Question 1

Figure 16-11  
-Refer to Figure 16-11. If this firm profit-maximizes, how much output will it produce?

Accepted Answer

The answer of Figure 16-11  
-Refer to Figure 16-11....

Question 2

Which of the following statements is correct?

Accepted Answer

A)  The more similar Firm A's product is to Firm B's product, the more likely Firm A is to advertise. 
B)  Monopolistically competitive firms advertise in order to increase the elasticity of the demand curve they face. 
C)  According to the signaling theory, the more product information an advertisement contains, the more effective it is. 
D)  Brand names may help consumers if they provide information about the quality of a product when acquiring such information is difficult. 
A)  The more similar Firm A's product is to Firm B's product, the more likely Firm A is to advertise. 
B)  Monopolistically competitive firms advertise in order to increase the elasticity of the demand curve they face. 
C)  According to the signaling theory, the more product information an advertisement contains, the more effective it is. 
D)  Brand names may help consumers if they provide information about the quality of a product when acquiring such information is difficult.

Question 3

In the short run, a firm operating in a monopolistically competitive market

Accepted Answer

A)  produces an efficient output level. 
B)  chooses the maximum price to maximize profits. 
C)  produces where marginal cost is minimized. 
D)  chooses a price that exceeds marginal revenue. 
A)  produces an efficient output level. 
B)  chooses the maximum price to maximize profits. 
C)  produces where marginal cost is minimized. 
D)  chooses a price that exceeds marginal revenue.

Question 4

Monopolistic competition is characterized by which of the following attributes? (i) free entry
(ii) product differentiation
(iii) many sellers

Accepted Answer

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

Question 5

Figure 16-12  
-Refer to Figure 16-12. How much excess capacity does this firm have?

Accepted Answer

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

Question 6

A firm maximizes its profit by producing output up to the point where marginal revenue equals marginal cost

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 7

Critics of advertising argue that advertising

Accepted Answer

A)  creates desires that otherwise might not exist. 
B)  enhances competition. 
C)  benefits television viewers who enjoy TV commercials. 
D)  All of the above are correct. 
A)  creates desires that otherwise might not exist. 
B)  enhances competition. 
C)  benefits television viewers who enjoy TV commercials. 
D)  All of the above are correct.

Question 8

When a firm operates with excess capacity,

Accepted Answer

A)  additional production would lower the average total cost. 
B)  additional production would increase the average total cost. 
C)  it must be a perfectly competitive firm. 
D)  it must be a monopolistically competitive firm. 
A)  additional production would lower the average total cost. 
B)  additional production would increase the average total cost. 
C)  it must be a perfectly competitive firm. 
D)  it must be a monopolistically competitive firm.

Question 9

In many college towns, private independent bookstores typically locate on the periphery of the college campus. However, in some college towns, the university has used political power to restrict private bookstores near campus through community zoning laws. Use your knowledge of markets to predict the price and quality of service differences in the market for college textbooks under the two different market regimes.

Accepted Answer

In monopoly markets, price wil

Question 10

Figure 16-13  
-Refer to Figure 16-13. What is the first step in this industry's adjustment to long run equilibrium?

Accepted Answer

The answer of Figure 16-13  
-Refer to Figure 16-13....

Question 11

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product, the firm will

Accepted Answer

A)  be able to increase its markup over marginal cost. 
B)  eventually have to reduce price to remain competitive. 
C)  increase the welfare of society. 
D)  reduce its average total cost. 
A)  be able to increase its markup over marginal cost. 
B)  eventually have to reduce price to remain competitive. 
C)  increase the welfare of society. 
D)  reduce its average total cost.

Question 12

The higher the concentration ratio, the

Accepted Answer

A)  more control an individual firm has to set prices. 
B)  more competitive the industry. 
C)  less competitive the industry. 
D)  Both a and c are correct. 
A)  more control an individual firm has to set prices. 
B)  more competitive the industry. 
C)  less competitive the industry. 
D)  Both a and c are correct.

Question 13

Monopolistic competition is characterized by i) efficient scale
Ii) markup pricing over marginal cost
Iii) deadweight loss
Iv) excess capacity

Accepted Answer

A)  i) and ii) only 
B)  ii) and iv) only 
C)  i), ii), and iii) only 
D)  ii), iii), and iv) only 
A)  i) and ii) only 
B)  ii) and iv) only 
C)  i), ii), and iii) only 
D)  ii), iii), and iv) only

Question 14

Some firms have an incentive to advertise because they sell a

Accepted Answer

A)  homogeneous product and charge a price equal to marginal cost. 
B)  homogeneous product and charge a price above marginal cost. 
C)  differentiated product and charge a price equal to marginal cost. 
D)  differentiated product and charge a price above marginal cost. 
A)  homogeneous product and charge a price equal to marginal cost. 
B)  homogeneous product and charge a price above marginal cost. 
C)  differentiated product and charge a price equal to marginal cost. 
D)  differentiated product and charge a price above marginal cost.

Question 15

In which of the following market structures is(are) there a large number of sellers? (i) monopolistic competition
(ii) perfect competition
(iii) oligopoly

Accepted Answer

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

Question 16

Figure 16-11  
-Refer to Figure 16-11. If this firm profit-maximizes, how much revenue will it earn?

Accepted Answer

The answer of Figure 16-11  
-Refer to Figure 16-11....

Question 17

Advertising

Accepted Answer

A)  provides information about products, including prices and seller locations. 
B)  has been proven to increase competition and reduce prices compared to markets without advertising. 
C)  signals quality to consumers, because advertising is expensive. 
D)  All of the above are correct. 
A)  provides information about products, including prices and seller locations. 
B)  has been proven to increase competition and reduce prices compared to markets without advertising. 
C)  signals quality to consumers, because advertising is expensive. 
D)  All of the above are correct.

Question 18

In the short run, a firm in a monopolistically competitive market operates much like a

Accepted Answer

A)  firm in a perfectly competitive market. 
B)  firm in an oligopoly. 
C)  monopolist. 
D)  monopsonist. 
A)  firm in a perfectly competitive market. 
B)  firm in an oligopoly. 
C)  monopolist. 
D)  monopsonist.

Question 19

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Accepted Answer

A)  average revenue exceeds marginal revenue 
B)  marginal revenue equals marginal cost 
C)  price exceeds marginal cost 
D)  All of the above are correct. 
A)  average revenue exceeds marginal revenue 
B)  marginal revenue equals marginal cost 
C)  price exceeds marginal cost 
D)  All of the above are correct.

Question 20

A monopolistically competitive market

Accepted Answer

A)  usually has too many firms, reducing the economic profit of each firm to zero. 
B)  usually has too few firms, reducing the product variety for consumers. 
C)  may have too many or too few firms, and the government can intervene to achieve the optimal number of firms. 
D)  may have too many or too few firms, but the government can do little to rectify the situation. 
A)  usually has too many firms, reducing the economic profit of each firm to zero. 
B)  usually has too few firms, reducing the product variety for consumers. 
C)  may have too many or too few firms, and the government can intervene to achieve the optimal number of firms. 
D)  may have too many or too few firms, but the government can do little to rectify the situation.

Exam 16: Monopolistic Competition

Figure 16-11 -Refer to Figure 16-11. If this firm profit-maximizes, how much output will it produce?

Which of the following statements is correct?

In the short run, a firm operating in a monopolistically competitive market

Monopolistic competition is characterized by which of the following attributes? (i) free entry (ii) product differentiation (iii) many sellers

Figure 16-12 -Refer to Figure 16-12. How much excess capacity does this firm have?

A firm maximizes its profit by producing output up to the point where marginal revenue equals marginal cost

Critics of advertising argue that advertising

When a firm operates with excess capacity,

Figure 16-13 -Refer to Figure 16-13. What is the first step in this industry's adjustment to long run equilibrium?

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product, the firm will

The higher the concentration ratio, the

Monopolistic competition is characterized by i) efficient scale Ii) markup pricing over marginal cost Iii) deadweight loss Iv) excess capacity

Some firms have an incentive to advertise because they sell a

In which of the following market structures is(are) there a large number of sellers? (i) monopolistic competition (ii) perfect competition (iii) oligopoly

Figure 16-11 -Refer to Figure 16-11. If this firm profit-maximizes, how much revenue will it earn?

Advertising

In the short run, a firm in a monopolistically competitive market operates much like a

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

A monopolistically competitive market

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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