Question 1

What is a similarity between monopoly and monopolistic competition

Accepted Answer

A) In both market structures, strategic interactions among sellers are important. 
B) In both market structures, there are relatively few sellers. 
C) In both market structures, sellers are price makers rather than price takers. 
D) In both market structures, product differentiation is important. 
A) In both market structures, strategic interactions among sellers are important. 
B) In both market structures, there are relatively few sellers. 
C) In both market structures, sellers are price makers rather than price takers. 
D) In both market structures, product differentiation is important.

Question 2

Table 16-2
A firm has the following cost structure:
  
-Refer to Table 16-2.If this firm is in a typical perfectly competitive market,when marginal revenue is $8 and price is $9,how many units of output will it likely produce in the long run

Accepted Answer

A) 0 units of output 
B) 4 units of output 
C) 5 units of output 
D) 6 units of output 
A) 0 units of output 
B) 4 units of output 
C) 5 units of output 
D) 6 units of output

Question 3

Table 16-1
A monopolistically competitive firm faces the following demand curve for its product:
  
-Refer to Table 16-1.The firm has total fixed costs of $20 and a constant marginal cost of $5 per unit.What will the firm do

Accepted Answer

A) It will produce 2 units; firms will exit the market in the long run. 
B) It will produce 4 units; firms will exit the market in the long run. 
C) It will produce 6 units; firms will exit the market in the long run. 
D) It will produce 8 units; firms will exit the market in the long run. 
A) It will produce 2 units; firms will exit the market in the long run. 
B) It will produce 4 units; firms will exit the market in the long run. 
C) It will produce 6 units; firms will exit the market in the long run. 
D) It will produce 8 units; firms will exit the market in the long run.

Question 4

Critics of advertising that focuses on product characteristics argue that it leads to less elastic demand for products.

Accepted Answer

A) True 
 B)False

Question 5

In a small college town,four microbreweries have opened in the past two years.Demonstrate the effect of these new market entrants on demand for incumbent firms (microbreweries) that already served this market.Assume that the local community now places a moratorium on new liquor licences for microbreweries.How will this moratorium affect the long-run profitability of incumbent firms?

Accepted Answer

The arrival of a new entrant should be g

Question 6

When firms in a monopolistically competitive market engage in price-related advertising,what do defenders of advertising argue

Accepted Answer

A) The quality of products sold in the market generally increases. 
B) Customers are less likely to be informed about other characteristics of the product. 
C) New firms are discouraged from entering the market. 
D) Each firm has less market power. 
A) The quality of products sold in the market generally increases. 
B) Customers are less likely to be informed about other characteristics of the product. 
C) New firms are discouraged from entering the market. 
D) Each firm has less market power.

Question 7

When a firm operates at the efficient scale,what explains the characteristic of the average-total-cost-curve

Accepted Answer

A) Its average revenue must be less than the minimum of average total cost. 
B) Its average revenue must be equal to the minimum of average total cost. 
C) The average-total-cost curve must be falling. 
D) The average-total-cost curve must be rising. 
A) Its average revenue must be less than the minimum of average total cost. 
B) Its average revenue must be equal to the minimum of average total cost. 
C) The average-total-cost curve must be falling. 
D) The average-total-cost curve must be rising.

Question 8

When we compare diagrams for firms in different market structures,what do we notice

Accepted Answer

A) For competitive firms and monopolistically competitive firms, the revenue curves are similar but the cost curves are quite different. 
B) For competitive firms and monopolistically competitive firms, the cost curves are similar but the revenue curves are quite different. 
C) For monopoly firms and monopolistically competitive firms, the revenue curves are similar but the cost curves are quite different. 
D) For monopoly firms and monopolistically competitive firms, the cost curves are similar but the revenue curves are quite different. 
A) For competitive firms and monopolistically competitive firms, the revenue curves are similar but the cost curves are quite different. 
B) For competitive firms and monopolistically competitive firms, the cost curves are similar but the revenue curves are quite different. 
C) For monopoly firms and monopolistically competitive firms, the revenue curves are similar but the cost curves are quite different. 
D) For monopoly firms and monopolistically competitive firms, the cost curves are similar but the revenue curves are quite different.

Question 9

A profit-maximizing firm in a monopolistically competitive market generally prices its product at some markup over marginal cost.

Accepted Answer

A) True 
 B)False

Question 10

For a profit-maximizing firm in a monopolistically competitive market,when price is equal to average total cost,price must lie above marginal cost.

Accepted Answer

A) True 
 B)False

Question 11

Which situation is least likely to apply to a monopolistically competitive firm

Accepted Answer

A) Profit is positive in the short run. 
B) Total cost exceeds total revenue in the short run. 
C) Profit is positive in the long run. 
D) Total revenue equals total cost in the long run. 
A) Profit is positive in the short run. 
B) Total cost exceeds total revenue in the short run. 
C) Profit is positive in the long run. 
D) Total revenue equals total cost in the long run.

Question 12

On an average night,80 percent of hotel rooms are occupied in large Canadian cities.What type of market is this kind of excess capacity indicative

Accepted Answer

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

Question 13

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 14

A monopolistically competitive market is characterized by barriers to entry.

Accepted Answer

A) True 
 B)False

Question 15

What does a monopolistically competitive firm do to maximize profit

Accepted Answer

A) It takes the price as given and it chooses its quantity, just as a competitive firm does. 
B) It takes the price as given and chooses its quantity, just as a colluding oligopolist does. 
C) It chooses its quantity and price, just as a competitive firm does. 
D) It chooses its quantity and price, just as a monopoly does. 
A) It takes the price as given and it chooses its quantity, just as a competitive firm does. 
B) It takes the price as given and chooses its quantity, just as a colluding oligopolist does. 
C) It chooses its quantity and price, just as a competitive firm does. 
D) It chooses its quantity and price, just as a monopoly does.

Question 16

Product differentiation in monopolistically competitive markets ensures that,for profit-maximizing firms,what will result

Accepted Answer

A) Marginal revenue will equal average total cost. 
B) Price will exceed marginal cost. 
C) Marginal cost will exceed average revenue. 
D) Average variable cost will exceed average revenue. 
A) Marginal revenue will equal average total cost. 
B) Price will exceed marginal cost. 
C) Marginal cost will exceed average revenue. 
D) Average variable cost will exceed average revenue.

Question 17

Which two curves are tangent to one another in a monopolistically competitive market with zero economic profit

Accepted Answer

A) demand and average variable cost 
B) demand and average total cost 
C) marginal revenue and average variable cost 
D) marginal revenue and average total cost 
A) demand and average variable cost 
B) demand and average total cost 
C) marginal revenue and average variable cost 
D) marginal revenue and average total cost

Question 18

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

Accepted Answer

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

Question 19

According to critics of advertising,what might advertising do in in some markets

Accepted Answer

A) attract products of lower quality into the market 
B) attract less-informed buyers into the market 
C) increase elasticity of demand 
D) decrease elasticity of demand 
A) attract products of lower quality into the market 
B) attract less-informed buyers into the market 
C) increase elasticity of demand 
D) decrease elasticity of demand

Question 20

When advertising is deceptive,what do critics claim happens

Accepted Answer

A) It increases competition in the market. 
B) It makes buyers less sensitive to price differences among similar products. 
C) It makes buyers more sensitive to price differences among similar products. 
D) It lowers the quality of goods in the market. 
A) It increases competition in the market. 
B) It makes buyers less sensitive to price differences among similar products. 
C) It makes buyers more sensitive to price differences among similar products. 
D) It lowers the quality of goods in the market.

Exam 16: Monopolistic Competition

What is a similarity between monopoly and monopolistic competition

Table 16-2 A firm has the following cost structure: -Refer to Table 16-2.If this firm is in a typical perfectly competitive market,when marginal revenue is $8 and price is $9,how many units of output will it likely produce in the long run

Table 16-1 A monopolistically competitive firm faces the following demand curve for its product: -Refer to Table 16-1.The firm has total fixed costs of $20 and a constant marginal cost of $5 per unit.What will the firm do

Critics of advertising that focuses on product characteristics argue that it leads to less elastic demand for products.

When firms in a monopolistically competitive market engage in price-related advertising,what do defenders of advertising argue

When a firm operates at the efficient scale,what explains the characteristic of the average-total-cost-curve

When we compare diagrams for firms in different market structures,what do we notice

A profit-maximizing firm in a monopolistically competitive market generally prices its product at some markup over marginal cost.

For a profit-maximizing firm in a monopolistically competitive market,when price is equal to average total cost,price must lie above marginal cost.

Which situation is least likely to apply to a monopolistically competitive firm

On an average night,80 percent of hotel rooms are occupied in large Canadian cities.What type of market is this kind of excess capacity indicative

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 market is characterized by barriers to entry.

What does a monopolistically competitive firm do to maximize profit

Product differentiation in monopolistically competitive markets ensures that,for profit-maximizing firms,what will result

Which two curves are tangent to one another in a monopolistically competitive market with zero economic profit

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

According to critics of advertising,what might advertising do in in some markets

When advertising is deceptive,what do critics claim happens

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 Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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