Question 1

Evidence suggests that, in markets with differentiated products but little advertising,

Accepted Answer

A)  consumers are not confused by conflicting signals. 
B)  firms are generally less profitable. 
C)  markets are less efficient. 
D)  consumers make better choices. 
A)  consumers are not confused by conflicting signals. 
B)  firms are generally less profitable. 
C)  markets are less efficient. 
D)  consumers make better choices.

Question 2

Of the following market structures, which are considered imperfectly competitive?

Accepted Answer

A)  III only 
B)  II and III 
C)  III and IV 
D)  II, III, and IV 
A)  III only 
B)  II and III 
C)  III and IV 
D)  II, III, and IV

Question 3

A market structure with only a few sellers, each offering similar or identical products, is known as

Accepted Answer

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

Question 4

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Accepted Answer

A)  highly-differentiated consumer goods. 
B)  goods produced by natural monopolies. 
C)  agricultural products. 
D)  products with a limited shelf life such as milk and lettuce. 
A)  highly-differentiated consumer goods. 
B)  goods produced by natural monopolies. 
C)  agricultural products. 
D)  products with a limited shelf life such as milk and lettuce.

Question 5

The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.

Accepted Answer

A) True 
 B)False

Question 6

The Mikati Philippines Hard Rock Cafe has the exact same menu as the Hard Rock Cafe in New York. This is an example of a brand name enhancing market efficiency for U.S. tourists visiting the Philippines.

Accepted Answer

A) True 
 B)False

Question 7

Figure 16-11  
-Refer to Figure 16-11. The graph depicts a monopolistically competitive firm in the short run. Which of the following explanations best describes the long run adjustment?

Accepted Answer

A)  More firms will enter this market and each firm will have a smaller share of the total market demand, shifting this firm's demand curve to the left. 
B)  More firms will enter this market and each firm will have a larger share of the total market demand, shifting this firm's demand to the right. 
C)  Firms will exit this market and each firm will have a smaller share of the total market demand, shifting this firm's demand to the left. 
D)  Firms will exit this market and each firm will have a larger share of the total market demand, shifting this firm's demand to the right. 
A)  More firms will enter this market and each firm will have a smaller share of the total market demand, shifting this firm's demand curve to the left. 
B)  More firms will enter this market and each firm will have a larger share of the total market demand, shifting this firm's demand to the right. 
C)  Firms will exit this market and each firm will have a smaller share of the total market demand, shifting this firm's demand to the left. 
D)  Firms will exit this market and each firm will have a larger share of the total market demand, shifting this firm's demand to the right.

Question 8

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-9. In order to maximize its profit, the firm will choose to produce

Accepted Answer

A)  100 units of output, and its profit will be positive. 
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 positive. 
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 9

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 10

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome? (i) perfect competition
(ii) monopolistic competition
(iii) monopoly

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 11

Scenario 16-8
Burger Bonanza, a major national burger chain, recently decided to spend $4 million on an advertising campaign featuring a world famous actor to promote its new Bomber Burger.
-Refer to Scenario 16-8. What can consumers conclude from Burger Bonanza's willingness to spend $4 million on an advertising campaign?

Accepted Answer

high quali

Question 12

Oligopoly is characterized by a few sellers offering similar products, whereas monopolistic competition is characterized by many sellers offering differentiated products.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is correct?

Accepted Answer

A)  Firms in monopolistic competition and monopoly can earn economic profits in both the short run and the long run. 
B)  Both perfectly competitive and monopolistically competitive firms charge a price equal to marginal cost. 
C)  Firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost. 
D)  Both perfectly competitive and monopolistically competitive firms produce the welfare-maximizing level of output. 
A)  Firms in monopolistic competition and monopoly can earn economic profits in both the short run and the long run. 
B)  Both perfectly competitive and monopolistically competitive firms charge a price equal to marginal cost. 
C)  Firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost. 
D)  Both perfectly competitive and monopolistically competitive firms produce the welfare-maximizing level of output.

Question 14

A monopolistically competitive firm chooses

Accepted Answer

A)  the quantity of output to produce, but the market determines price. 
B)  the price, but competition in the market determines the quantity. 
C)  price, but output is determined by a cartel production quota. 
D)  the quantity of output to produce and the price at which it will sell its output. 
A)  the quantity of output to produce, but the market determines price. 
B)  the price, but competition in the market determines the quantity. 
C)  price, but output is determined by a cartel production quota. 
D)  the quantity of output to produce and the price at which it will sell its output.

Question 15

Scenario 16-7
Consider the problem facing two firms, YumYum and Bertollini, in the frozen food market. Each firm has just come up with an idea for a new "frozen meal for two" which it would sell for $9. Assume that the marginal cost for each new product is a constant $2, and the only fixed cost is for advertising. Each company knows that if it spends $12 million on advertising it will get 1.5 million consumers to try its new product. YumYum has done market research which suggests that its product does not have any "staying" power in the market. Even though it could get 1.5 million consumers to buy the product once, it is unlikely that they will continue to buy the product in the future. Bertollini's market research suggests that its product is very good, and consumers who try the product will continue to be consumers over the ensuing year. On the basis of its market research, Bertollini estimates that its initial 1.5 million customers will buy one unit of the product each month in the coming year, for a total of 18 million units.
-Refer to Scenario 16-7. By its willingness to spend money on advertising, Bertollini

Accepted Answer

A)  signals the quality of its new product to consumers. 
B)  signals that it is not a profit maximizer. 
C)  is detracting from the efficiency of markets. 
D)  will drive YumYum out of the market. 
A)  signals the quality of its new product to consumers. 
B)  signals that it is not a profit maximizer. 
C)  is detracting from the efficiency of markets. 
D)  will drive YumYum out of the market.

Question 16

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Accepted Answer

A) True 
 B)False

Question 17

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Accepted Answer

A)  industrial products. 
B)  homogeneous products. 
C)  consumer goods for which there are no close substitutes. 
D)  highly-differentiated consumer goods. 
A)  industrial products. 
B)  homogeneous products. 
C)  consumer goods for which there are no close substitutes. 
D)  highly-differentiated consumer goods.

Question 18

Firms can freely enter a market

Accepted Answer

A)  only when the market is a monopoly. 
B)  only when the market is a monopoly or monopolistically competitive. 
C)  only when the market is monopolistically competitive or perfectly competitive. 
D)  when the market is perfectly competitive, monopolistically competitive, or monopolistid. 
A)  only when the market is a monopoly. 
B)  only when the market is a monopoly or monopolistically competitive. 
C)  only when the market is monopolistically competitive or perfectly competitive. 
D)  when the market is perfectly competitive, monopolistically competitive, or monopolistid.

Question 19

When a new firm enters a monopolistically competitive market, the individual demand curves faced by all existing firms in that market will

Accepted Answer

A)  shift to the left. 
B)  shift to the right. 
C)  shift in a direction that is unpredictable without further information. 
D)  remain unchanged. It is the supply curve that will shift. 
A)  shift to the left. 
B)  shift to the right. 
C)  shift in a direction that is unpredictable without further information. 
D)  remain unchanged. It is the supply curve that will shift.

Question 20

Scenario 16-4
Delish, a moderately priced restaurant, has recently announced intentions to open a restaurant in Boston, MA. Assume that the restaurant market in Boston is characterized by monopolistic competition.
-Refer to Scenario 16-4. As a result of the new restaurant, existing restauranteurs in Boston are likely to experience a

Accepted Answer

A)  product-variety externality, which is a negative externality. 
B)  product-variety externality, which is a positive externality. 
C)  business-stealing externality, which is a negative externality. 
D)  business-stealing externality, which is a positive externality. 
A)  product-variety externality, which is a negative externality. 
B)  product-variety externality, which is a positive externality. 
C)  business-stealing externality, which is a negative externality. 
D)  business-stealing externality, which is a positive externality.

Evidence suggests that, in markets with differentiated products but little advertising,

Of the following market structures, which are considered imperfectly competitive?

A market structure with only a few sellers, each offering similar or identical products, is known as

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.

The Mikati Philippines Hard Rock Cafe has the exact same menu as the Hard Rock Cafe in New York. This is an example of a brand name enhancing market efficiency for U.S. tourists visiting the Philippines.

Figure 16-11 -Refer to Figure 16-11. The graph depicts a monopolistically competitive firm in the short run. Which of the following explanations best describes the long run adjustment?

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. In order to maximize its profit, the firm will choose to produce

A monopolistically competitive firm

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome? (i) perfect competition (ii) monopolistic competition (iii) monopoly

Oligopoly is characterized by a few sellers offering similar products, whereas monopolistic competition is characterized by many sellers offering differentiated products.

Which of the following statements is correct?

A monopolistically competitive firm chooses

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Firms can freely enter a market

When a new firm enters a monopolistically competitive market, the individual demand curves faced by all existing firms in that market will

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

Exam 16: Monopolistic Competition

Evidence suggests that, in markets with differentiated products but little advertising,

Of the following market structures, which are considered imperfectly competitive?

A market structure with only a few sellers, each offering similar or identical products, is known as

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.

The Mikati Philippines Hard Rock Cafe has the exact same menu as the Hard Rock Cafe in New York. This is an example of a brand name enhancing market efficiency for U.S. tourists visiting the Philippines.

Figure 16-11 -Refer to Figure 16-11. The graph depicts a monopolistically competitive firm in the short run. Which of the following explanations best describes the long run adjustment?

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. In order to maximize its profit, the firm will choose to produce

A monopolistically competitive firm

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome? (i) perfect competition (ii) monopolistic competition (iii) monopoly

Oligopoly is characterized by a few sellers offering similar products, whereas monopolistic competition is characterized by many sellers offering differentiated products.

Which of the following statements is correct?

A monopolistically competitive firm chooses

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Firms can freely enter a market

When a new firm enters a monopolistically competitive market, the individual demand curves faced by all existing firms in that market will

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