Question 1

Which of the following statements is correct?

Accepted Answer

A)  Firms in monopolistic competition and monopoly can earn economic profits in both the short run and the long run. 
B)  Both perfectly competitive and monopolistically competitive firms charge a price equal to marginal cost. 
C)  Firms in perfect competition,monopolistic competition,and monopoly maximize profits by producing where marginal revenue equals marginal cost. 
D)  Both perfectly competitive and monopolistically competitive firms produce the welfare-maximizing level of output. 
A)  Firms in monopolistic competition and monopoly can earn economic profits in both the short run and the long run. 
B)  Both perfectly competitive and monopolistically competitive firms charge a price equal to marginal cost. 
C)  Firms in perfect competition,monopolistic competition,and monopoly maximize profits by producing where marginal revenue equals marginal cost. 
D)  Both perfectly competitive and monopolistically competitive firms produce the welfare-maximizing level of output.

Question 2

In a monopolistically competitive market,

Accepted Answer

A)  the entry of new firms creates externalities. 
B)  the absence of restrictions on entry by new firms ensures that there will be no deadweight loss. 
C)  there are always too many firms in the market relative to the socially-optimal number of firms. 
D)  firms cannot earn positive economic profits in the short run. 
A)  the entry of new firms creates externalities. 
B)  the absence of restrictions on entry by new firms ensures that there will be no deadweight loss. 
C)  there are always too many firms in the market relative to the socially-optimal number of firms. 
D)  firms cannot earn positive economic profits in the short run.

Question 3

Figure 16-4  
-Refer to Figure 16-4.Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into 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 4

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

Accepted Answer

A)  perfectly competitive market. 
B)  monopolistically competitive market. 
C)  oligopoly. 
D)  monopoly. 
A)  perfectly competitive market. 
B)  monopolistically competitive market. 
C)  oligopoly. 
D)  monopoly.

Question 5

For a profit-maximizing monopolistically competitive firm,price exceeds marginal cost in

Accepted Answer

A)  the short run but not in the long run. 
B)  the long run but not in the short run. 
C)  both the short run and the long run. 
D)  neither the short run nor the long run. 
A)  the short run but not in the long run. 
B)  the long run but not in the short run. 
C)  both the short run and the long run. 
D)  neither the short run nor the long run.

Question 6

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.At the profit-maximizing quantity,what is Traci's total profit?

Accepted Answer

A)  $30 
B)  $59 
C)  $77 
D)  $84 
A)  $30 
B)  $59 
C)  $77 
D)  $84

Question 7

When McDonald's opens a store in Dhaka,Bangladesh,it has a strong incentive to enforce product quality consistent with stores in the United States.

Accepted Answer

A) True 
 B)False

Question 8

A market structure with only a few sellers,each offering similar or identical products,is known as

Accepted Answer

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

Question 9

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

Accepted Answer

A) P > ATC B) P = ATC C) P < ATC D) Any of the above could be correct. A) P > ATC B) P = ATC C) P < ATC D) Any of the above could be correct.

Question 10

Figure 16-1.The figure is drawn for a monopolistically competitive firm.  
-Refer to Figure 16-1.Suppose that average total cost is $18 when Q=12.What is the profit-maximizing price and resulting profit?

Accepted Answer

A)  P=$12,profit=$0 
B)  P=$18,profit=$72 
C)  P=$18,profit=$24 
D)  P=$18,profit=$0 
A)  P=$12,profit=$0 
B)  P=$18,profit=$72 
C)  P=$18,profit=$24 
D)  P=$18,profit=$0

Question 11

Table 16-2
The following table shows the total output produced by the top six firms as well as the total industry output for each industry.
  
-Refer to Table 16-2.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 12

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.Even defenders of brand names would have to admit that

Accepted Answer

A)  no rational consumer would spend twice as much for Coca-Cola as he would for Uncle Don's cola. 
B)  the side-by-side presence of these two colas conveys no useful information to consumers. 
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)  the side-by-side presence of these two colas conveys no useful information to consumers. 
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 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

If firms in a monopolistically competitive market are earning economic profits,which of the following scenarios would best describe the change existing firms would face as the market adjusts to the long-run equilibrium?

Accepted Answer

A)  an increase in demand for each firm 
B)  a decrease in demand for each firm 
C)  a downward shift in the marginal cost curve for each firm 
D)  an upward shift in the marginal cost curve for each firm 
A)  an increase in demand for each firm 
B)  a decrease in demand for each firm 
C)  a downward shift in the marginal cost curve for each firm 
D)  an upward shift in the marginal cost curve for each firm

Question 15

The entry of new firms into a monopolistically competitive market is accompanied by

Accepted Answer

A)  both positive and negative externalities. 
B)  only positive externalities. 
C)  only negative externalities. 
D)  only private profit opportunities (no externalities). 
A)  both positive and negative externalities. 
B)  only positive externalities. 
C)  only negative externalities. 
D)  only private profit opportunities (no externalities).

Question 16

A downward-sloping demand curve

Accepted Answer

A)  is a feature of all monopolistically competitive firms. 
B)  means that the firm in question will never experience a zero profit. 
C)  causes marginal revenue to exceed price. 
D)  prohibits firms from earning positive economic profits in the long run. 
A)  is a feature of all monopolistically competitive firms. 
B)  means that the firm in question will never experience a zero profit. 
C)  causes marginal revenue to exceed price. 
D)  prohibits firms from earning positive economic profits in the long run.

Question 17

A monopolistically competitive market is like both a competitive market and a monopoly in that firms in all three market structures

Accepted Answer

A)  can earn economic profits in the short run. 
B)  can earn economic profits in the long run. 
C)  charge a price above marginal cost. 
D)  All of the above are correct. 
A)  can earn economic profits in the short run. 
B)  can earn economic profits in the long run. 
C)  charge a price above marginal cost. 
D)  All of the above are correct.

Question 18

In a long-run equilibrium,a firm in a monopolistically competitive market operates

Accepted Answer

A)  where marginal revenue is zero. 
B)  where marginal revenue is negative. 
C)  on the rising portion of its average total cost curve. 
D)  on the declining portion of its average total cost curve. 
A)  where marginal revenue is zero. 
B)  where marginal revenue is negative. 
C)  on the rising portion of its average total cost curve. 
D)  on the declining portion of its average total cost curve.

Question 19

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

Accepted Answer

A)  P > MR and P = MC 
B)  ATC = demand and MR = MC 
C)  P  ATC and demand > MR 
A)  P > MR and P = MC 
B)  ATC = demand and MR = MC 
C)  P  ATC and demand > MR

Question 20

Television advertisements aired during major sporting events are very expensive.A theory asserting that people buy a product simply because it is advertised would suggest that information on the high cost of advertising

Accepted Answer

A)  enhances the effectiveness of the advertisement. 
B)  reduces people's willingness to purchase advertised products. 
C)  is leaked to discredit the firms that spend so much on advertising. 
D)  reduces the effective staying power of a product. 
A)  enhances the effectiveness of the advertisement. 
B)  reduces people's willingness to purchase advertised products. 
C)  is leaked to discredit the firms that spend so much on advertising. 
D)  reduces the effective staying power of a product.

Exam 16: Monopolistic Competition

Which of the following statements is correct?

In a monopolistically competitive market,

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

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

For a profit-maximizing monopolistically competitive firm,price exceeds marginal cost in

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.At the profit-maximizing quantity,what is Traci's total profit?

When McDonald's opens a store in Dhaka,Bangladesh,it has a strong incentive to enforce product quality consistent with stores in the United States.

A market structure with only a few sellers,each offering similar or identical products,is known as

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

Figure 16-1.The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.Suppose that average total cost is $18 when Q=12.What is the profit-maximizing price and resulting profit?

Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2.Which industry has the highest concentration ratio?

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.Even defenders of brand names would have to admit that

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.

If firms in a monopolistically competitive market are earning economic profits,which of the following scenarios would best describe the change existing firms would face as the market adjusts to the long-run equilibrium?

The entry of new firms into a monopolistically competitive market is accompanied by

A downward-sloping demand curve

A monopolistically competitive market is like both a competitive market and a monopoly in that firms in all three market structures

In a long-run equilibrium,a firm in a monopolistically competitive market operates

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

Television advertisements aired during major sporting events are very expensive.A theory asserting that people buy a product simply because it is advertised would suggest that information on the high cost of advertising

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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