Question 1

The market for novels is

Accepted Answer

A)  perfectly competitive. 
B)  a monopoly. 
C)  monopolistically competitive. 
D)  an oligopoly. 
A)  perfectly competitive. 
B)  a monopoly. 
C)  monopolistically competitive. 
D)  an oligopoly.

Question 2

Suppose there is a market in which the firms hold the following market shares: 25%, 20%, 18%, 15%, 8%, 7%, 4%, 2%, 1%. What is the concentration ratio for this market?

Accepted Answer

The answer of Suppose there is a market in which...

Question 3

A monopolistically competitive market is like both a competitive market and a monopoly in that

Accepted Answer

A)  all three market structures feature easy entry by new firms in the long run. 
B)  firms in all three market structures maximize profit by producing an output level where marginal revenue equals marginal cost. 
C)  firms in all three market structures produce the welfare-maximizing level of output. 
D)  All of the above are correct. 
A)  all three market structures feature easy entry by new firms in the long run. 
B)  firms in all three market structures maximize profit by producing an output level where marginal revenue equals marginal cost. 
C)  firms in all three market structures produce the welfare-maximizing level of output. 
D)  All of the above are correct.

Question 4

Advertising that uses celebrity endorsements is most likely intended to

Accepted Answer

A)  increase elasticity of demand for the advertised product. 
B)  reduce the ability of markets to allocate resources efficiently. 
C)  provide a signal of product quality. 
D)  be useful only for psychological effects. 
A)  increase elasticity of demand for the advertised product. 
B)  reduce the ability of markets to allocate resources efficiently. 
C)  provide a signal of product quality. 
D)  be useful only for psychological effects.

Question 5

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 are price takers. 
C)  Both a monopolistically competitive industry and a monopoly are characterized by a very small number of (or one) firm(s). 
D)  Firms can easily enter a perfectly competitive or monopolistically competitive industry. 
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 are price takers. 
C)  Both a monopolistically competitive industry and a monopoly are characterized by a very small number of (or one) firm(s). 
D)  Firms can easily enter a perfectly competitive or monopolistically competitive industry.

Question 6

Firms that sell highly differentiated consumer goods, such as over-the-counter drugs, soft drinks, breakfast cereals, and dog food, typically spend between 10 and 20 percent of revenue for

Accepted Answer

The answer of Firms that sell highly differentiated consumer goods,...

Question 7

Although monopolistically competitive markets offer consumers a wide variety of differentiated products, there may still be insufficient variety if

Accepted Answer

A)  there are large fixed costs in the market. 
B)  there are no barriers to entry in the market. 
C)  the business-stealing externality is present in the market. 
D)  the government does not impose regulations on the market. 
A)  there are large fixed costs in the market. 
B)  there are no barriers to entry in the market. 
C)  the business-stealing externality is present in the market. 
D)  the government does not impose regulations on the market.

Question 8

Monopolistically competitive markets differ from perfectly competitive markets due to (i) the number of sellers.
(ii) the barriers to entry.
(iii) the product differentiation among the sellers.

Accepted Answer

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

Question 9

When a firm in a monopolistically competitive market earns zero economic profit, its product price must equal marginal cost.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)  marginal revenue is equal to marginal cost. 
B)  average total cost is minimized. 
C)  marginal revenue is tangent to average total cost. 
D)  All of the above are correct. 
A)  marginal revenue is equal to marginal cost. 
B)  average total cost is minimized. 
C)  marginal revenue is tangent to average total cost. 
D)  All of the above are correct.

Question 11

Figure 16-14  
-Refer to Figure 16-14. Which of the following represents the excess capacity of this firm?

Accepted Answer

A)  BJ 
B)  GH 
C)  LM 
D)  There is no excess capacity. 
A)  BJ 
B)  GH 
C)  LM 
D)  There is no excess capacity.

Question 12

A monopolistically competitive firm is currently producing 20 units of output. At this level of output the firm is charging a price equal to $20, has marginal revenue equal to $12, has marginal cost equal to $12, and has average total cost equal to $18. From this information we can infer that

Accepted Answer

A)  the firm is currently maximizing its profit. 
B)  the profits of the firm are negative. 
C)  firms are likely to leave this market in the long run. 
D)  All of the above are correct. 
A)  the firm is currently maximizing its profit. 
B)  the profits of the firm are negative. 
C)  firms are likely to leave this market in the long run. 
D)  All of the above are correct.

Question 13

To maximize its profit, a monopolistically competitive firm

Accepted Answer

A)  takes the price as given and chooses its quantity, just as a competitive firm does. 
B)  takes the price as given and chooses its quantity, just as a colluding oligopolist does. 
C)  chooses its quantity and price, just as a competitive firm does. 
D)  chooses its quantity and price, just as a monopoly does. 
A)  takes the price as given and chooses its quantity, just as a competitive firm does. 
B)  takes the price as given and chooses its quantity, just as a colluding oligopolist does. 
C)  chooses its quantity and price, just as a competitive firm does. 
D)  chooses its quantity and price, just as a monopoly does.

Question 14

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. How much profit will this firm earn when it chooses its output to maximize profit?

Accepted Answer

A)  a $12 loss 
B)  an $8 profit 
C)  a $25 profit 
D)  a $32 profit 
A)  a $12 loss 
B)  an $8 profit 
C)  a $25 profit 
D)  a $32 profit

Question 15

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. How much profit will Peter earn each day if he chooses the price and quantity that maximize his profit?

Accepted Answer

A)  $176 
B)  $208 
C)  $225 
D)  $352 
A)  $176 
B)  $208 
C)  $225 
D)  $352

Question 16

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-9. As the figure is drawn, the firm is in

Accepted Answer

A)  a short-run equilibrium but it is not in a long-run equilibrium. 
B)  a long-run equilibrium but it is not in a short-run equilibrium. 
C)  a short-run equilibrium as well as a long-run equilibrium. 
D)  neither a short-run equilibrium nor a long-run equilibrium. 
A)  a short-run equilibrium but it is not in a long-run equilibrium. 
B)  a long-run equilibrium but it is not in a short-run equilibrium. 
C)  a short-run equilibrium as well as a long-run equilibrium. 
D)  neither a short-run equilibrium nor a long-run equilibrium.

Question 17

Because a monopolistically competitive firm has some market power, in the long-run the price of its product exceeds its

Accepted Answer

A)  average revenue. 
B)  average total cost. 
C)  marginal cost. 
D)  None of the above is correct. 
A)  average revenue. 
B)  average total cost. 
C)  marginal cost. 
D)  None of the above is correct.

Question 18

Figure 16-10
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-10. In response to the situation represented by the figure, we would expect

Accepted Answer

A)  some of the firms that are currently in the market to exit. 
B)  the demand for this firm's product to increase, assuming this firm does not exit. 
C)  this firm's profit to move from its current value toward zero. 
D)  All of the above are correct. 
A)  some of the firms that are currently in the market to exit. 
B)  the demand for this firm's product to increase, assuming this firm does not exit. 
C)  this firm's profit to move from its current value toward zero. 
D)  All of the above are correct.

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

Monopolistic competition differs from perfect competition because in monopolistically competitive markets

Accepted Answer

A)  there are barriers to entry. 
B)  all firms can eventually earn economic profits. 
C)  each of the sellers offers a somewhat different product. 
D)  strategic interactions between firms are important. 
A)  there are barriers to entry. 
B)  all firms can eventually earn economic profits. 
C)  each of the sellers offers a somewhat different product. 
D)  strategic interactions between firms are important.

Exam 16: Monopolistic Competition

The market for novels is

Suppose there is a market in which the firms hold the following market shares: 25%, 20%, 18%, 15%, 8%, 7%, 4%, 2%, 1%. What is the concentration ratio for this market?

A monopolistically competitive market is like both a competitive market and a monopoly in that

Advertising that uses celebrity endorsements is most likely intended to

Which of the following statements is correct?

Firms that sell highly differentiated consumer goods, such as over-the-counter drugs, soft drinks, breakfast cereals, and dog food, typically spend between 10 and 20 percent of revenue for

Although monopolistically competitive markets offer consumers a wide variety of differentiated products, there may still be insufficient variety if

Monopolistically competitive markets differ from perfectly competitive markets due to (i) the number of sellers. (ii) the barriers to entry. (iii) the product differentiation among the sellers.

When a firm in a monopolistically competitive market earns zero economic profit, its product price must equal marginal cost.

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

Figure 16-14 -Refer to Figure 16-14. Which of the following represents the excess capacity of this firm?

A monopolistically competitive firm is currently producing 20 units of output. At this level of output the firm is charging a price equal to $20, has marginal revenue equal to $12, has marginal cost equal to $12, and has average total cost equal to $18. From this information we can infer that

To maximize its profit, a monopolistically competitive firm

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. How much profit will this firm earn when it chooses its output to maximize profit?

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. As the figure is drawn, the firm is in

Because a monopolistically competitive firm has some market power, in the long-run the price of its product exceeds its

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. In response to the situation represented by the figure, we would expect

Entry by new firms into a monopolistically competitive market

Monopolistic competition differs from perfect competition because in monopolistically competitive markets

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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