Question 1

A firm produces the welfare-maximizing level of output

Accepted Answer

A)  only when the market is perfectly competitive. 
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 perfectly competitive. 
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 2

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 is the most competitive?

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 3

Assume the role of a defender of advertising.Describe the characteristics of advertising that enhance the effectiveness of markets and increase the social welfare of society.

Accepted Answer

Advertising provides information to cons

Question 4

The two types of imperfectly competitive markets are

Accepted Answer

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

Question 5

The debate over whether advertising serves a valuable purpose in society is definitively answered by economists who study the tastes and preferences of individuals.

Accepted Answer

A) True 
 B)False

Question 6

When an industry has many firms,the industry is

Accepted Answer

A)  an oligopoly if the firms sell differentiated products,but it is monopolistically competitive if the firms sell identical products. 
B)  an oligopoly if the firms sell differentiated products,but it is perfectly competitive if the firms sell identical products. 
C)  monopolistically competitive if the firms sell differentiated products,but it is perfectly competitive if the firms sell identical products. 
D)  perfectly competitive if the firms sell differentiated products,but it is monopolistically competitive if the firms sell identical products. 
A)  an oligopoly if the firms sell differentiated products,but it is monopolistically competitive if the firms sell identical products. 
B)  an oligopoly if the firms sell differentiated products,but it is perfectly competitive if the firms sell identical products. 
C)  monopolistically competitive if the firms sell differentiated products,but it is perfectly competitive if the firms sell identical products. 
D)  perfectly competitive if the firms sell differentiated products,but it is monopolistically competitive if the firms sell identical products.

Question 7

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product,the firm will

Accepted Answer

A)  be able to increase its markup over marginal cost. 
B)  eventually have to lower price to remain competitive. 
C)  increase the welfare of society. 
D)  reduce its average total cost. 
A)  be able to increase its markup over marginal cost. 
B)  eventually have to lower price to remain competitive. 
C)  increase the welfare of society. 
D)  reduce its average total cost.

Question 8

A concentration ratio

Accepted Answer

A)  measures the percentage of total output supplied by the four largest firms in the industry. 
B)  reflects the level of competition in an industry. 
C)  is related to the control that each firm has over price. 
D)  All of the above are correct. 
A)  measures the percentage of total output supplied by the four largest firms in the industry. 
B)  reflects the level of competition in an industry. 
C)  is related to the control that each firm has over price. 
D)  All of the above are correct.

Question 9

In a long-run equilibrium,

Accepted Answer

A)  only a perfectly competitive firm operates at its efficient scale. 
B)  only a monopolistically competitive firm operates at its efficient scale. 
C)  neither a competitive firm nor a monopolistically competitive firm charges a markup over marginal cost. 
D)  both a perfectly competitive firm and a monopolistically competitive firm operate at their efficient scale of production. 
A)  only a perfectly competitive firm operates at its efficient scale. 
B)  only a monopolistically competitive firm operates at its efficient scale. 
C)  neither a competitive firm nor a monopolistically competitive firm charges a markup over marginal cost. 
D)  both a perfectly competitive firm and a monopolistically competitive firm operate at their efficient scale of production.

Question 10

For a profit-maximizing monopolistically competitive firm,marginal revenue equals 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 11

An important difference between the situation faced by a profit-maximizing monopolistically competitive firm in the short run and the situation faced by that same firm in the long run is that in the short run,

Accepted Answer

A)  price may exceed marginal revenue,but in the long run,price equals marginal revenue. 
B)  price may exceed marginal cost,but in the long run,price equals marginal cost. 
C)  price may exceed average total cost,but in the long run,price equals average total cost. 
D)  there are many firms in the market,but in the long run,there are only a few firms in the market. 
A)  price may exceed marginal revenue,but in the long run,price equals marginal revenue. 
B)  price may exceed marginal cost,but in the long run,price equals marginal cost. 
C)  price may exceed average total cost,but in the long run,price equals average total cost. 
D)  there are many firms in the market,but in the long run,there are only a few firms in the market.

Question 12

Which of the following statements is correct?

Accepted Answer

A)  The more similar Firm A's product is to Firm B's product,the more likely Firm A is to advertise. 
B)  Monopolistically competitive firms advertise in order to increase the elasticity of the demand curve they face. 
C)  According to the signaling theory,the more product information an advertisement contains,the more effective it is. 
D)  Brand names may help consumers if they provide information about the quality of a product when acquiring such information is difficult. 
A)  The more similar Firm A's product is to Firm B's product,the more likely Firm A is to advertise. 
B)  Monopolistically competitive firms advertise in order to increase the elasticity of the demand curve they face. 
C)  According to the signaling theory,the more product information an advertisement contains,the more effective it is. 
D)  Brand names may help consumers if they provide information about the quality of a product when acquiring such information is difficult.

Question 13

Figure 16-2
This figure depicts a situation in a monopolistically competitive market.  
-Refer to Figure 16-2.What price will the monopolistically competitive firm charge in this market?

Accepted Answer

A)  $60 
B)  $70 
C)  $75 
D)  $80 
A)  $60 
B)  $70 
C)  $75 
D)  $80

Question 14

Firms that sell highly differentiated consumer goods,such as soft drinks,breakfast cereals,and dog food,typically spend what percent of their revenues on advertising?

Accepted Answer

A)  0-1 
B)  2-4 
C)  10-20 
D)  over 50 
A)  0-1 
B)  2-4 
C)  10-20 
D)  over 50

Question 15

Which of the following statements is not correct?

Accepted Answer

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

Question 16

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 B?

Accepted Answer

A)  5% 
B)  46% 
C)  85% 
D)  95% 
A)  5% 
B)  46% 
C)  85% 
D)  95%

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.What is the concentration ratio in Industry C?

Accepted Answer

A)  29% 
B)  39% 
C)  45% 
D)  56% 
A)  29% 
B)  39% 
C)  45% 
D)  56%

Question 18

Examples of monopolistically competitive markets include the markets for

Accepted Answer

A)  restaurants and furniture. 
B)  wheat and corn. 
C)  postage stamps and wooden pencils. 
D)  All of the above are correct. 
A)  restaurants and furniture. 
B)  wheat and corn. 
C)  postage stamps and wooden pencils. 
D)  All of the above are correct.

Question 19

In the long run,a monopolistically competitive firm produces a quantity that is

Accepted Answer

A)  equal to the efficient scale. 
B)  less than the efficient scale. 
C)  greater than the efficient scale. 
D)  consistent with diseconomies of scale. 
A)  equal to the efficient scale. 
B)  less than the efficient scale. 
C)  greater than the efficient scale. 
D)  consistent with diseconomies of scale.

Question 20

When a monopolistically competitive firm is in long-run equilibrium,

Accepted Answer

A)  marginal revenue is equal to marginal cost. 
B)  price is equal to average total cost. 
C)  demand is equal to average total cost. 
D)  All of the above are correct. 
A)  marginal revenue is equal to marginal cost. 
B)  price is equal to average total cost. 
C)  demand is equal to average total cost. 
D)  All of the above are correct.

Exam 16: Monopolistic Competition

A firm produces the welfare-maximizing level of output

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 is the most competitive?

Assume the role of a defender of advertising.Describe the characteristics of advertising that enhance the effectiveness of markets and increase the social welfare of society.

The two types of imperfectly competitive markets are

The debate over whether advertising serves a valuable purpose in society is definitively answered by economists who study the tastes and preferences of individuals.

When an industry has many firms,the industry is

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product,the firm will

A concentration ratio

In a long-run equilibrium,

For a profit-maximizing monopolistically competitive firm,marginal revenue equals marginal cost in

An important difference between the situation faced by a profit-maximizing monopolistically competitive firm in the short run and the situation faced by that same firm in the long run is that in the short run,

Which of the following statements is correct?

Figure 16-2 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-2.What price will the monopolistically competitive firm charge in this market?

Firms that sell highly differentiated consumer goods,such as soft drinks,breakfast cereals,and dog food,typically spend what percent of their revenues on advertising?

Which of the following statements is not correct?

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 B?

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 C?

Examples of monopolistically competitive markets include the markets for

In the long run,a monopolistically competitive firm produces a quantity that is

When a monopolistically competitive firm is in long-run equilibrium,

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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