Question 1

Which market structure(s) include(s) many firms with differentiated products who can enter and exit the market freely?

Accepted Answer

monopolist

Question 2

"In a long-run equilibrium, price is equal to average total cost." This statement applies to

Accepted Answer

A)  competitive markets, but not to monopolistically competitive markets or monopolies. 
B)  competitive and monopolistically competitive markets, but not to monopolies. 
C)  competitive markets, monopolistically competitive markets, and monopolies. 
D)  None of the above is correct. 
A)  competitive markets, but not to monopolistically competitive markets or monopolies. 
B)  competitive and monopolistically competitive markets, but not to monopolies. 
C)  competitive markets, monopolistically competitive markets, and monopolies. 
D)  None of the above is correct.

Question 3

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 4

When monopolistically competitive firms advertise, in the long run

Accepted Answer

A)  they will still earn zero economic profit. 
B)  they can earn positive economic profit by increasing market share. 
C)  the market price must fall. 
D)  the market price must rise. 
A)  they will still earn zero economic profit. 
B)  they can earn positive economic profit by increasing market share. 
C)  the market price must fall. 
D)  the market price must rise.

Question 5

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 0, what quantity would a profit-maximizing monopolist produce?

Accepted Answer

A)  Q = 0 
B)  Q = 2 
C)  Q = 5 
D)  Q = 10 
A)  Q = 0 
B)  Q = 2 
C)  Q = 5 
D)  Q = 10

Question 6

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures features entry in the long run?

Accepted Answer

perfect co

Question 7

When a monopolistically competitive firm is in a long-run equilibrium, the values of marginal cost, average total cost, and price are all the same.

Accepted Answer

A) True 
 B)False

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 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 9

Two college students, Mary and Maggie, are spending spring break in Florida. Mary buys a cup of coffee each morning at the local Starbucks rather than from one of the local coffee shops. Maggie claims that Mary is irrational because she never purchases Starbucks coffee at home, and Starbucks coffee costs more than the coffee sold by local shops. An economist would most likely explain Mary's behavior by suggesting that

Accepted Answer

A)  Mary's behavior is rational, but Maggie's behavior is clearly irrational. 
B)  Mary's behavior is clearly irrational, but Maggie's behavior is rational. 
C)  the Starbucks brand name suggests consistent quality. 
D)  the advertising by Starbucks in Florida is more persuasive than the advertising by Starbucks in Mary and Maggie's home town. 
A)  Mary's behavior is rational, but Maggie's behavior is clearly irrational. 
B)  Mary's behavior is clearly irrational, but Maggie's behavior is rational. 
C)  the Starbucks brand name suggests consistent quality. 
D)  the advertising by Starbucks in Florida is more persuasive than the advertising by Starbucks in Mary and Maggie's home town.

Question 10

In the study done by Lee Benham on advertising for eyeglasses,

Accepted Answer

A)  advertising increased the average price. 
B)  advertising decreased the average price. 
C)  there was no difference in price, but quality was better in the states that didn't allow advertising. 
D)  advertising appeared to have no effect whatsoever in the states that permitted advertising. 
A)  advertising increased the average price. 
B)  advertising decreased the average price. 
C)  there was no difference in price, but quality was better in the states that didn't allow advertising. 
D)  advertising appeared to have no effect whatsoever in the states that permitted advertising.

Question 11

The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

Accepted Answer

A)  business-stealing externality that is observed in monopolistically competitive markets. 
B)  product-variety externality that is observed in monopolistically competitive markets. 
C)  inefficiencies of the long-term losses earned by monopolistically competitive firms. 
D)  persistence of positive profits into the long run for monopolistically competitive firms. 
A)  business-stealing externality that is observed in monopolistically competitive markets. 
B)  product-variety externality that is observed in monopolistically competitive markets. 
C)  inefficiencies of the long-term losses earned by monopolistically competitive firms. 
D)  persistence of positive profits into the long run for monopolistically competitive firms.

Question 12

In monopolistic competition as well as in monopoly,

Accepted Answer

A)  price exceeds marginal revenue for each firm. 
B)  profit is zero in a long-run equilibrium for each firm. 
C)  entry and exit by firms are unrestricted. 
D)  there are at most a few firms in each market. 
A)  price exceeds marginal revenue for each firm. 
B)  profit is zero in a long-run equilibrium for each firm. 
C)  entry and exit by firms are unrestricted. 
D)  there are at most a few firms in each market.

Question 13

Monopolistic competition is a type of

Accepted Answer

A)  oligopoly. 
B)  market structure. 
C)  price discrimination. 
D)  advertising strategy. 
A)  oligopoly. 
B)  market structure. 
C)  price discrimination. 
D)  advertising strategy.

Question 14

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-9. Given this firm's cost curves, if the firm were perfectly competitive rather than monopolistically competitive, then in a long-run equilibrium it would produce

Accepted Answer

A)  less than 100 units of output. 
B)  between 100 and 133.33 units of output. 
C)  133.33 units of output. 
D)  more than 133.33 units of output. 
A)  less than 100 units of output. 
B)  between 100 and 133.33 units of output. 
C)  133.33 units of output. 
D)  more than 133.33 units of output.

Question 15

Suppose that monopolistically competitive firms in a certain market are earning positive profits. In the transition from this initial situation to a long-run equilibrium,

Accepted Answer

A)  the number of firms in the market decreases. 
B)  each existing firm experiences a decrease in demand for its product. 
C)  each existing firm experiences a rightward shift of its marginal revenue curve. 
D)  each existing firm experiences an upward shift in its average total cost curve. 
A)  the number of firms in the market decreases. 
B)  each existing firm experiences a decrease in demand for its product. 
C)  each existing firm experiences a rightward shift of its marginal revenue curve. 
D)  each existing firm experiences an upward shift in its average total cost curve.

Question 16

Scenario 16-3
Peter operates an ice cream shop in the center of Fairfield. He sells several unusual flavors of organic, homemade ice cream so he has a monopoly over his own ice cream, though he competes with many other firms selling ice cream in Fairfield for the same customers. Peter's demand and cost values for sales per day are given in the table below. (Everyone who purchases Peter's ice cream buys a double scoop cone because it's so delicious.)
  
-Refer to Scenario 16-3. What price should Peter charge to maximize his profits?

Accepted Answer

The answer of Scenario 16-3
Peter operates an ice cream shop...

Question 17

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 18

Which of the following statements is not correct?

Accepted Answer

A)  Monopolistic competition is different from monopoly because monopolistic competition is characterized by free entry, whereas monopoly is characterized by barriers to entry. 
B)  Both monopolistic competition and oligopoly fall in between the more extreme market structures of competition and monopoly. 
C)  Monopolistic competition is different from oligopoly because each seller in monopolistic competition is small relative to the market, whereas each seller can affect the actions of other sellers in an oligopoly. 
D)  Both monopolistic competition and perfect competition are characterized by product differentiation. 
A)  Monopolistic competition is different from monopoly because monopolistic competition is characterized by free entry, whereas monopoly is characterized by barriers to entry. 
B)  Both monopolistic competition and oligopoly fall in between the more extreme market structures of competition and monopoly. 
C)  Monopolistic competition is different from oligopoly because each seller in monopolistic competition is small relative to the market, whereas each seller can affect the actions of other sellers in an oligopoly. 
D)  Both monopolistic competition and perfect competition are characterized by product differentiation.

Question 19

A monopolistically competitive firm faces the following demand schedule for its product:   The firm has total fixed costs of $9 and a constant marginal cost of $3 per unit. The firm will maximize profit with

Accepted Answer

A)  9 units of output. 
B)  15 units of output. 
C)  21 units of output. 
D)  30 units of output. 
A)  9 units of output. 
B)  15 units of output. 
C)  21 units of output. 
D)  30 units of output.

Question 20

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.

Which market structure(s) include(s) many firms with differentiated products who can enter and exit the market freely?

"In a long-run equilibrium, price is equal to average total cost." This statement applies to

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

When monopolistically competitive firms advertise, in the long run

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 0, what quantity would a profit-maximizing monopolist produce?

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures features entry in the long run?

When a monopolistically competitive firm is in a long-run equilibrium, the values of marginal cost, average total cost, and price are all the same.

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 is the most competitive?

In the study done by Lee Benham on advertising for eyeglasses,

The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

In monopolistic competition as well as in monopoly,

Monopolistic competition is a type of

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. Given this firm's cost curves, if the firm were perfectly competitive rather than monopolistically competitive, then in a long-run equilibrium it would produce

Suppose that monopolistically competitive firms in a certain market are earning positive profits. In the transition from this initial situation to a long-run equilibrium,

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

Which of the following statements is not correct?

A monopolistically competitive firm faces the following demand schedule for its product: The firm has total fixed costs of $9 and a constant marginal cost of $3 per unit. The firm will maximize profit with

Professional organizations and producer groups have an incentive to

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

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Exam 16: Monopolistic Competition

Which market structure(s) include(s) many firms with differentiated products who can enter and exit the market freely?

"In a long-run equilibrium, price is equal to average total cost." This statement applies to

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

When monopolistically competitive firms advertise, in the long run

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 0, what quantity would a profit-maximizing monopolist produce?

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures features entry in the long run?

When a monopolistically competitive firm is in a long-run equilibrium, the values of marginal cost, average total cost, and price are all the same.

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 is the most competitive?

In the study done by Lee Benham on advertising for eyeglasses,

The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

In monopolistic competition as well as in monopoly,

Monopolistic competition is a type of

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. Given this firm's cost curves, if the firm were perfectly competitive rather than monopolistically competitive, then in a long-run equilibrium it would produce

Suppose that monopolistically competitive firms in a certain market are earning positive profits. In the transition from this initial situation to a long-run equilibrium,

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

Which of the following statements is not correct?

A monopolistically competitive firm faces the following demand schedule for its product: The firm has total fixed costs of $9 and a constant marginal cost of $3 per unit. The firm will maximize profit with

Professional organizations and producer groups have an incentive to

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