Question 1

Under which of the following market structures would consumers likely receive the most product variety?

Accepted Answer

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

Question 2

Firms in a monopolistically competitive market

Accepted Answer

A)  are price takers. 
B)  produce an output level that minimizes average total cost in the long run. 
C)  maximize profits by producing where price equals marginal cost. 
D)  cannot earn economic profits in the long run. 
A)  are price takers. 
B)  produce an output level that minimizes average total cost in the long run. 
C)  maximize profits by producing where price equals marginal cost. 
D)  cannot earn economic profits in the long run.

Question 3

Figure 16-2
This figure depicts a situation in a monopolistically competitive market.  
-Refer to Figure 16-2.How much profit will the monopolistically competitive firm earn in this situation?

Accepted Answer

A)  a $10 profit 
B)  a $200 profit 
C)  a $400 profit 
D)  No profit,since monopolistically competitive firms never earn economic profit. 
A)  a $10 profit 
B)  a $200 profit 
C)  a $400 profit 
D)  No profit,since monopolistically competitive firms never earn economic profit.

Question 4

When a firm's demand curve is tangent to its average total cost curve,the

Accepted Answer

A)  firm's economic profit is zero. 
B)  firm may be earning economic profits. 
C)  firm must be operating at its efficient scale. 
D)  Both a and c are correct. 
A)  firm's economic profit is zero. 
B)  firm may be earning economic profits. 
C)  firm must be operating at its efficient scale. 
D)  Both a and c are correct.

Question 5

In which of the following market structures can firms earn economic profits in the long run?

Accepted Answer

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

Question 6

Long-run profit earned by a monopolistically competitive firm is driven to the competitive level due to a(n)

Accepted Answer

A)  change in the technology that the firm utilizes. 
B)  shift of its demand curve. 
C)  shift of its supply curve. 
D)  increase in the firm's average cost of production. 
A)  change in the technology that the firm utilizes. 
B)  shift of its demand curve. 
C)  shift of its supply curve. 
D)  increase in the firm's average cost of production.

Question 7

Which of the following is an example of a monopolistically competitive industry?

Accepted Answer

A)  computer operating systems 
B)  tennis balls 
C)  movies 
D)  cable television 
A)  computer operating systems 
B)  tennis balls 
C)  movies 
D)  cable television

Question 8

Product differentiation always leads to some measure of market power.

Accepted Answer

A) True 
 B)False

Question 9

The administrative burden of regulating price in a monopolistically competitive market is

Accepted Answer

A)  small due to economies of scale. 
B)  large because price is usually below marginal cost. 
C)  large because of the large number of firms that produce differentiated products. 
D)  small because firms produce with excess capacity. 
A)  small due to economies of scale. 
B)  large because price is usually below marginal cost. 
C)  large because of the large number of firms that produce differentiated products. 
D)  small because firms produce with excess capacity.

Question 10

Monopolistic competition is a type of

Accepted Answer

A)  oligopoly. 
B)  market structure. 
C)  price discrimination. 
D)  advertising strategy. 
A)  oligopoly. 
B)  market structure. 
C)  price discrimination. 
D)  advertising strategy.

Question 11

A monopolistically competitive market is characterized by barriers to entry.

Accepted Answer

A) True 
 B)False

Question 12

Monopolistically competitive markets differ from perfectly competitive markets due to

Accepted Answer

A)  (i)only 
B)  (iii)only 
C)  (i)and (iii)only 
D)  (ii)and (iii)only 
A)  (i)only 
B)  (iii)only 
C)  (i)and (iii)only 
D)  (ii)and (iii)only

Question 13

Monopolistic competition is an inefficient market structure because

Accepted Answer

A)  price exceeds marginal cost. 
B)  it has a deadweight loss,just as monopoly does. 
C)  at the equilibrium,some consumers will value the good at more than the marginal cost of production. 
D)  All of the above are correct. 
A)  price exceeds marginal cost. 
B)  it has a deadweight loss,just as monopoly does. 
C)  at the equilibrium,some consumers will value the good at more than the marginal cost of production. 
D)  All of the above are correct.

Question 14

Advertising that uses celebrity endorsements is most likely intended to

Accepted Answer

A)  increase elasticity of demand for the advertised product. 
B)  reduce the ability of markets to allocate resources efficiently. 
C)  provide a signal of product quality. 
D)  be useful only for psychological effects. 
A)  increase elasticity of demand for the advertised product. 
B)  reduce the ability of markets to allocate resources efficiently. 
C)  provide a signal of product quality. 
D)  be useful only for psychological effects.

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.Which of the diagrams illustrates the impact of some existing firms leaving the market?

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 16

Why does a typical monopolistically competitive firm face a downward-sloping demand curve?

Accepted Answer

Because its product

Question 17

In the long run,monopolistically competitive firms produce where demand equals average total cost.

Accepted Answer

A) True 
 B)False

Question 18

An oligopoly is a market in which

Accepted Answer

A)  there are only a few sellers,each offering a product similar or identical to the products offered by other firms in the market. 
B)  firms are price takers. 
C)  the actions of one seller in the market have no impact on the other sellers' profits. 
D)  there are many price-taking firms,each offering a product similar or identical to the products offered by other firms in the market. 
A)  there are only a few sellers,each offering a product similar or identical to the products offered by other firms in the market. 
B)  firms are price takers. 
C)  the actions of one seller in the market have no impact on the other sellers' profits. 
D)  there are many price-taking firms,each offering a product similar or identical to the products offered by other firms in the market.

Question 19

Evaluate the following statement: "Advertisements that use celebrity endorsements are devoid of any value and do not enhance the efficient functioning of markets."

Accepted Answer

Some people argue that celebrity endorse

Question 20

Which of the following statements is not correct?

Accepted Answer

A)  Monopolistic competition is different from monopoly because monopolistic competition is characterized by free entry,whereas monopoly is characterized by barriers to entry. 
B)  Both monopolistic competition and oligopoly fall in between the more extreme market structures of competition and monopoly. 
C)  Monopolistic competition is different from oligopoly because each seller in monopolistic competition is small relative to the market,whereas each seller can affect the actions of other sellers in an oligopoly. 
D)  Both monopolistic competition and perfect competition are characterized by product differentiation. 
A)  Monopolistic competition is different from monopoly because monopolistic competition is characterized by free entry,whereas monopoly is characterized by barriers to entry. 
B)  Both monopolistic competition and oligopoly fall in between the more extreme market structures of competition and monopoly. 
C)  Monopolistic competition is different from oligopoly because each seller in monopolistic competition is small relative to the market,whereas each seller can affect the actions of other sellers in an oligopoly. 
D)  Both monopolistic competition and perfect competition are characterized by product differentiation.

Exam 16: Monopolistic Competition

Under which of the following market structures would consumers likely receive the most product variety?

Firms in a monopolistically competitive market

Figure 16-2 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-2.How much profit will the monopolistically competitive firm earn in this situation?

When a firm's demand curve is tangent to its average total cost curve,the

In which of the following market structures can firms earn economic profits in the long run?

Long-run profit earned by a monopolistically competitive firm is driven to the competitive level due to a(n)

Which of the following is an example of a monopolistically competitive industry?

Product differentiation always leads to some measure of market power.

The administrative burden of regulating price in a monopolistically competitive market is

Monopolistic competition is a type of

A monopolistically competitive market is characterized by barriers to entry.

Monopolistically competitive markets differ from perfectly competitive markets due to

Monopolistic competition is an inefficient market structure because

Advertising that uses celebrity endorsements is most likely intended to

Why does a typical monopolistically competitive firm face a downward-sloping demand curve?

In the long run,monopolistically competitive firms produce where demand equals average total cost.

An oligopoly is a market in which

Evaluate the following statement: "Advertisements that use celebrity endorsements are devoid of any value and do not enhance the efficient functioning of markets."

Which of the following statements is not correct?

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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