Question 1

For the economy as a whole,spending on advertising comprises about what percent of total firm revenue?

Accepted Answer

A)  0.5 
B)  2 
C)  10 
D)  20 
A)  0.5 
B)  2 
C)  10 
D)  20

Question 2

Which of the following statements regarding brand names in advertising is not correct?

Accepted Answer

A)  Brand names provide consumers with information about quality when quality cannot be easily judged in advance of purchase. 
B)  Brand names give firms an incentive to maintain high quality to maintain the reputation of the firm. 
C)  Brand names allow firms to produce and sell inferior products in the long run since people will continue to purchase the brand-name product. 
D)  Brand names can cause consumers to perceive differences in products that do not actually exist. 
A)  Brand names provide consumers with information about quality when quality cannot be easily judged in advance of purchase. 
B)  Brand names give firms an incentive to maintain high quality to maintain the reputation of the firm. 
C)  Brand names allow firms to produce and sell inferior products in the long run since people will continue to purchase the brand-name product. 
D)  Brand names can cause consumers to perceive differences in products that do not actually exist.

Question 3

Excess capacity characterizes firms in monopolistically competitive markets,even in situations of long-run equilibrium.

Accepted Answer

A) True 
 B)False

Question 4

The "monopoly" in monopolistically competitive markets is most likely a result of firms having some pricing power due to product differentiation.

Accepted Answer

A) True 
 B)False

Question 5

A monopolistically competitive market

Accepted Answer

A)  has some features of monopoly and some features of competition. 
B)  has one large,dominant firm and many other smaller firms. 
C)  is difficult to enter. 
D)  occurs whenever firms earn zero economic profit. 
A)  has some features of monopoly and some features of competition. 
B)  has one large,dominant firm and many other smaller firms. 
C)  is difficult to enter. 
D)  occurs whenever firms earn zero economic profit.

Question 6

A monopolistically competitive firm's choice of output level is virtually identical to the choice made by

Accepted Answer

A)  a perfectly competitive firm. 
B)  a duopolist. 
C)  a monopolist. 
D)  an oligopolist. 
A)  a perfectly competitive firm. 
B)  a duopolist. 
C)  a monopolist. 
D)  an oligopolist.

Question 7

A monopolistically competitive firm

Accepted Answer

A)  charges a price that is equal to marginal cost. 
B)  experiences a zero profit in the long run. 
C)  produces at the efficient scale in the long run. 
D)  All of the above are correct. 
A)  charges a price that is equal to marginal cost. 
B)  experiences a zero profit in the long run. 
C)  produces at the efficient scale in the long run. 
D)  All of the above are correct.

Question 8

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 has the lowest 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 9

The government may not be able to improve the inefficiencies of a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

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

Question 11

The term excess capacity refers to the fact that a firm produces a lower quantity than it would if it operated at the efficient scale.

Accepted Answer

A) True 
 B)False

Question 12

Evidence from the market for eyeglasses suggests that advertising leads to

Accepted Answer

A)  lower-quality products for consumers. 
B)  lower prices for consumers. 
C)  higher prices for consumers. 
D)  less concern on the part of consumers about price differences among similar goods. 
A)  lower-quality products for consumers. 
B)  lower prices for consumers. 
C)  higher prices for consumers. 
D)  less concern on the part of consumers about price differences among similar goods.

Question 13

Firms in monopolistically competitive markets and monopolies can earn long-run profits due to barriers to entry.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements is not correct?

Accepted Answer

A)  Firms in monopolistic competition and monopoly can earn economic profits in the short run. 
B)  Firms in monopolistic competition and perfect competition produce the welfare-maximizing level of output. 
C)  Monopolistically competitive firms price above marginal cost,whereas competitive firms price at marginal cost. 
D)  Firms wishing to enter a monopolistically competitive market can do so freely,whereas firms wishing to enter a monopoly market will face barriers. 
A)  Firms in monopolistic competition and monopoly can earn economic profits in the short run. 
B)  Firms in monopolistic competition and perfect competition produce the welfare-maximizing level of output. 
C)  Monopolistically competitive firms price above marginal cost,whereas competitive firms price at marginal cost. 
D)  Firms wishing to enter a monopolistically competitive market can do so freely,whereas firms wishing to enter a monopoly market will face barriers.

Question 15

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome?

Accepted Answer

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

Question 16

The government of Italy will not allow any Hard Rock Cafe restaurants to open in Italy.Defenders of the efficiency of brand-name markets would argue that this has hindered restaurant market efficiency in Italy.

Accepted Answer

A) True 
 B)False

Question 17

A firm has the following cost structure:
 
If this firm is in a typical monopolistically competitive market,in the long run it will likely produce

Accepted Answer

A)  4 or fewer units of output. 
B)  5 units of output. 
C)  more than 5 units of output. 
D)  None of the above are necessarily correct because there is not enough information to tell. 
A)  4 or fewer units of output. 
B)  5 units of output. 
C)  more than 5 units of output. 
D)  None of the above are necessarily correct because there is not enough information to tell.

Question 18

When a firm operates with excess capacity,it must be in a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 19

A monopolistically competitive firm is currently earning a positive economic profit.If other firms enter the market,we would expect that the added competition will cause this firm to adjust its output such that it

Accepted Answer

A)  will operate closer to its efficient scale. 
B)  will operate further from its efficient scale. 
C)  will no longer be at its efficient scale. 
D)  might move either closer to or further from its efficient scale. 
A)  will operate closer to its efficient scale. 
B)  will operate further from its efficient scale. 
C)  will no longer be at its efficient scale. 
D)  might move either closer to or further from its efficient scale.

Question 20

Which two curves are tangent to each other in a monopolistically competitive market with zero economic profit?

Accepted Answer

A)  demand and average variable cost 
B)  demand and average total cost 
C)  marginal revenue and average variable cost 
D)  marginal revenue and average total cost 
A)  demand and average variable cost 
B)  demand and average total cost 
C)  marginal revenue and average variable cost 
D)  marginal revenue and average total cost

Exam 16: Monopolistic Competition

For the economy as a whole,spending on advertising comprises about what percent of total firm revenue?

Which of the following statements regarding brand names in advertising is not correct?

Excess capacity characterizes firms in monopolistically competitive markets,even in situations of long-run equilibrium.

The "monopoly" in monopolistically competitive markets is most likely a result of firms having some pricing power due to product differentiation.

A monopolistically competitive market

A monopolistically competitive firm's choice of output level is virtually identical to the choice made by

A monopolistically competitive firm

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 has the lowest concentration ratio?

The government may not be able to improve the inefficiencies of a monopolistically competitive market.

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

The term excess capacity refers to the fact that a firm produces a lower quantity than it would if it operated at the efficient scale.

Evidence from the market for eyeglasses suggests that advertising leads to

Firms in monopolistically competitive markets and monopolies can earn long-run profits due to barriers to entry.

Which of the following statements is not correct?

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome?

The government of Italy will not allow any Hard Rock Cafe restaurants to open in Italy.Defenders of the efficiency of brand-name markets would argue that this has hindered restaurant market efficiency in Italy.

A firm has the following cost structure: If this firm is in a typical monopolistically competitive market,in the long run it will likely produce

When a firm operates with excess capacity,it must be in a monopolistically competitive market.

A monopolistically competitive firm is currently earning a positive economic profit.If other firms enter the market,we would expect that the added competition will cause this firm to adjust its output such that it

Which two curves are tangent to each other in a monopolistically competitive market with zero economic profit?

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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