Question 1

Which of the following markets impose deadweight losses on society?

Accepted Answer

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

Question 2

Consider monopoly,monopolistic competition,and perfect competition.In which of these three market structures does a profit-maximizing firm charge a price that exceeds marginal cost?

Accepted Answer

A)  monopoly only 
B)  monopoly and monopolistic competition only 
C)  monopoly,monopolistic competition,and perfect competition 
D)  The answer cannot be determined without knowing whether the market is in the long run or short run. 
A)  monopoly only 
B)  monopoly and monopolistic competition only 
C)  monopoly,monopolistic competition,and perfect competition 
D)  The answer cannot be determined without knowing whether the market is in the long run or short run. B

Question 3

Monopolistic competition is characterized by which of the following attributes?

Accepted Answer

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

Question 4

Critics of advertising argue that in some markets advertising may

Accepted Answer

A)  attract products of lower quality into the market. 
B)  attract less informed buyers into the market. 
C)  decrease elasticity of demand allowing firms to charge a larger markup over marginal cost. 
D)  enhance competition in markets to an unnecessary degree. 
A)  attract products of lower quality into the market. 
B)  attract less informed buyers into the market. 
C)  decrease elasticity of demand allowing firms to charge a larger markup over marginal cost. 
D)  enhance competition in markets to an unnecessary degree.

Question 5

To maximize its profit,a monopolistically competitive firm

Accepted Answer

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

Question 6

Monopolistic competition differs from perfect competition because in monopolistically competitive markets

Accepted Answer

A)  there are barriers to entry. 
B)  all firms can eventually earn economic profits. 
C)  each of the sellers offers a somewhat different product. 
D)  strategic interactions between firms are important. 
A)  there are barriers to entry. 
B)  all firms can eventually earn economic profits. 
C)  each of the sellers offers a somewhat different product. 
D)  strategic interactions between firms are important.

Question 7

Table 16-5
Traci's Hairstyling is one salon among many in the market for hairstyling.The following table presents cost and revenue data for hair cuts at Traci's Hairstyling.
  
-Refer to Table 16-5.Given the cost and revenue data,Traci's is

Accepted Answer

A)  not in a long-run equilibrium.More businesses will enter the hair salon market in the long-run. 
B)  not in a short-run equilibrium. 
C)  not in a long-run equilibrium.Some businesses currently in the hair salon market will exit the market in the long-run. 
D)  in a long-run equilibrium. 
A)  not in a long-run equilibrium.More businesses will enter the hair salon market in the long-run. 
B)  not in a short-run equilibrium. 
C)  not in a long-run equilibrium.Some businesses currently in the hair salon market will exit the market in the long-run. 
D)  in a long-run equilibrium.

Question 8

The free entry and exit of firms in a monopolistically competitive market guarantees that

Accepted Answer

A)  both economic profits and economic losses can persist in the long run. 
B)  both economic profits and economic losses disappear in the long run. 
C)  economic profits,but not economic losses,can persist in the long run. 
D)  economic losses,but not economic profits,can persist in the long run. 
A)  both economic profits and economic losses can persist in the long run. 
B)  both economic profits and economic losses disappear in the long run. 
C)  economic profits,but not economic losses,can persist in the long run. 
D)  economic losses,but not economic profits,can persist in the long run.

Question 9

Economists are unanimous in their belief that advertising is socially inefficient.

Accepted Answer

A) True 
 B)False

Question 10

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 11

The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

Accepted Answer

A)  business-stealing externality that is observed in monopolistically competitive markets. 
B)  product-variety externality that is observed in monopolistically competitive markets. 
C)  inefficiencies of the long-term losses earned by monopolistically competitive firms.. 
D)  persistence of positive profits into the long run for monopolistically competitive firms. 
A)  business-stealing externality that is observed in monopolistically competitive markets. 
B)  product-variety externality that is observed in monopolistically competitive markets. 
C)  inefficiencies of the long-term losses earned by monopolistically competitive firms.. 
D)  persistence of positive profits into the long run for monopolistically competitive firms.

Question 12

Which of the following statements is correct?

Accepted Answer

A)  In the long run,both perfectly competitive firms and monopolistically competitive firms operate with excess capacity. 
B)  A firm operates with excess capacity when,in the long run,its level of output is below the efficient scale. 
C)  For any firm,efficient scale is the level of output at which the average-total-cost curve is tangent to the demand curve. 
D)  All of the above are correct. 
A)  In the long run,both perfectly competitive firms and monopolistically competitive firms operate with excess capacity. 
B)  A firm operates with excess capacity when,in the long run,its level of output is below the efficient scale. 
C)  For any firm,efficient scale is the level of output at which the average-total-cost curve is tangent to the demand curve. 
D)  All of the above are correct.

Question 13

In both perfect competition and monopolistic competition,each firm

Accepted Answer

A)  has some monopoly power. 
B)  sells a product that is at least slightly different from those of other firms. 
C)  faces a downward-sloping demand curve. 
D)  has many competitors. 
A)  has some monopoly power. 
B)  sells a product that is at least slightly different from those of other firms. 
C)  faces a downward-sloping demand curve. 
D)  has many competitors.

Question 14

A profit-maximizing firm operating in a monopolistically competitive market that is in a long-run equilibrium has

Accepted Answer

A)  minimized average total cost. 
B)  chosen to produce where demand is unitary elastic. 
C)  produced the efficient scale of output. 
D)  chosen a quantity of output where average revenue equals average total cost. 
A)  minimized average total cost. 
B)  chosen to produce where demand is unitary elastic. 
C)  produced the efficient scale of output. 
D)  chosen a quantity of output where average revenue equals average total cost.

Question 15

In a monopolistically competitive market,the number of firms adjusts until economic profits are driven to zero.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is not correct?

Accepted Answer

A)  Monopolistic competition is similar to monopoly because in each market structure the firm can charge a price above marginal costs. 
B)  Monopolistic competition is similar to perfect competition because both market structures are characterized by free entry. 
C)  Monopolistic competition is similar to oligopoly because both market structures are characterized by barriers to entry. 
D)  Monopolistic competition is similar to perfect competition because both market structures are characterized by many sellers. 
A)  Monopolistic competition is similar to monopoly because in each market structure the firm can charge a price above marginal costs. 
B)  Monopolistic competition is similar to perfect competition because both market structures are characterized by free entry. 
C)  Monopolistic competition is similar to oligopoly because both market structures are characterized by barriers to entry. 
D)  Monopolistic competition is similar to perfect competition because both market structures are characterized by many sellers.

Question 17

The deadweight loss that is associated with a monopolistically competitive market is a result of

Accepted Answer

A)  price falling short of marginal cost in order to increase market share. 
B)  price exceeding marginal cost. 
C)  the firm operating in a regulated industry. 
D)  excessive advertising costs. 
A)  price falling short of marginal cost in order to increase market share. 
B)  price exceeding marginal cost. 
C)  the firm operating in a regulated industry. 
D)  excessive advertising costs.

Question 18

In the long run,monopolistically competitive firms produce where demand equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 19

In which of the following markets is economic profit driven to zero in the long run?

Accepted Answer

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

Question 20

Figure 16-2
This figure depicts a situation in a monopolistically competitive market.  
-Refer to Figure 16-2.How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

Accepted Answer

A)  $200 
B)  $312.50 
C)  $400 
D)  $800 
A)  $200 
B)  $312.50 
C)  $400 
D)  $800

Exam 16: Monopolistic Competition

Which of the following markets impose deadweight losses on society?

Consider monopoly,monopolistic competition,and perfect competition.In which of these three market structures does a profit-maximizing firm charge a price that exceeds marginal cost?

Monopolistic competition is characterized by which of the following attributes?

Critics of advertising argue that in some markets advertising may

To maximize its profit,a monopolistically competitive firm

Monopolistic competition differs from perfect competition because in monopolistically competitive markets

Table 16-5 Traci's Hairstyling is one salon among many in the market for hairstyling.The following table presents cost and revenue data for hair cuts at Traci's Hairstyling. -Refer to Table 16-5.Given the cost and revenue data,Traci's is

The free entry and exit of firms in a monopolistically competitive market guarantees that

Economists are unanimous in their belief that advertising is socially inefficient.

A firm in a monopolistically competitive market faces a

The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

Which of the following statements is correct?

In both perfect competition and monopolistic competition,each firm

A profit-maximizing firm operating in a monopolistically competitive market that is in a long-run equilibrium has

In a monopolistically competitive market,the number of firms adjusts until economic profits are driven to zero.

Which of the following statements is not correct?

The deadweight loss that is associated with a monopolistically competitive market is a result of

In the long run,monopolistically competitive firms produce where demand equals marginal cost.

In which of the following markets is economic profit driven to zero in the long run?

Figure 16-2 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-2.How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

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

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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