Question 1

Which of the following goods are likely to be sold in a monopolistically competitive market?

Accepted Answer

A)  compact discs 
B)  wheat 
C)  corn 
D)  postage stamps 
A)  compact discs 
B)  wheat 
C)  corn 
D)  postage stamps

Question 2

Critics of advertising argue that advertising leads to less elastic demand for products and a larger markup of price over marginal cost.

Accepted Answer

A) True 
 B)False

Question 3

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 4

Which of the following statements is not correct?

Accepted Answer

A)  Critics of advertising argue that firms advertise to manipulate consumers' tastes. 
B)  Defenders of advertising argue that advertising provides valuable product information to consumers. 
C)  An industry with many brand name products will be more competitive than one with many generic products. 
D)  The willingness of a firm to spend a large amount of money on advertising can signal the quality of the product. 
A)  Critics of advertising argue that firms advertise to manipulate consumers' tastes. 
B)  Defenders of advertising argue that advertising provides valuable product information to consumers. 
C)  An industry with many brand name products will be more competitive than one with many generic products. 
D)  The willingness of a firm to spend a large amount of money on advertising can signal the quality of the product.

Question 5

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

Accepted Answer

A)  the quality of products sold in the market always 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 always 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 6

Because monopolistically competitive firms produce differentiated products,each firm

Accepted Answer

A)  faces a demand curve that is horizontal. 
B)  faces a demand curve that is vertical. 
C)  has no control over product price. 
D)  has some control over product price. 
A)  faces a demand curve that is horizontal. 
B)  faces a demand curve that is vertical. 
C)  has no control over product price. 
D)  has some control over product price.

Question 7

Figure 16-4  
-Refer to Figure 16-4.Which of the graphs depicts a short-run equilibrium that will encourage the exit of some firms from a monopolistically competitive industry?

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 8

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

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 be declining. 
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 be declining.

Question 9

When quality cannot be easily judged in advance,what provides consumers with information about the quality of a product?

Accepted Answer

A)  a brand name 
B)  a tie-in 
C)  the quantity available for sale 
D)  the amount of deadweight loss 
A)  a brand name 
B)  a tie-in 
C)  the quantity available for sale 
D)  the amount of deadweight loss

Question 10

The claim that advertising reduces the elasticity of demand is likely to be made by a defender of advertising.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Which of these types of firms can earn a positive economic profit in the long run?

Accepted Answer

A)  monopolies,but not competitive firms or monopolistically competitive firms 
B)  monopolies and monopolistically competitive firms,but not competitive firms 
C)  monopolies,monopolistically competitive firms,and monopolies 
D)  No firms earn positive economic profit in the long run.Entry will reduce all firms' economic profit to zero in the long run. 
A)  monopolies,but not competitive firms or monopolistically competitive firms 
B)  monopolies and monopolistically competitive firms,but not competitive firms 
C)  monopolies,monopolistically competitive firms,and monopolies 
D)  No firms earn positive economic profit in the long run.Entry will reduce all firms' economic profit to zero in the long run.

Question 13

Which of the following conditions is characteristic of a monopolistically competitive firm in both the short-run and the long run?

Accepted Answer

A) P > MC B) MC = ATC C) P < MR D) All of the above are correct. A) P > MC B) MC = ATC C) P < MR D) All of the above are correct.

Question 14

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 15

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 16

The debate over the efficiency of markets in which products with brand names are sold

Accepted Answer

A)  is framed by the role of regulation in advertising. 
B)  is likely to be resolved by reference to anecdotal evidence. 
C)  hinges on whether consumers are rational in their choices. 
D)  hinges on the effectiveness of advertising that identifies price differences. 
A)  is framed by the role of regulation in advertising. 
B)  is likely to be resolved by reference to anecdotal evidence. 
C)  hinges on whether consumers are rational in their choices. 
D)  hinges on the effectiveness of advertising that identifies price differences.

Question 17

Table 16-1
The following table shows the percentage of output supplied by the top eight firms in four different industries.
  
-Refer to Table 16-1.Which industry has the highest concentration ratio?

Accepted Answer

A)  Industry A 
B)  Industry B 
C)  Industry C 
D)  Industry D 
A)  Industry A 
B)  Industry B 
C)  Industry C 
D)  Industry D

Question 18

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 19

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 20

Figure 16-3  
-Refer to Figure 16-3.At the profit-maximizing,or loss-minimizing,output level,the firm in this figure has total costs of approximately

Accepted Answer

A)  $2,000. 
B)  $3,000. 
C)  $4,000. 
D)  $5,000. 
A)  $2,000. 
B)  $3,000. 
C)  $4,000. 
D)  $5,000.

Exam 16: Monopolistic Competition

Which of the following goods are likely to be sold in a monopolistically competitive market?

Critics of advertising argue that advertising leads to less elastic demand for products and a larger markup of price over marginal cost.

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

Which of the following statements is not correct?

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

Because monopolistically competitive firms produce differentiated products,each firm

Figure 16-4 -Refer to Figure 16-4.Which of the graphs depicts a short-run equilibrium that will encourage the exit of some firms from a monopolistically competitive industry?

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

When quality cannot be easily judged in advance,what provides consumers with information about the quality of a product?

The claim that advertising reduces the elasticity of demand is likely to be made by a defender of advertising.

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

Which of these types of firms can earn a positive economic profit in the long run?

Which of the following conditions is characteristic of a monopolistically competitive firm in both the short-run and the long run?

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

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

The debate over the efficiency of markets in which products with brand names are sold

Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. -Refer to Table 16-1.Which industry has the highest concentration ratio?

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

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

Figure 16-3 -Refer to Figure 16-3.At the profit-maximizing,or loss-minimizing,output level,the firm in this figure has total costs of approximately

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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