Question 1

When a monopolistically competitive firm raises its price,

Accepted Answer

A)  quantity demanded falls to zero. 
B)  quantity demanded declines but not to zero. 
C)  the market supply curve shifts outward. 
D)  quantity demanded remains constant. 
A)  quantity demanded falls to zero. 
B)  quantity demanded declines but not to zero. 
C)  the market supply curve shifts outward. 
D)  quantity demanded remains constant.

Question 2

As developing countries make a transition to market-based economies,one of the first major capital investments is in "Western-quality" hotels.Explain why brand-name hotel accommodations are a critical step in attracting foreign investment.

Accepted Answer

Brand-name hotels are a critic

Question 3

Your company has recently requested that you travel to Dhaka,Bangladesh,to work on negotiations for a new factory to be located in one of the port cities.Your travel agent provides a list of several hundred local hotels and a Sheraton.In this case,the Sheraton brand-name is likely to be used as a signal of

Accepted Answer

A)  perceived differences that are not likely to exist among your various options. 
B)  quality when quality cannot be easily judged. 
C)  inefficiency in markets characterized by recognizable brand names. 
D)  the quality of general lodging accommodations in Dhaka. 
A)  perceived differences that are not likely to exist among your various options. 
B)  quality when quality cannot be easily judged. 
C)  inefficiency in markets characterized by recognizable brand names. 
D)  the quality of general lodging accommodations in Dhaka.

Question 4

The higher the concentration ratio,the

Accepted Answer

A)  more control an individual firm has to set prices. 
B)  more competitive the industry. 
C)  less competitive the industry. 
D)  Both a and c are correct. 
A)  more control an individual firm has to set prices. 
B)  more competitive the industry. 
C)  less competitive the industry. 
D)  Both a and c are correct.

Question 5

In which of the following market structures do firms produce the welfare-maximizing level of output?

Accepted Answer

A)  perfect competition 
B)  monopolistic competition 
C)  monopoly 
D)  Both a and b are correct. 
A)  perfect competition 
B)  monopolistic competition 
C)  monopoly 
D)  Both a and b are correct.

Question 6

A monopolistically competitive firm

Accepted Answer

A)  has the usual deadweight loss of monopoly pricing. 
B)  experiences a zero profit in a long-run equilibrium. 
C)  is said to have excess capacity. 
D)  All of the above are correct. 
A)  has the usual deadweight loss of monopoly pricing. 
B)  experiences a zero profit in a long-run equilibrium. 
C)  is said to have excess capacity. 
D)  All of the above are correct.

Question 7

Which of the following correctly lists the products in order from most advertised to least advertised?

Accepted Answer

A)  soft drinks,breakfast cereals,dog food 
B)  corn,dog food,communication satellites 
C)  dog food,communication satellites,corn 
D)  wheat,corn,crude oil 
A)  soft drinks,breakfast cereals,dog food 
B)  corn,dog food,communication satellites 
C)  dog food,communication satellites,corn 
D)  wheat,corn,crude oil

Question 8

Which of the following best describes the idea of excess capacity in monopolistic competition?

Accepted Answer

A)  Firms produce more output than is socially desirable. 
B)  The output produced by a typical firm is less than what would occur at the minimum point on its ATC curve. 
C)  Due to product differentiation,firms choose output levels where price equals average total cost. 
D)  Firms keep some surplus output on hand in case there is a shift in the demand for their product. 
A)  Firms produce more output than is socially desirable. 
B)  The output produced by a typical firm is less than what would occur at the minimum point on its ATC curve. 
C)  Due to product differentiation,firms choose output levels where price equals average total cost. 
D)  Firms keep some surplus output on hand in case there is a shift in the demand for their product.

Question 9

A monopolistically competitive market is like a monopoly in that

Accepted Answer

A)  both market structures feature easy entry by new firms in the long run. 
B)  the main objective of firms in both market structures is something other than profit maximization. 
C)  firms in both market structures produce the welfare-maximizing level of output. 
D)  firms in both market structures set price above marginal cost. 
A)  both market structures feature easy entry by new firms in the long run. 
B)  the main objective of firms in both market structures is something other than profit maximization. 
C)  firms in both market structures produce the welfare-maximizing level of output. 
D)  firms in both market structures set price above marginal cost.

Question 10

Because a monopolistically competitive firm has some market power,in the long-run the price of its product exceeds its

Accepted Answer

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

Question 11

What is meant by the term "excess capacity" as it relates to monopolistically competitive firms?

Accepted Answer

Monopolistically competitive f

Question 12

The product-variety externality is associated with the

Accepted Answer

A)  producer surplus that accrues to incumbent firms in a monopolistically competitive industry. 
B)  loss of consumer surplus from exposure to additional advertising. 
C)  consumer surplus that is generated from the introduction of a new product. 
D)  opportunity cost of firms exiting a monopolistically competitive industry. 
A)  producer surplus that accrues to incumbent firms in a monopolistically competitive industry. 
B)  loss of consumer surplus from exposure to additional advertising. 
C)  consumer surplus that is generated from the introduction of a new product. 
D)  opportunity cost of firms exiting a monopolistically competitive industry.

Question 13

A monopolistically competitive industry is characterized by

Accepted Answer

A)  many firms selling products that are similar but not identical. 
B)  many firms selling identical products. 
C)  a few firms selling products that are similar but not identical. 
D)  a few firms selling highly different products. 
A)  many firms selling products that are similar but not identical. 
B)  many firms selling identical products. 
C)  a few firms selling products that are similar but not identical. 
D)  a few firms selling highly different products.

Question 14

Table 16-3
This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm.
  
-Refer to Table 16-3.What price will this firm charge to maximize profit?

Accepted Answer

A)  $6 
B)  $7 
C)  $8 
D)  $9 
A)  $6 
B)  $7 
C)  $8 
D)  $9

Question 15

Figure 16-7
The lines in the figures below illustrate the potential effect of entry and exit in a monopolistically competitive market on either the demand curve or the marginal cost curve of existing firms.  
-Refer to Figure 16-7.Panel (d)illustrates the change that would occur if existing firms faced

Accepted Answer

A)  long-run economic losses. 
B)  a decrease in the diversity of products offered in the market. 
C)  new entrants in the market. 
D)  firms exiting the market. 
A)  long-run economic losses. 
B)  a decrease in the diversity of products offered in the market. 
C)  new entrants in the market. 
D)  firms exiting the market.

Question 16

The Mikati Philippines Hard Rock Cafe has the exact same menu as the Hard Rock Cafe in New York.This is an example of a brand name enhancing market efficiency for U.S.tourists visiting the Philippines.

Accepted Answer

A) True 
 B)False

Question 17

A firm is a price taker

Accepted Answer

A)  only when the market is perfectly competitive. 
B)  only when the market is perfectly competitive or monopolistic. 
C)  only when the market is perfectly competitive or monopolistically competitive. 
D)  when the market is perfectly competitive,monopolistically competitive,or monopolistic. 
A)  only when the market is perfectly competitive. 
B)  only when the market is perfectly competitive or monopolistic. 
C)  only when the market is perfectly competitive or monopolistically competitive. 
D)  when the market is perfectly competitive,monopolistically competitive,or monopolistic.

Question 18

A monopolistically competitive market

Accepted Answer

A)  usually has too many firms,reducing the economic profit of each firm to zero. 
B)  usually has too few firms,reducing the product variety for consumers. 
C)  may have too many or too few firms,and the government can intervene to achieve the optimal number of firms. 
D)  may have too many or too few firms,but the government can do little to rectify the situation. 
A)  usually has too many firms,reducing the economic profit of each firm to zero. 
B)  usually has too few firms,reducing the product variety for consumers. 
C)  may have too many or too few firms,and the government can intervene to achieve the optimal number of firms. 
D)  may have too many or too few firms,but the government can do little to rectify the situation.

Question 19

Monopolistic competition is considered by some to be inefficient because

Accepted Answer

A)  price exceeds marginal cost. 
B)  output is excessive. 
C)  long-run profits are positive. 
D)  barriers to entry limit the number of firms in the market. 
A)  price exceeds marginal cost. 
B)  output is excessive. 
C)  long-run profits are positive. 
D)  barriers to entry limit the number of firms in the market.

Question 20

In the short run,a firm in a monopolistically competitive market operates much like a

Accepted Answer

A)  firm in a perfectly competitive market. 
B)  firm in an oligopoly. 
C)  monopolist. 
D)  monopsonist. 
A)  firm in a perfectly competitive market. 
B)  firm in an oligopoly. 
C)  monopolist. 
D)  monopsonist.

Exam 16: Monopolistic Competition

When a monopolistically competitive firm raises its price,

As developing countries make a transition to market-based economies,one of the first major capital investments is in "Western-quality" hotels.Explain why brand-name hotel accommodations are a critical step in attracting foreign investment.

The higher the concentration ratio,the

In which of the following market structures do firms produce the welfare-maximizing level of output?

A monopolistically competitive firm

Which of the following correctly lists the products in order from most advertised to least advertised?

Which of the following best describes the idea of excess capacity in monopolistic competition?

A monopolistically competitive market is like a monopoly in that

Because a monopolistically competitive firm has some market power,in the long-run the price of its product exceeds its

What is meant by the term "excess capacity" as it relates to monopolistically competitive firms?

The product-variety externality is associated with the

A monopolistically competitive industry is characterized by

Table 16-3 This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm. -Refer to Table 16-3.What price will this firm charge to maximize profit?

The Mikati Philippines Hard Rock Cafe has the exact same menu as the Hard Rock Cafe in New York.This is an example of a brand name enhancing market efficiency for U.S.tourists visiting the Philippines.

A firm is a price taker

A monopolistically competitive market

Monopolistic competition is considered by some to be inefficient because

In the short run,a firm in a monopolistically competitive market operates much like a

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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