Question 1

In a monopolistically competitive market,

Accepted Answer

A)  the entry of new firms creates externalities. 
B)  the absence of restrictions on entry by new firms ensures that there will be no deadweight loss. 
C)  there are always too many firms in the market relative to the socially-optimal number of firms. 
D)  firms cannot earn positive economic profits in the short run. 
A)  the entry of new firms creates externalities. 
B)  the absence of restrictions on entry by new firms ensures that there will be no deadweight loss. 
C)  there are always too many firms in the market relative to the socially-optimal number of firms. 
D)  firms cannot earn positive economic profits in the short run.

Question 2

Oligopoly and monopolistic competition are examples of a market structure called imperfect competition.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not a key feature of monopolistic competition?

Accepted Answer

A)  Excess capacity 
B)  A markup of price over marginal cost 
C)  Positive economic profits for firms in the long run 
D)  Differentiated products among firms in the market 
A)  Excess capacity 
B)  A markup of price over marginal cost 
C)  Positive economic profits for firms in the long run 
D)  Differentiated products among firms in the market

Question 4

A monopolistically competitive firm faces a downward-sloping demand curve because there are few firms in the market.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)  the demand curve will be perfectly elastic. 
B)  price exceeds marginal cost. 
C)  marginal cost must be falling. 
D)  marginal revenue exceeds marginal cost. 
A)  the demand curve will be perfectly elastic. 
B)  price exceeds marginal cost. 
C)  marginal cost must be falling. 
D)  marginal revenue exceeds marginal cost.

Question 6

A profit-maximizing firm operating in a monopolistically competitive market that is in a long-run equilibrium has

Accepted Answer

A)  minimized average total cost. 
B)  chosen to produce where demand is unitary elastic. 
C)  produced the efficient scale of output. 
D)  chosen a quantity of output where average revenue equals average total cost. 
A)  minimized average total cost. 
B)  chosen to produce where demand is unitary elastic. 
C)  produced the efficient scale of output. 
D)  chosen a quantity of output where average revenue equals average total cost.

Question 7

The product-variety externality is associated with the

Accepted Answer

A)  producer surplus that accrues to incumbent firms in a monopolistically competitive industry. 
B)  loss of consumer surplus from exposure to additional advertising. 
C)  consumer surplus that is generated from the introduction of a new product. 
D)  opportunity cost of firms exiting a monopolistically competitive industry. 
A)  producer surplus that accrues to incumbent firms in a monopolistically competitive industry. 
B)  loss of consumer surplus from exposure to additional advertising. 
C)  consumer surplus that is generated from the introduction of a new product. 
D)  opportunity cost of firms exiting a monopolistically competitive industry.

Question 8

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

Accepted Answer

A)  P = AR 
B)  MR = MC 
C)  P > MC 
D)  All of the above are correct. 
A)  P = AR 
B)  MR = MC 
C)  P > MC 
D)  All of the above are correct.

Question 9

Scenario 16-2
Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q.
-Refer to Scenario 16-2. If the marginal cost of producing this good is 4, what quantity would a profit-maximizing monopolist produce?

Accepted Answer

A)  Q = 2 
B)  Q = 4 
C)  Q = 6 
D)  Q = 8 
A)  Q = 2 
B)  Q = 4 
C)  Q = 6 
D)  Q = 8

Question 10

Figure 16-5  
-Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will not encourage either the entry or exit of firms in a monopolistically competitive industry?

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 11

Figure 16-4  
-Refer to Figure 16-4. At the profit-maximizing, or loss-minimizing, output level, the firm in this figure has total revenue of approximately

Accepted Answer

A)  $12,000. 
B)  $21,000. 
C)  $24,000. 
D)  $27,300. 
A)  $12,000. 
B)  $21,000. 
C)  $24,000. 
D)  $27,300.

Question 12

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 13

In a long-run equilibrium, firms in both perfectly competitive markets and monopolistically competitive markets produce a quantity below the efficient scale of production.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following markets impose deadweight losses on society? (i) perfect competition
(ii) monopolistic competition
(iii) monopoly

Accepted Answer

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

Question 15

Figure 16-12  
-Refer to Figure 16-12. If this firm profit-maximizes, what price will it charge?

Accepted Answer

The answer of Figure 16-12  
-Refer to Figure 16-12....

Question 16

In comparison to perfect competition, monopolistic competition is characterized by

Accepted Answer

A)  efficient scale. 
B)  pricing at marginal cost. 
C)  excess capacity. 
D)  All of the above are correct. 
A)  efficient scale. 
B)  pricing at marginal cost. 
C)  excess capacity. 
D)  All of the above are correct.

Question 17

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. What price will this firm charge to maximize profit?

Accepted Answer

A)  $25 
B)  $30 
C)  $35 
D)  $40 
A)  $25 
B)  $30 
C)  $35 
D)  $40

Question 18

Figure 16-12  
-Refer to Figure 16-12. When this firm profit­maximizes, what is the amount of the firm's profit or loss?

Accepted Answer

The answer of Figure 16-12  
-Refer to Figure 16-12....

Question 19

Figure 16-10
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-10. In order to maximize its profit, the firm will choose to produce

Accepted Answer

A)  100 units of output, and its profit will be negative. 
B)  100 units of output, and its profit will be zero. 
C)  133.33 units of output, and its profit will be negative. 
D)  133.33 units of output, and its profit will be zero. 
A)  100 units of output, and its profit will be negative. 
B)  100 units of output, and its profit will be zero. 
C)  133.33 units of output, and its profit will be negative. 
D)  133.33 units of output, and its profit will be zero.

Question 20

The product-variety externality states the benefits to consumers from the introduction of a new product.

Accepted Answer

A) True 
 B)False

Exam 16: Monopolistic Competition

In a monopolistically competitive market,

Oligopoly and monopolistic competition are examples of a market structure called imperfect competition.

Which of the following is not a key feature of monopolistic competition?

A monopolistically competitive firm faces a downward-sloping demand curve because there are few firms in the market.

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

A profit-maximizing firm operating in a monopolistically competitive market that is in a long-run equilibrium has

The product-variety externality is associated with the

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

Scenario 16-2 Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q. -Refer to Scenario 16-2. If the marginal cost of producing this good is 4, what quantity would a profit-maximizing monopolist produce?

Figure 16-5 -Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will not encourage either the entry or exit of firms in a monopolistically competitive industry?

Figure 16-4 -Refer to Figure 16-4. At the profit-maximizing, or loss-minimizing, output level, the firm in this figure has total revenue of approximately

Imperfectly competitive firms are characterized by

In a long-run equilibrium, firms in both perfectly competitive markets and monopolistically competitive markets produce a quantity below the efficient scale of production.

Which of the following markets impose deadweight losses on society? (i) perfect competition (ii) monopolistic competition (iii) monopoly

Figure 16-12 -Refer to Figure 16-12. If this firm profit-maximizes, what price will it charge?

In comparison to perfect competition, monopolistic competition is characterized by

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. What price will this firm charge to maximize profit?

Figure 16-12 -Refer to Figure 16-12. When this firm profit­maximizes, what is the amount of the firm's profit or loss?

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. In order to maximize its profit, the firm will choose to produce

The product-variety externality states the benefits to consumers from the introduction of a new product.

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

Filters

Figure 16-12 -Refer to Figure 16-12. When this firm profitmaximizes, what is the amount of the firm's profit or loss?