Question 1

Figure 16-3  
-Refer to Figure 16-3.Assume the firm in the figure is currently producing 8 units of output and charging $400.The firm

Accepted Answer

A)  will increase its profits if it raises its price and reduces its production level. 
B)  will increase its profits if it lowers its price and expands its production level. 
C)  is maximizing profits. 
D)  will increase its profits if it raises its prices and expands its production level. 
A)  will increase its profits if it raises its price and reduces its production level. 
B)  will increase its profits if it lowers its price and expands its production level. 
C)  is maximizing profits. 
D)  will increase its profits if it raises its prices and expands its production level.

Question 2

A concentration ratio

Accepted Answer

A)  measures the percentage of total sales of the top firm in the industry. 
B)  reflects the level of competition in an industry. 
C)  is inversely related to the price charged by the top firm in the industry. 
D)  All of the above are correct. 
A)  measures the percentage of total sales of the top firm in the industry. 
B)  reflects the level of competition in an industry. 
C)  is inversely related to the price charged by the top firm in the industry. 
D)  All of the above are correct.

Question 3

A monopolistically competitive firm is currently producing 10 units of output.At this level of output the firm is charging a price equal to $10,has marginal revenue equal to $6,has marginal cost equal to $6,and has average total cost equal to $12.From this information we can infer that

Accepted Answer

A)  the firm is currently maximizing its profit. 
B)  the profits of the firm are negative. 
C)  firms are likely to leave this market in the long run. 
D)  All of the above are correct. 
A)  the firm is currently maximizing its profit. 
B)  the profits of the firm are negative. 
C)  firms are likely to leave this market in the long run. 
D)  All of the above are correct.

Question 4

If regulators required firms in monopolistically competitive markets to set price equal to marginal cost,

Accepted Answer

A)  firms would respond by lowering their costs. 
B)  firms would require a subsidy to stay in business 
C)  new firms that enter the market would operate at efficient scale. 
D)  the most efficient firms would not be affected. 
A)  firms would respond by lowering their costs. 
B)  firms would require a subsidy to stay in business 
C)  new firms that enter the market would operate at efficient scale. 
D)  the most efficient firms would not be affected.

Question 5

One key difference between an oligopoly market and a competitive market is that oligopolistic firms

Accepted Answer

A)  are price takers while competitive firms are not. 
B)  can affect the profit of other firms in the market by the choices they make while firms in competitive markets do not affect each other by the choices they make. 
C)  sell completely unrelated products while competitive firms do not. 
D)  sell their product at a price equal to marginal cost while competitive firms do not. 
A)  are price takers while competitive firms are not. 
B)  can affect the profit of other firms in the market by the choices they make while firms in competitive markets do not affect each other by the choices they make. 
C)  sell completely unrelated products while competitive firms do not. 
D)  sell their product at a price equal to marginal cost while competitive firms do not.

Question 6

Figure 16-6  
-Refer to Figure 16-6.Suppose a firm is operating in the situation depicted in panela.Which of the following statements is correct?

Accepted Answer

A)  The firm is earning positive short-run profits. 
B)  The firm is earning negative short-run profits. 
C)  The firm is earning zero short-run profits. 
D)  We cannot determine profits because we do not know the firm's average total costs. 
A)  The firm is earning positive short-run profits. 
B)  The firm is earning negative short-run profits. 
C)  The firm is earning zero short-run profits. 
D)  We cannot determine profits because we do not know the firm's average total costs.

Question 7

Table 16-4
This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm.
  
-Refer to Table 16-4.Which of the following statements regarding this monopolistically competitive firm is correct?

Accepted Answer

A)  New firms will enter this market in the long run since firm profits are greater than zero. 
B)  Firms will leave this market in the long run since firm profits are less than zero. 
C)  This firm is currently in long-run equilibrium. 
D)  This firm is currently in long-run equilibrium,and the firm is producing its efficient scale of output. 
A)  New firms will enter this market in the long run since firm profits are greater than zero. 
B)  Firms will leave this market in the long run since firm profits are less than zero. 
C)  This firm is currently in long-run equilibrium. 
D)  This firm is currently in long-run equilibrium,and the firm is producing its efficient scale of output.

Question 8

Each firm in a monopolistically competitive firm faces a downward-sloping demand curve because

Accepted Answer

A)  there are many other sellers in the market. 
B)  there are very few other sellers in the market. 
C)  the firm's product is different from those offered by other firms in the market. 
D)  that firm faces the threat of entry into the market by new firms. 
A)  there are many other sellers in the market. 
B)  there are very few other sellers in the market. 
C)  the firm's product is different from those offered by other firms in the market. 
D)  that firm faces the threat of entry into the market by new firms.

Question 9

Figure 16-1.The figure is drawn for a monopolistically competitive firm.  
-Refer to Figure 16-1.The firm's profit-maximizing level of output is

Accepted Answer

A)  8 units. 
B)  12 units. 
C)  16 units. 
D)  24 units. 
A)  8 units. 
B)  12 units. 
C)  16 units. 
D)  24 units.

Question 10

Monopolistic competition is the only market structure that features many sellers.

Accepted Answer

A) True 
 B)False

Question 11

A monopolistically competitive market could be considered inefficient because

Accepted Answer

A)  marginal revenue exceeds average revenue. 
B)  price exceeds marginal cost. 
C)  the efficient scale of production is only achieved in the long run,not in the short run. 
D)  markup pricing does not occur in any other market structure. 
A)  marginal revenue exceeds average revenue. 
B)  price exceeds marginal cost. 
C)  the efficient scale of production is only achieved in the long run,not in the short run. 
D)  markup pricing does not occur in any other market structure.

Question 12

Firm A produces and sells in a market that is characterized by highly differentiated consumer goods.Firm B produces and sells industrial products.Firm C produces and sells an agricultural commodity.Which firm is likely to spend the greatest portion of its total revenue on advertising?

Accepted Answer

A)  firm A 
B)  firm B 
C)  firm C 
D)  There is no reason to believe that any one of the three firms would spend a greater portion of its total revenue on advertising than the other two firms. 
A)  firm A 
B)  firm B 
C)  firm C 
D)  There is no reason to believe that any one of the three firms would spend a greater portion of its total revenue on advertising than the other two firms.

Question 13

Select the type of market that is described by the following attributes: many firms,differentiated products,and free entry.

Accepted Answer

A)  natural monopoly 
B)  perfectly competition 
C)  monopolistic competition 
D)  monopoly 
A)  natural monopoly 
B)  perfectly competition 
C)  monopolistic competition 
D)  monopoly

Question 14

In a monopolistically competitive market,

Accepted Answer

A)  entry by new firms is impeded by barriers to entry;thus,the number of firms in the market is never ideal. 
B)  entry by new firms is impeded by barriers to entry,but the number of firms in the market is nevertheless always ideal. 
C)  free entry ensures that the number of firms in the market is ideal. 
D)  there may be too few or too many firms in the market,despite free entry. 
A)  entry by new firms is impeded by barriers to entry;thus,the number of firms in the market is never ideal. 
B)  entry by new firms is impeded by barriers to entry,but the number of firms in the market is nevertheless always ideal. 
C)  free entry ensures that the number of firms in the market is ideal. 
D)  there may be too few or too many firms in the market,despite free entry.

Question 15

Figure 16-5  
-Refer to Figure 16-5.Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is doing its best but still losing money?

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

Figure 16-1.The figure is drawn for a monopolistically competitive firm.  
-Refer to Figure 16-1.Suppose ATC = $18 when Q = 12.Then the

Accepted Answer

A)  firm is in a long-run equilibrium when it produces 12 units of output. 
B)  firm is in a long-run equilibrium when it produces 16 units of output. 
C)  best the firm can do is sustain a loss of $24. 
D)  best the firm can do is earn a profit of $48. 
A)  firm is in a long-run equilibrium when it produces 12 units of output. 
B)  firm is in a long-run equilibrium when it produces 16 units of output. 
C)  best the firm can do is sustain a loss of $24. 
D)  best the firm can do is earn a profit of $48.

Question 17

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Accepted Answer

A)  average revenue exceeds marginal revenue 
B)  marginal revenue exceeds average revenue 
C)  average revenue is equal to marginal revenue 
D)  revenue is always maximized along with profit 
A)  average revenue exceeds marginal revenue 
B)  marginal revenue exceeds average revenue 
C)  average revenue is equal to marginal revenue 
D)  revenue is always maximized along with profit

Question 18

To maximize its profit,a monopolistically competitive firm chooses its level of output by looking for the level of output at which

Accepted Answer

A)  price equals marginal cost. 
B)  marginal revenue equals marginal cost. 
C)  average total cost is minimized. 
D)  All of the above are correct. 
A)  price equals marginal cost. 
B)  marginal revenue equals marginal cost. 
C)  average total cost is minimized. 
D)  All of the above are correct.

Question 19

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 is the least 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 20

When a market is monopolistically competitive,the typical firm in the market is likely to experience a

Accepted Answer

A)  positive profit in the short run and in the long run. 
B)  positive or negative profit in the short run and a zero profit in the long run. 
C)  zero profit in the short run and a positive or negative profit in the long run. 
D)  zero profit in the short run and in the long run. 
A)  positive profit in the short run and in the long run. 
B)  positive or negative profit in the short run and a zero profit in the long run. 
C)  zero profit in the short run and a positive or negative profit in the long run. 
D)  zero profit in the short run and in the long run.

Exam 16: Monopolistic Competition

Figure 16-3 -Refer to Figure 16-3.Assume the firm in the figure is currently producing 8 units of output and charging $400.The firm

A concentration ratio

A monopolistically competitive firm is currently producing 10 units of output.At this level of output the firm is charging a price equal to $10,has marginal revenue equal to $6,has marginal cost equal to $6,and has average total cost equal to $12.From this information we can infer that

If regulators required firms in monopolistically competitive markets to set price equal to marginal cost,

One key difference between an oligopoly market and a competitive market is that oligopolistic firms

Figure 16-6 -Refer to Figure 16-6.Suppose a firm is operating in the situation depicted in panela.Which of the following statements is correct?

Table 16-4 This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm. -Refer to Table 16-4.Which of the following statements regarding this monopolistically competitive firm is correct?

Each firm in a monopolistically competitive firm faces a downward-sloping demand curve because

Figure 16-1.The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.The firm's profit-maximizing level of output is

Monopolistic competition is the only market structure that features many sellers.

A monopolistically competitive market could be considered inefficient because

Firm A produces and sells in a market that is characterized by highly differentiated consumer goods.Firm B produces and sells industrial products.Firm C produces and sells an agricultural commodity.Which firm is likely to spend the greatest portion of its total revenue on advertising?

Select the type of market that is described by the following attributes: many firms,differentiated products,and free entry.

In a monopolistically competitive market,

Figure 16-5 -Refer to Figure 16-5.Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is doing its best but still losing money?

Figure 16-1.The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.Suppose ATC = $18 when Q = 12.Then the

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

To maximize its profit,a monopolistically competitive firm chooses its level of output by looking for the level of output at which

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 is the least competitive?

When a market is monopolistically competitive,the typical firm in the market is likely to experience 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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