Question 1

A monopolistically competitive market has characteristics that are similar to

Accepted Answer

A)  a monopoly only. 
B)  a competitive firm only. 
C)  both a monopoly and a competitive firm. 
D)  neither a monopoly nor a competitive firm. 
A)  a monopoly only. 
B)  a competitive firm only. 
C)  both a monopoly and a competitive firm. 
D)  neither a monopoly nor a competitive firm.

Question 2

A monopolistically competitive industry is characterized by

Accepted Answer

A)  many firms selling products that are similar but not identical. 
B)  many firms selling identical products. 
C)  a few firms selling products that are similar but not identical. 
D)  a few firms selling highly different products. 
A)  many firms selling products that are similar but not identical. 
B)  many firms selling identical products. 
C)  a few firms selling products that are similar but not identical. 
D)  a few firms selling highly different products.

Question 3

In some countries, brand name fast-food restaurants are not allowed to operate. Such restrictions are likely to

Accepted Answer

A)  enhance the social welfare of society. 
B)  increase the number of fast-food restaurants. 
C)  reduce barriers to entry in imperfect markets. 
D)  reduce the competitive nature of local fast-food markets. 
A)  enhance the social welfare of society. 
B)  increase the number of fast-food restaurants. 
C)  reduce barriers to entry in imperfect markets. 
D)  reduce the competitive nature of local fast-food markets.

Question 4

In which of the following market structures do firms produce the welfare-maximizing level of output?

Accepted Answer

A)  perfect competition 
B)  monopolistic competition 
C)  monopoly 
D)  Both a and b are correct. 
A)  perfect competition 
B)  monopolistic competition 
C)  monopoly 
D)  Both a and b are correct.

Question 5

Monopolistic competition is characterized by a few sellers offering similar products, whereas oligopoly is characterized by many sellers offering differentiated products.

Accepted Answer

A) True 
 B)False

Question 6

In a monopolistically competitive market,

Accepted Answer

A)  entry by new firms is impeded by barriers to entry; thus, the number of firms in the market is never ideal. 
B)  entry by new firms is impeded by barriers to entry, but the number of firms in the market is nevertheless always ideal. 
C)  free entry ensures that the number of firms in the market is ideal. 
D)  there may be too few or too many firms in the market, despite free entry. 
A)  entry by new firms is impeded by barriers to entry; thus, the number of firms in the market is never ideal. 
B)  entry by new firms is impeded by barriers to entry, but the number of firms in the market is nevertheless always ideal. 
C)  free entry ensures that the number of firms in the market is ideal. 
D)  there may be too few or too many firms in the market, despite free entry.

Question 7

A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

Accepted Answer

A)  no change in profits for all hotels/motels. 
B)  reduced efficiency of local lodging markets. 
C)  a request by consumers to increase the number of billboards. 
D)  increased price competition among hotels/motels in the community. 
A)  no change in profits for all hotels/motels. 
B)  reduced efficiency of local lodging markets. 
C)  a request by consumers to increase the number of billboards. 
D)  increased price competition among hotels/motels in the community.

Question 8

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 9

A firm produces the welfare-maximizing level of output

Accepted Answer

A)  only when the market is perfectly competitive. 
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 perfectly competitive. 
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 10

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-9. For this firm, the long-run equilibrium quantity of output is

Accepted Answer

A)  100 and the long-run equilibrium price is $90. 
B)  100 and the long-run equilibrium price is $140. 
C)  133.33 and the long-run equilibrium price is $56.67. 
D)  133.33 and the long-run equilibrium price is $123.33. 
A)  100 and the long-run equilibrium price is $90. 
B)  100 and the long-run equilibrium price is $140. 
C)  133.33 and the long-run equilibrium price is $56.67. 
D)  133.33 and the long-run equilibrium price is $123.33.

Question 11

Figure 16-3
This figure depicts a situation in a monopolistically competitive market.  
-Refer to Figure 16-3. What price will the monopolistically competitive firm charge in this market?

Accepted Answer

A)  $60 
B)  $70 
C)  $75 
D)  $80 
A)  $60 
B)  $70 
C)  $75 
D)  $80

Question 12

One thing that both critics of advertising and defenders of advertising agree on is that advertising fosters competition.

Accepted Answer

A) True 
 B)False

Question 13

To be considered an oligopoly, the market must have a concentration ratio below 50%.

Accepted Answer

A) True 
 B)False

Question 14

When McDonald's opens a store in Dhaka, Bangladesh, it has a strong incentive to enforce product quality consistent with stores in the United States.

Accepted Answer

A) True 
 B)False

Question 15

In perfect competition as well as in monopolistic competition,

Accepted Answer

A)  marginal revenue is equal to price for each firm. 
B)  profit is positive in a long-run equilibrium for each firm. 
C)  entry and exit by firms are restricted. 
D)  there are many firms in a single market. 
A)  marginal revenue is equal to price for each firm. 
B)  profit is positive in a long-run equilibrium for each firm. 
C)  entry and exit by firms are restricted. 
D)  there are many firms in a single market.

Question 16

When a firm operates at efficient scale, it is producing at the minimum point on its average total cost curve.

Accepted Answer

A) True 
 B)False

Question 17

A study of the market for optometrists' services in the 1960s showed that

Accepted Answer

A)  all states in the United States prohibited advertising by optometrists. 
B)  almost all professional optometrists opposed legal restrictions on their rights to advertise. 
C)  the average price of eyeglasses would decrease if the legal restrictions on advertising by optometrists were removed. 
D)  advertising on eyeglasses limited competition among optometrists. 
A)  all states in the United States prohibited advertising by optometrists. 
B)  almost all professional optometrists opposed legal restrictions on their rights to advertise. 
C)  the average price of eyeglasses would decrease if the legal restrictions on advertising by optometrists were removed. 
D)  advertising on eyeglasses limited competition among optometrists.

Question 18

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

Accepted Answer

A)  $12,000. 
B)  $18,000. 
C)  $21,000. 
D)  $24,000. 
A)  $12,000. 
B)  $18,000. 
C)  $21,000. 
D)  $24,000.

Question 19

Figure 16-3
This figure depicts a situation in a monopolistically competitive market.  
-Refer to Figure 16-3. 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 20

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-9. Efficient scale is reached

Accepted Answer

A)  at 100 units. 
B)  between 100 and 133.33 units. 
C)  at 133.33 units. 
D)  beyond 133.33 units. 
A)  at 100 units. 
B)  between 100 and 133.33 units. 
C)  at 133.33 units. 
D)  beyond 133.33 units.

Exam 16: Monopolistic Competition

A monopolistically competitive market has characteristics that are similar to

A monopolistically competitive industry is characterized by

In some countries, brand name fast-food restaurants are not allowed to operate. Such restrictions are likely to

In which of the following market structures do firms produce the welfare-maximizing level of output?

Monopolistic competition is characterized by a few sellers offering similar products, whereas oligopoly is characterized by many sellers offering differentiated products.

In a monopolistically competitive market,

A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

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

A firm produces the welfare-maximizing level of output

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. For this firm, the long-run equilibrium quantity of output is

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. What price will the monopolistically competitive firm charge in this market?

One thing that both critics of advertising and defenders of advertising agree on is that advertising fosters competition.

To be considered an oligopoly, the market must have a concentration ratio below 50%.

When McDonald's opens a store in Dhaka, Bangladesh, it has a strong incentive to enforce product quality consistent with stores in the United States.

In perfect competition as well as in monopolistic competition,

When a firm operates at efficient scale, it is producing at the minimum point on its average total cost curve.

A study of the market for optometrists' services in the 1960s showed that

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

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. What is the profit-maximizing price, quantity, and resulting profit?

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. Efficient scale is reached

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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