Question 1

A monopolistically competitive market has characteristics that are similar to

Accepted Answer

A)  a monopoly only. 
B)  a competitive firm only. 
C)  both a monopoly and a competitive firm. 
D)  neither a monopoly nor a competitive firm. 
A)  a monopoly only. 
B)  a competitive firm only. 
C)  both a monopoly and a competitive firm. 
D)  neither a monopoly nor a competitive firm.

Question 2

A profit-maximizing firm in a monopolistically competitive market always operates on the downward-sloping portion of its marginal cost curve.

Accepted Answer

A) True 
 B)False

Question 3

In markets where the government imposes an excise tax on unit sales,it also has a tendency to dabble with restrictions on advertising (for example,cigarettes and hard liquor).Do potential (or actual)restrictions on advertising in these markets serve the interest of a government that is interested in maximizing its tax revenue from the sale of these products? Explain your answer.

Accepted Answer

In the case of the examples given,demand

Question 4

When monopolistically competitive firms advertise,in the long run

Accepted Answer

A)  they will still earn zero economic profit. 
B)  they can earn positive economic profit by increasing market share. 
C)  the market price must fall. 
D)  the market price must rise. 
A)  they will still earn zero economic profit. 
B)  they can earn positive economic profit by increasing market share. 
C)  the market price must fall. 
D)  the market price must rise.

Question 5

Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e. ,on an average night,80 percent of the hotel rooms are full).This kind of excess capacity is indicative of what kind of market?

Accepted Answer

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

Question 6

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 7

A monopolistically competitive market is like both a competitive market and a monopoly in that

Accepted Answer

A)  all three market structures feature easy entry by new firms in the long run. 
B)  firms in all three market structures maximize profit by producing an output level where marginal revenue equals marginal cost. 
C)  firms in all three market structures produce the welfare-maximizing level of output. 
D)  All of the above are correct. 
A)  all three market structures feature easy entry by new firms in the long run. 
B)  firms in all three market structures maximize profit by producing an output level where marginal revenue equals marginal cost. 
C)  firms in all three market structures produce the welfare-maximizing level of output. 
D)  All of the above are correct.

Question 8

When a firm exits a monopolistically competitive market,the individual demand curves faced by all remaining firms in that market will

Accepted Answer

A)  shift in a direction that is unpredictable without further information. 
B)  shift to the right. 
C)  shift to the left. 
D)  remain unchanged.It is the supply curve that will shift. 
A)  shift in a direction that is unpredictable without further information. 
B)  shift to the right. 
C)  shift to the left. 
D)  remain unchanged.It is the supply curve that will shift.

Question 9

Oligopoly and monopolistic competition are examples of a market structure called imperfect competition.

Accepted Answer

A) True 
 B)False

Question 10

Figure 16-4  
-Refer to Figure 16-4.Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm?

Accepted Answer

A)  panel a 
B)  panel b 
C)  panel c 
D)  All of the above are correct. 
A)  panel a 
B)  panel b 
C)  panel c 
D)  All of the above are correct.

Question 11

A profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competitive market because the firm in the monopolistically competitive market

Accepted Answer

A)  is characterized by market-share maximization. 
B)  has no barriers to entry. 
C)  faces a downward-sloping demand curve for its product. 
D)  faces a horizontal demand curve at the market clearing price. 
A)  is characterized by market-share maximization. 
B)  has no barriers to entry. 
C)  faces a downward-sloping demand curve for its product. 
D)  faces a horizontal demand curve at the market clearing price.

Question 12

Free entry eliminates long-run profits for firms in competitive and monopolistic industries.

Accepted Answer

A) True 
 B)False

Question 13

In a monopolistically competitive market,social welfare would be enhanced if

Accepted Answer

A)  price equaled marginal cost. 
B)  government regulation eliminated the product-variety externality. 
C)  the government raised taxes to subsidize firms that price below average total cost. 
D)  there were fewer firms,making the industry closer to an oligopoly. 
A)  price equaled marginal cost. 
B)  government regulation eliminated the product-variety externality. 
C)  the government raised taxes to subsidize firms that price below average total cost. 
D)  there were fewer firms,making the industry closer to an oligopoly.

Question 14

A monopolistically competitive firm chooses

Accepted Answer

A)  the quantity of output to produce,but the market determines price. 
B)  the price,but competition in the market determines the quantity. 
C)  price,but output is determined by a cartel production quota. 
D)  the quantity of output to produce and the price at which it will sell its output. 
A)  the quantity of output to produce,but the market determines price. 
B)  the price,but competition in the market determines the quantity. 
C)  price,but output is determined by a cartel production quota. 
D)  the quantity of output to produce and the price at which it will sell its output.

Question 15

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.What is the concentration ratio in Industry D?

Accepted Answer

A)  32% 
B)  56% 
C)  60% 
D)  65% 
A)  32% 
B)  56% 
C)  60% 
D)  65%

Question 16

A firm in a monopolistically competitive market can earn short-run profits but not long-run profits.

Accepted Answer

A) True 
 B)False

Question 17

Under which of the following market structures would consumers likely pay the highest price for a product?

Accepted Answer

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

Question 18

Advertising during the Super Bowl is an example of information about quality contained primarily in the existence and expense of the advertising.

Accepted Answer

A) True 
 B)False

Question 19

Two soft drinks sit side-by-side in a grocery store: A six-pack of Coca-Cola (a brand name)sells for $3.00,while a six-pack of Uncle Don's cola (not a brand name)sells for $1.50.In a typical day the store sells some of each type of cola,which suggests that

Accepted Answer

A)  no rational consumer would spend twice as much for Coca-Cola as he would for Uncle Don's cola. 
B)  some consumers must perceive that Coca-Cola is a higher quality product. 
C)  Coca-Cola has no incentive to maintain the quality of its product just because of the Coca-Cola brand name. 
D)  None of the above is correct. 
A)  no rational consumer would spend twice as much for Coca-Cola as he would for Uncle Don's cola. 
B)  some consumers must perceive that Coca-Cola is a higher quality product. 
C)  Coca-Cola has no incentive to maintain the quality of its product just because of the Coca-Cola brand name. 
D)  None of the above is correct.

Question 20

When a firm operates at efficient scale,it is producing at the minimum point on its average total cost curve.

Accepted Answer

A) True 
 B)False

Exam 16: Monopolistic Competition

A monopolistically competitive market has characteristics that are similar to

A profit-maximizing firm in a monopolistically competitive market always operates on the downward-sloping portion of its marginal cost curve.

When monopolistically competitive firms advertise,in the long run

Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e. ,on an average night,80 percent of the hotel rooms are full).This kind of excess capacity is indicative of what kind of market?

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

A monopolistically competitive market is like both a competitive market and a monopoly in that

When a firm exits a monopolistically competitive market,the individual demand curves faced by all remaining firms in that market will

Oligopoly and monopolistic competition are examples of a market structure called imperfect competition.

Figure 16-4 -Refer to Figure 16-4.Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm?

A profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competitive market because the firm in the monopolistically competitive market

Free entry eliminates long-run profits for firms in competitive and monopolistic industries.

In a monopolistically competitive market,social welfare would be enhanced if

A monopolistically competitive firm chooses

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.What is the concentration ratio in Industry D?

A firm in a monopolistically competitive market can earn short-run profits but not long-run profits.

Under which of the following market structures would consumers likely pay the highest price for a product?

Advertising during the Super Bowl is an example of information about quality contained primarily in the existence and expense of the advertising.

Two soft drinks sit side-by-side in a grocery store: A six-pack of Coca-Cola (a brand name)sells for $3.00,while a six-pack of Uncle Don's cola (not a brand name)sells for $1.50.In a typical day the store sells some of each type of cola,which suggests that

When a firm operates at efficient scale,it is producing at the minimum point on its average total cost curve.

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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