Question 1

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 2

Suppose for some firm that average total cost is minimized at Q₁ units of output.For a monopolistically competitive firm in long-run equilibrium,Q₁

Accepted Answer

A) is also the level of output at which marginal cost equals average total cost. 
B) exceeds the level of output at which there is a point of tangency between the demand curve and the average total cost curve. 
C) exceeds the level of output at which marginal revenue equals marginal cost. 
D) All of the above are correct. 
A) is also the level of output at which marginal cost equals average total cost. 
B) exceeds the level of output at which there is a point of tangency between the demand curve and the average total cost curve. 
C) exceeds the level of output at which marginal revenue equals marginal cost. 
D) All of the above are correct.

Question 3

Because a monopolistically competitive firm has some market power,in the long-run the price of its good exceeds its

Accepted Answer

A) average revenue. 
B) average total cost. 
C) marginal cost. 
D) profit per unit. 
A) average revenue. 
B) average total cost. 
C) marginal cost. 
D) profit per unit.

Question 4

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 5

Figure 17-5
  
-Refer to Figure 17-5.This figure depicts a situation in a monopolistically competitive market.How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

Accepted Answer

A) $200.00 
B) $312.50 
C) $400.00 
D) $800.00 
A) $200.00 
B) $312.50 
C) $400.00 
D) $800.00

Question 6

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Accepted Answer

A) firms are more likely to operate at efficient scale. 
B) there are likely to be too many firms in a monopolistically competitive market. 
C) market efficiency is likely to be enhanced by the entry of new firms. 
D) the market structure is likely to be in transition. 
A) firms are more likely to operate at efficient scale. 
B) there are likely to be too many firms in a monopolistically competitive market. 
C) market efficiency is likely to be enhanced by the entry of new firms. 
D) the market structure is likely to be in transition.

Question 7

Figure 17-5
  
-Refer to Figure 17-5.This figure depicts a situation in a monopolistically competitive market.How much profit will the monopolistically competitive firm earn in this situation?

Accepted Answer

A) A $10 profit. 
B) A $20 profit. 
C) A $200 profit. 
D) No profit, since monopolistically competitive firms never earn economic profit. 
A) A $10 profit. 
B) A $20 profit. 
C) A $200 profit. 
D) No profit, since monopolistically competitive firms never earn economic profit.

Question 8

In the study done by Lee Benham on advertising for eyeglasses,

Accepted Answer

A) advertising increased the average price. 
B) advertising decreased the average price. 
C) there was no difference in price, but quality was better in the states that didn't allow advertising. 
D) advertising appeared to have no effect whatsoever in the states that permitted advertising. 
A) advertising increased the average price. 
B) advertising decreased the average price. 
C) there was no difference in price, but quality was better in the states that didn't allow advertising. 
D) advertising appeared to have no effect whatsoever in the states that permitted advertising.

Question 9

A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

Accepted Answer

A) a decrease in profits for all hotels/motels. 
B) reduced efficiency of local lodging markets. 
C) a request by consumers to increase the number of billboards. 
D) increased price competition among hotels/motels in the community. 
A) a decrease in profits for all hotels/motels. 
B) reduced efficiency of local lodging markets. 
C) a request by consumers to increase the number of billboards. 
D) increased price competition among hotels/motels in the community.

Question 10

Entry of firms in a monopolistically competitive industry is characterized by two externalities.List these externalities and briefly describe how consumers and existing firms are influenced by these externalities.

Accepted Answer

Business-stealing effect: incumbent firm

Question 11

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Accepted Answer

A) True 
 B)False

Question 12

Table 17-3
Traci's Hairstyling is one salon among many in the market for hairstyling. The following table presents cost and revenue data for Traci's Hairstyling.
  
-Refer to Table 17-3.When maximizing profit,what price does Traci's charge for hairstyling?

Accepted Answer

A) $20 
B) $25 
C) $30 
D) $35 
A) $20 
B) $25 
C) $30 
D) $35

Question 13

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 to 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 to 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 14

Table 17-1
  
-Refer to Table 17-1.This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm.How much profit will this firm earn when it chooses its output to maximize profit?

Accepted Answer

A) A $4 loss. 
B) A $2 loss. 
C) A $6 profit. 
D) A $16 profit. 
A) A $4 loss. 
B) A $2 loss. 
C) A $6 profit. 
D) A $16 profit.

Question 15

Eunice consumes Coke exclusively.She claims that there is a clear taste difference and that competing brands of cola leave an unsavory residual taste in her mouth.However,in a blind taste test,Eunice is found to prefer generic store-brand cola to Coke eight out of ten times.The results of Eunice's taste test would reinforce claims by critics of brand names that

Accepted Answer

A) consumers are always willing to pay more for brand names. 
B) brand names cause consumers to perceive differences that do not really exist. 
C) brand names cause consumers to be more sensitive to product differences. 
D) brand names are a form of socially efficient advertising. 
A) consumers are always willing to pay more for brand names. 
B) brand names cause consumers to perceive differences that do not really exist. 
C) brand names cause consumers to be more sensitive to product differences. 
D) brand names are a form of socially efficient advertising.

Question 16

Professional organizations (for example,the American Medical Association and the American Bar Association)have been active advocates for regulation to restrict the right of professionals to advertise.Describe what economic incentives might exist for existing professionals to restrict advertising.

Accepted Answer

If advertising increases information abo

Question 17

Under which of the following market structures would the highest output of a particular good be produced?

Accepted Answer

A) Perfect competition 
B) Monopolistic competition 
C) Oligopoly 
D) Monopoly 
A) Perfect competition 
B) Monopolistic competition 
C) Oligopoly 
D) Monopoly

Exam 17: Monopolistic Competition

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

Suppose for some firm that average total cost is minimized at Q₁ units of output.For a monopolistically competitive firm in long-run equilibrium,Q₁

Because a monopolistically competitive firm has some market power,in the long-run the price of its good exceeds its

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

Figure 17-5 -Refer to Figure 17-5.This figure depicts a situation in a monopolistically competitive market.How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Figure 17-5 -Refer to Figure 17-5.This figure depicts a situation in a monopolistically competitive market.How much profit will the monopolistically competitive firm earn in this situation?

In the study done by Lee Benham on advertising for eyeglasses,

A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

Entry of firms in a monopolistically competitive industry is characterized by two externalities.List these externalities and briefly describe how consumers and existing firms are influenced by these externalities.

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Table 17-3 Traci's Hairstyling is one salon among many in the market for hairstyling. The following table presents cost and revenue data for Traci's Hairstyling. -Refer to Table 17-3.When maximizing profit,what price does Traci's charge for hairstyling?

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

Table 17-1 -Refer to Table 17-1.This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm.How much profit will this firm earn when it chooses its output to maximize profit?

Professional organizations (for example,the American Medical Association and the American Bar Association)have been active advocates for regulation to restrict the right of professionals to advertise.Describe what economic incentives might exist for existing professionals to restrict advertising.

Under which of the following market structures would the highest output of a particular good be produced?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

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 Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short Run Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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