. 
D)  markup pricing does not occur in any other market structure. 
A)  marginal revenue exceeds average revenue. 
B)  price exceeds marginal cost. 
C)  the efficient scale of production is only achieved in the long run, not in the short run. 
D)  markup pricing does not occur in any other market structure.

Question 11

A firm in a monopolistically competitive market faces a

Accepted Answer

A)  downward-sloping demand curve because the firm's product is different from those offered by other firms. 
B)  downward-sloping demand curve because there are only a few firms in the market. 
C)  horizontal demand curve because there are many firms in the market. 
D)  horizontal demand curve because firms can enter the market without restriction. 
A)  downward-sloping demand curve because the firm's product is different from those offered by other firms. 
B)  downward-sloping demand curve because there are only a few firms in the market. 
C)  horizontal demand curve because there are many firms in the market. 
D)  horizontal demand curve because firms can enter the market without restriction.

Question 12

Monopolistic competition is characterized by i)
Efficient scale
Ii)
Markup pricing over marginal cost
Iii)
Deadweight loss
Iv)
Excess capacity

Accepted Answer

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

Question 13

Advertising

Accepted Answer

A)  provides information about products, including prices and seller locations. 
B)  has been proven to increase competition and reduce prices compared to markets without advertising. 
C)  signals quality to consumers, because advertising is expensive. 
D)  All of the above are correct. 
A)  provides information about products, including prices and seller locations. 
B)  has been proven to increase competition and reduce prices compared to markets without advertising. 
C)  signals quality to consumers, because advertising is expensive. 
D)  All of the above are correct.

Question 14

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.Which of the following statements regarding this monopolistically competitive firm is correct?

Accepted Answer

A)  New firms will enter this market in the long run since firm profits are greater than zero. 
B)  Firms will leave this market in the long run since firm profits are less than zero. 
C)  This firm is currently in long-run equilibrium. 
D)  This firm is currently in long-run equilibrium, and the firm is producing its efficient scale of output. 
A)  New firms will enter this market in the long run since firm profits are greater than zero. 
B)  Firms will leave this market in the long run since firm profits are less than zero. 
C)  This firm is currently in long-run equilibrium. 
D)  This firm is currently in long-run equilibrium, and the firm is producing its efficient scale of output.

Question 15

If "too much choice" is a problem for consumers,it would occur in which market structure(s)?

Accepted Answer

A)  perfect competition 
B)  monopoly 
C)  monopolistic competition 
D)  perfect competition and monopolistic competition 
A)  perfect competition 
B)  monopoly 
C)  monopolistic competition 
D)  perfect competition and monopolistic competition

Question 16

In a monopolistically competitive industry,a firm's demand curve also represent its

Accepted Answer

A)  marginal revenue. 
B)  marginal cost. 
C)  average revenue. 
D)  profit. 
A)  marginal revenue. 
B)  marginal cost. 
C)  average revenue. 
D)  profit.

Question 17

Monopolistically competitive firms have excess capacity.To maximize profits,firms will

Accepted Answer

A)  increase their output to lower their average total cost of production and eliminate the excess capacity. 
B)  produce where price equals marginal cost to eliminate the excess capacity. 
C)  produce where average revenue equals marginal cost to eliminate the excess capacity. 
D)  maintain the excess capacity. 
A)  increase their output to lower their average total cost of production and eliminate the excess capacity. 
B)  produce where price equals marginal cost to eliminate the excess capacity. 
C)  produce where average revenue equals marginal cost to eliminate the excess capacity. 
D)  maintain the excess capacity.

Question 18

Imperfectly competitive firms are characterized by

Accepted Answer

A)  horizontal demand curves. 
B)  standardized products. 
C)  a large number of small firms. 
D)  price making ability. 
A)  horizontal demand curves. 
B)  standardized products. 
C)  a large number of small firms. 
D)  price making ability.

Question 19

Which of the following is not an example of Joel Waldfogel's "Tyranny of the Market"?

Accepted Answer

A)  A daily newspaper tailored to appeal to the majority of readers in an area. 
B)  Nike creating specialized shoes for American Indians' wider feet. 
C)  Pharmaceutical companies spending research and development funds on drugs for common diseases. 
D)  Airlines offering daily direct flights from one large city to another. 
A)  A daily newspaper tailored to appeal to the majority of readers in an area. 
B)  Nike creating specialized shoes for American Indians' wider feet. 
C)  Pharmaceutical companies spending research and development funds on drugs for common diseases. 
D)  Airlines offering daily direct flights from one large city to another.

Question 20

How does advertising signal to consumers that the product is a good one?

Accepted Answer

A)  By seeing famous people using the product, consumers infer that they too can be famous. 
B)  By being willing to spend money on advertising, firms let consumers know the product is likely a good one since firms would not likely advertise a poor product. 
C)  By making consumers laugh during commercials, firms are associating positive experiences with the product. 
D)  Without allowing consumers to actually use the product, it is not possible for firms to signal to consumers the product's quality. 
A)  By seeing famous people using the product, consumers infer that they too can be famous. 
B)  By being willing to spend money on advertising, firms let consumers know the product is likely a good one since firms would not likely advertise a poor product. 
C)  By making consumers laugh during commercials, firms are associating positive experiences with the product. 
D)  Without allowing consumers to actually use the product, it is not possible for firms to signal to consumers the product's quality.

Exam 16: Monopolistic Competition.

In perfect competition as well as in monopolistic competition,

Television advertisements aired during major sporting events are very expensive.A theory asserting that people buy a product simply because it is advertised would suggest that information on the high cost of advertising

Figure 16-6 -Refer to Figure 16-6.The firm depicted in panel b faces a horizontal demand curve.If panel b depicts a profit-maximizing firm,

A firm maximizes its profit by producing output up to the point where marginal revenue equals marginal cost

Figure 16-3 -Refer to Figure 16-3.The firm in this figure is monopolistically competitive.It illustrates

Which of the following markets is not likely characterized by a monopolistically competitive market?

A firm in a monopolistically competitive market is similar to a monopoly in the sense that (i)they both face downward-sloping demand curves. (ii)they both charge a price that exceeds marginal cost. (iii)free entry and exit determines the long-run equilibrium.

If there are many firms participating in a market,the market is either

A downward-sloping demand curve

A monopolistically competitive market could be considered inefficient because

A firm in a monopolistically competitive market faces a

Monopolistic competition is characterized by i) Efficient scale Ii) Markup pricing over marginal cost Iii) Deadweight loss Iv) Excess capacity

Advertising

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.Which of the following statements regarding this monopolistically competitive firm is correct?

If "too much choice" is a problem for consumers,it would occur in which market structure(s)?

In a monopolistically competitive industry,a firm's demand curve also represent its

Monopolistically competitive firms have excess capacity.To maximize profits,firms will

Imperfectly competitive firms are characterized by

Which of the following is not an example of Joel Waldfogel's "Tyranny of the Market"?

How does advertising signal to consumers that the product is a good one?

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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