Question 1

A study of the market for optometrists' services in the 1960s showed that

Accepted Answer

A) all states in the United States prohibited advertising by optometrists. 
B) almost all professional optometrists opposed legal restrictions on their rights to advertise. 
C) the average price of eyeglasses would be reduced by the removal of legal restrictions on advertising by optometrists. 
D) advertising on eyeglasses limited competition among optometrists. 
A) all states in the United States prohibited advertising by optometrists. 
B) almost all professional optometrists opposed legal restrictions on their rights to advertise. 
C) the average price of eyeglasses would be reduced by the removal of legal restrictions on advertising by optometrists. 
D) advertising on eyeglasses limited competition among optometrists.

Question 2

Advertisements that appear to convey no information at all

Accepted Answer

A) are usually associated with "infomercials." 
B) are mostly useless to consumers, but valuable to firms. 
C) are mostly useless to firms, but valuable to consumers for their entertainment quality alone. 
D) may convey information to consumers by providing them with a signal that firms are willing to spend significant amounts of money to advertise. 
A) are usually associated with "infomercials." 
B) are mostly useless to consumers, but valuable to firms. 
C) are mostly useless to firms, but valuable to consumers for their entertainment quality alone. 
D) may convey information to consumers by providing them with a signal that firms are willing to spend significant amounts of money to advertise.

Question 3

Table 17-2
  
-Refer to Table 17-2.Which of the following statements regarding this monopolistically competitive firm is true?

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 4

When poor-quality products are advertised using cheap advertising,consumers learn to ignore such cheap advertising.

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 output will the monopolistically competitive firm produce in this situation?

Accepted Answer

A) 20 units 
B) 25 units 
C) 40 units 
D) No output, since producing in this situation will result in a loss for the firm. 
A) 20 units 
B) 25 units 
C) 40 units 
D) No output, since producing in this situation will result in a loss for the firm.

Question 6

In which of the following market structures can firms earn economic profits in the long run?

Accepted Answer

A) Perfect competition 
B) Monopolistic competition 
C) Monopoly 
D) Both b and c 
A) Perfect competition 
B) Monopolistic competition 
C) Monopoly 
D) Both b and c

Question 7

The product-variety externality associated with monopolistic competition arises because in monopolistically competitive markets,

Accepted Answer

A) firms produce with excess capacity. 
B) firms try to differentiate their products. 
C) firms would like to produce homogeneous products, but the large number of firms prohibits it. 
D) entry and exit is not restricted. 
A) firms produce with excess capacity. 
B) firms try to differentiate their products. 
C) firms would like to produce homogeneous products, but the large number of firms prohibits it. 
D) entry and exit is not restricted.

Question 8

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 9

In both perfect competition and monopolistic competition,

Accepted Answer

A) each firm is, in many ways, like a monopoly. 
B) each firm sells a product that is at least slightly different from those of other firms. 
C) each firm faces a downward-sloping demand curve. 
D) each firm has many competitors. 
A) each firm is, in many ways, like a monopoly. 
B) each firm sells a product that is at least slightly different from those of other firms. 
C) each firm faces a downward-sloping demand curve. 
D) each firm has many competitors.

Question 10

Figure 17-6
  
-Refer to Figure 17-6.The maximum total short-run economic profit for the monopolistically competitive firm in this figure is

Accepted Answer

A) $1,000. 
B) $2,000. 
C) $3,000 
D) $5,000. 
A) $1,000. 
B) $2,000. 
C) $3,000 
D) $5,000.

Question 11

Table 17-2
  
-Refer to Table 17-2.This table shows the demand schedule,marginal cost,and average cost for a monopolistically competitive firm.What price should this firm charge to maximize profit?

Accepted Answer

A) $4 
B) $8 
C) $12 
D) $16 
A) $4 
B) $8 
C) $12 
D) $16

Question 12

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 13

A monopolistically competitive firm faces the following demand schedule for its product:  
The firm has total fixed costs of $20 and a constant marginal cost of $2 per unit.The firm will maximize profit with

Accepted Answer

A) 6 units of output. 
B) 9 units of output. 
C) 11 units of output. 
D) 13 units of output. 
A) 6 units of output. 
B) 9 units of output. 
C) 11 units of output. 
D) 13 units of output.

Question 14

Suppose the point of tangency that characterizes long-run equilibrium for a monopolistically competitive firm occurs at Q₁ units of output.This level of output,Q₁,

Accepted Answer

A) exceeds the level of output at which marginal revenue equals marginal cost. 
B) exceeds the level of output at which marginal cost equals average total cost. 
C) falls short of the level of output at which price equals marginal cost. 
D) exceeds the firm's efficient scale of output. 
A) exceeds the level of output at which marginal revenue equals marginal cost. 
B) exceeds the level of output at which marginal cost equals average total cost. 
C) falls short of the level of output at which price equals marginal cost. 
D) exceeds the firm's efficient scale of output.

Question 15

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.If the government forced Traci's to produce at the efficient scale of output,what is the maximum profit Traci's could earn?

Accepted Answer

A) $77 
B) $80 
C) $84 
D) $96 
A) $77 
B) $80 
C) $84 
D) $96

Question 16

Figure 17-1
  
-Refer to Figure 17-1.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 17

Figure 17-1
  
-Refer to Figure 17-1.Which of the graphs depicts the situation for a profit-maximizing firm in a monopolistically competitive market?

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 18

Empirical evidence suggests that advertising usually leads to an increase in the price for advertised products.

Accepted Answer

A) True 
 B)False

Question 19

One way in which monopolistic competition differs from oligopoly is that

Accepted Answer

A) there are no barriers to entry in oligopolies. 
B) in oligopoly markets there are only a few sellers. 
C) all firms in an oligopoly eventually earn zero economic profits. 
D) strategic interactions between firms are rarely evident in oligopolies. 
A) there are no barriers to entry in oligopolies. 
B) in oligopoly markets there are only a few sellers. 
C) all firms in an oligopoly eventually earn zero economic profits. 
D) strategic interactions between firms are rarely evident in oligopolies.

Question 20

In the long run,a monopolistically competitive firm produces a quantity that is

Accepted Answer

A) equal to the efficient scale. 
B) less than the efficient scale. 
C) greater than the efficient scale. 
D) consistent with diseconomies of scale. 
A) equal to the efficient scale. 
B) less than the efficient scale. 
C) greater than the efficient scale. 
D) consistent with diseconomies of scale.

Exam 17: Monopolistic Competition

A study of the market for optometrists' services in the 1960s showed that

Advertisements that appear to convey no information at all

Table 17-2 -Refer to Table 17-2.Which of the following statements regarding this monopolistically competitive firm is true?

When poor-quality products are advertised using cheap advertising,consumers learn to ignore such cheap advertising.

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

In which of the following market structures can firms earn economic profits in the long run?

The product-variety externality associated with monopolistic competition arises because in monopolistically competitive markets,

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.

In both perfect competition and monopolistic competition,

Figure 17-6 -Refer to Figure 17-6.The maximum total short-run economic profit for the monopolistically competitive firm in this figure is

Table 17-2 -Refer to Table 17-2.This table shows the demand schedule,marginal cost,and average cost for a monopolistically competitive firm.What price should this firm charge to maximize profit?

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

A monopolistically competitive firm faces the following demand schedule for its product: The firm has total fixed costs of $20 and a constant marginal cost of $2 per unit.The firm will maximize profit with

Suppose the point of tangency that characterizes long-run equilibrium for a monopolistically competitive firm occurs at Q₁ units of output.This level of output,Q₁,

Figure 17-1 -Refer to Figure 17-1.The firm depicted in panel b faces a horizontal demand curve.If panel b depicts a profit-maximizing firm,

Figure 17-1 -Refer to Figure 17-1.Which of the graphs depicts the situation for a profit-maximizing firm in a monopolistically competitive market?

Empirical evidence suggests that advertising usually leads to an increase in the price for advertised products.

One way in which monopolistic competition differs from oligopoly is that

In the long run,a monopolistically competitive firm produces a quantity that is

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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