Question 1

Imperfectly competitive firms are characterized by

Accepted Answer

A)  horizontal demand curves. 
B)  standardized products. 
C)  a large number of small firms. 
D)  price making ability. 
A)  horizontal demand curves. 
B)  standardized products. 
C)  a large number of small firms. 
D)  price making ability.

Question 2

Figure 16-2
This figure depicts a situation in a monopolistically competitive market.  
-Refer to Figure 16-2.What is the profit-maximizing price,quantity,and resulting profit?

Accepted Answer

A)  P=$60,Q=20 units,profit=$200 
B)  P=$80,Q=20 units,profit=$200 
C)  P=$75,Q=25 units,profit=$100 
D)  P=$60,Q=40 units,profit=$0 
A)  P=$60,Q=20 units,profit=$200 
B)  P=$80,Q=20 units,profit=$200 
C)  P=$75,Q=25 units,profit=$100 
D)  P=$60,Q=40 units,profit=$0

Question 3

For a monopolistically competitive firm,

Accepted Answer

A)  marginal revenue and price are the same. 
B)  average revenue and price are the same. 
C)  at the profit-maximizing quantity of output,price equals marginal cost. 
D)  at the profit-maximizing quantity of output,price equals the minimum of average total cost. 
A)  marginal revenue and price are the same. 
B)  average revenue and price are the same. 
C)  at the profit-maximizing quantity of output,price equals marginal cost. 
D)  at the profit-maximizing quantity of output,price equals the minimum of average total cost.

Question 4

Professional organizations and producer groups have an incentive to

Accepted Answer

A)  restrict advertising in order to enhance competition on the basis of price. 
B)  restrict advertising in order to reduce competition on the basis of price. 
C)  encourage advertising in order to reduce competition on the basis of price. 
D)  encourage advertising in order to enhance competition on the basis of price. 
A)  restrict advertising in order to enhance competition on the basis of price. 
B)  restrict advertising in order to reduce competition on the basis of price. 
C)  encourage advertising in order to reduce competition on the basis of price. 
D)  encourage advertising in order to enhance competition on the basis of price.

Question 5

A typical firm in the U.S.economy would be classified as

Accepted Answer

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

Question 6

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

Accepted Answer

A)  firms would most likely experience economic losses. 
B)  firms would also operate at their efficient scale. 
C)  new firms would likely to enter the market. 
D)  the most efficient firms would not likely to be affected. 
A)  firms would most likely experience economic losses. 
B)  firms would also operate at their efficient scale. 
C)  new firms would likely to enter the market. 
D)  the most efficient firms would not likely to be affected.

Question 7

Excess capacity is

Accepted Answer

A)  an example of the inefficiencies of monopolistically competitive markets. 
B)  a short-run problem but not a long-run problem. 
C)  a characteristic of rising average total cost curves. 
D)  Both a and b are correct. 
A)  an example of the inefficiencies of monopolistically competitive markets. 
B)  a short-run problem but not a long-run problem. 
C)  a characteristic of rising average total cost curves. 
D)  Both a and b are correct.

Question 8

A monopolistically competitive firm has the following cost structure:
 
The firm faces the following demand curve:
 
If the government forces this firm to produce at its efficient scale,it will

Accepted Answer

A)  produce 3 units and make $9. 
B)  produce 4 units and make $6. 
C)  produce 5 units and lose $5. 
D)  produce 7 units and lose $49. 
A)  produce 3 units and make $9. 
B)  produce 4 units and make $6. 
C)  produce 5 units and lose $5. 
D)  produce 7 units and lose $49.

Question 9

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 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 10

Which of the following conditions distinguishes monopolistic competition from perfect competition?

Accepted Answer

A)  the number of sellers in the market 
B)  the freedom of entry and exit by firms in the market 
C)  the size of firms in the market 
D)  product differentiation 
A)  the number of sellers in the market 
B)  the freedom of entry and exit by firms in the market 
C)  the size of firms in the market 
D)  product differentiation

Question 11

Monopolistically competitive firms,like monopoly firms,maximize their profits by charging a price that exceeds marginal cost.

Accepted Answer

A) True 
 B)False

Question 12

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.What is the concentration ratio for Industry D?

Accepted Answer

A)  about 13% 
B)  about 35% 
C)  about 45% 
D)  about 63% 
A)  about 13% 
B)  about 35% 
C)  about 45% 
D)  about 63%

Question 13

Figure 16-4  
-Refer to Figure 16-4.Panel b is consistent with a firm in a monopolistically competitive market that is

Accepted Answer

A)  not in long-run equilibrium. 
B)  in long-run equilibrium. 
C)  producing its efficient scale of output. 
D)  earning a positive economic profit. 
A)  not in long-run equilibrium. 
B)  in long-run equilibrium. 
C)  producing its efficient scale of output. 
D)  earning a positive economic profit.

Question 14

Table 16-5
Traci's Hairstyling is one salon among many in the market for hairstyling.The following table presents cost and revenue data for hair cuts at Traci's Hairstyling.
  
-Refer to Table 16-5.If the government required Traci's to produce at the efficient scale of output,how many haircuts would Traci's sell?

Accepted Answer

A)  either 3 or 4 
B)  either 4 or 5 
C)  either 5 or 6 
D)  either 6 or 7 
A)  either 3 or 4 
B)  either 4 or 5 
C)  either 5 or 6 
D)  either 6 or 7

Question 15

The primary claim of defenders of advertising is that it

Accepted Answer

A)  conveys information about firm profitability. 
B)  is psychological rather than informational. 
C)  enhances the information available to consumers. 
D)  reduces the elasticity of demand for a firm's product. 
A)  conveys information about firm profitability. 
B)  is psychological rather than informational. 
C)  enhances the information available to consumers. 
D)  reduces the elasticity of demand for a firm's product.

Question 16

Suppose for some firm that average total cost is minimized at Q1 units of output.For a monopolistically competitive firm in long-run equilibrium,Q1

Accepted Answer

A)  is also the level of output at which marginal cost equals average total cost. 
B)  exceeds the level of output at which there is a point of tangency between the demand curve and the average total cost curve. 
C)  exceeds the level of output at which marginal revenue equals marginal cost. 
D)  All of the above are correct. 
A)  is also the level of output at which marginal cost equals average total cost. 
B)  exceeds the level of output at which there is a point of tangency between the demand curve and the average total cost curve. 
C)  exceeds the level of output at which marginal revenue equals marginal cost. 
D)  All of the above are correct.

Question 17

Defenders of advertising argue that firms use advertising as a signal of quality,even if the advertising delivers little helpful information about the product.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following represents the best government policy to reduce the deadweight loss associated with a monopolistically competitive market?

Accepted Answer

A)  The government should regulate firms in a manner similar to natural monopolies. 
B)  The government should encourage more firms to enter the industry because without government intervention,there are likely to be "too few" firms. 
C)  The government should encourage some firms to exit the industry because without government intervention,there are likely to be "too many" firms. 
D)  There is no government policy that can reduce deadweight loss without creating other problems. 
A)  The government should regulate firms in a manner similar to natural monopolies. 
B)  The government should encourage more firms to enter the industry because without government intervention,there are likely to be "too few" firms. 
C)  The government should encourage some firms to exit the industry because without government intervention,there are likely to be "too many" firms. 
D)  There is no government policy that can reduce deadweight loss without creating other problems.

Question 19

Entry by new firms into a monopolistically competitive market

Accepted Answer

A)  creates additional consumer surplus. 
B)  imposes a positive externality on existing firms. 
C)  leads to the same externalities that are observed when new firms enter a perfectly competitive market. 
D)  increases the demand for existing firms' products. 
A)  creates additional consumer surplus. 
B)  imposes a positive externality on existing firms. 
C)  leads to the same externalities that are observed when new firms enter a perfectly competitive market. 
D)  increases the demand for existing firms' products.

Question 20

In the short run,a firm operating in a monopolistically competitive market

Accepted Answer

A)  produces an output level where marginal revenue equals average total cost. 
B)  maximizes revenues as well as profits. 
C)  can earn zero economic profits. 
D)  sets price equal to marginal cost. 
A)  produces an output level where marginal revenue equals average total cost. 
B)  maximizes revenues as well as profits. 
C)  can earn zero economic profits. 
D)  sets price equal to marginal cost.

Exam 16: Monopolistic Competition

Imperfectly competitive firms are characterized by

Figure 16-2 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-2.What is the profit-maximizing price,quantity,and resulting profit?

For a monopolistically competitive firm,

Professional organizations and producer groups have an incentive to

A typical firm in the U.S.economy would be classified as

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

Excess capacity is

A monopolistically competitive firm has the following cost structure: The firm faces the following demand curve: If the government forces this firm to produce at its efficient scale,it will

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 most competitive?

Which of the following conditions distinguishes monopolistic competition from perfect competition?

Monopolistically competitive firms,like monopoly firms,maximize their profits by charging a price that exceeds marginal cost.

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.What is the concentration ratio for Industry D?

Figure 16-4 -Refer to Figure 16-4.Panel b is consistent with a firm in a monopolistically competitive market that is

The primary claim of defenders of advertising is that it

Suppose for some firm that average total cost is minimized at Q1 units of output.For a monopolistically competitive firm in long-run equilibrium,Q1

Defenders of advertising argue that firms use advertising as a signal of quality,even if the advertising delivers little helpful information about the product.

Which of the following represents the best government policy to reduce the deadweight loss associated with a monopolistically competitive market?

Entry by new firms into a monopolistically competitive market

In the short run,a firm operating in a monopolistically competitive market

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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Suppose for some firm that average total cost is minimized at Q₁ units of output.For a monopolistically competitive firm in long-run equilibrium,Q₁