Question 1

Monopolistic competition features _____ products.

Accepted Answer

A)  identical 
B)  only food, such as McDonald's and Burger King 
C)  differentiated 
D)  only electronic, such as Apple and Motorola 
A)  identical 
B)  only food, such as McDonald's and Burger King 
C)  differentiated 
D)  only electronic, such as Apple and Motorola

Question 2

Which of the following is NOT an example of product differentiation?

Accepted Answer

A)  Shell versus Chevron 
B)  Coca-Cola versus Pepsi 
C)  Levi's versus American Eagle 
D)  a small oil well 
A)  Shell versus Chevron 
B)  Coca-Cola versus Pepsi 
C)  Levi's versus American Eagle 
D)  a small oil well

Question 3

When does a monopolistic competitive industry experience other entrants into the market?

Accepted Answer

When there are profits to be h

Question 4

Persuasion ads can deepen our enjoyment of products by evoking good memories.

Accepted Answer

A) True 
 B)False

Question 5

Products are identical in the case of monopolistic competition.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is NOT true about advertising?

Accepted Answer

A)  Advertising brings businesses and customers together. 
B)  Advertising helps promote many useful goods and services. 
C)  Advertising improves the incentive to make low-cost, high-quality items. 
D)  Advertising lowers the social surplus by costing businesses a lot of money with no corresponding benefit. 
A)  Advertising brings businesses and customers together. 
B)  Advertising helps promote many useful goods and services. 
C)  Advertising improves the incentive to make low-cost, high-quality items. 
D)  Advertising lowers the social surplus by costing businesses a lot of money with no corresponding benefit.

Question 7

The movie The Invention of Lying takes place in a world where everyone can only tell the absolute truth. An advertisement for Coke admits there is nothing new about the product and that it's basically just brown sugar water. It ends with the tagline: "Coke. It's very famous." How is Coke using advertising in this fictional advertisement?

Accepted Answer

A)  as a signal 
B)  as conveying new information 
C)  as part of the product 
D)  both as a signal and the conveyor of new information 
A)  as a signal 
B)  as conveying new information 
C)  as part of the product 
D)  both as a signal and the conveyor of new information

Question 8

Persuasive advertising:

Accepted Answer

A)  is informative. 
B)  is wasteful. 
C)  can create market power for firms by brand differentiation. 
D)  has been shown to do little to increase sales. 
A)  is informative. 
B)  is wasteful. 
C)  can create market power for firms by brand differentiation. 
D)  has been shown to do little to increase sales.

Question 9

Monopolistic competition is a:

Accepted Answer

A)  group of suppliers that try to act as if they were a monopoly. 
B)  market that is dominated by a small number of firms. 
C)  market with a large number of firms selling similar but not identical products. 
D)  group of suppliers that try to act as if they were a perfectly competitive market. 
A)  group of suppliers that try to act as if they were a monopoly. 
B)  market that is dominated by a small number of firms. 
C)  market with a large number of firms selling similar but not identical products. 
D)  group of suppliers that try to act as if they were a perfectly competitive market.

Question 10

Use the following to answer questions:
Figure: Monopolistic Competition  
-(Figure: Monopolistic Competition) Refer to the figure. Suppose the figure represents a firm that operates in a monopolistically competitive market. In the long run you would expect:

Accepted Answer

A)  prices to increase. 
B)  demand to become more inelastic. 
C)  less quality and innovation. 
D)  more firms to enter the market. 
A)  prices to increase. 
B)  demand to become more inelastic. 
C)  less quality and innovation. 
D)  more firms to enter the market.

Question 11

Advertising is sometimes simply about trying to change our minds.

Accepted Answer

A) True 
 B)False

Question 12

Consumers benefit from advertising:
I. by gaining product information.
II. by being persuaded to try a new product they might like.
III. when the ad provides a signal of the product's quality.
IV. if the ad leads to a lower price for the product.

Accepted Answer

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

Question 13

Monopolistic competitive products are usually _____ advertised.

Accepted Answer

A)  never 
B)  rarely 
C)  occasionally 
D)  highly 
A)  never 
B)  rarely 
C)  occasionally 
D)  highly

Question 14

Advertising can make potential customers more interested in buying, or at least sampling the product.

Accepted Answer

A) True 
 B)False

Question 15

Perfectly competitive firms will not advertise because there is no gain from selling additional units of the product.

Accepted Answer

A) True 
 B)False

Question 16

Monopolistically competitive firms set price:

Accepted Answer

A)  less than marginal cost. 
B)  equal to marginal cost. 
C)  greater than marginal cost. 
D)  sometimes greater than, sometimes less than, and sometimes equal to marginal cost. 
A)  less than marginal cost. 
B)  equal to marginal cost. 
C)  greater than marginal cost. 
D)  sometimes greater than, sometimes less than, and sometimes equal to marginal cost.

Question 17

When an advertisement serves as a signaling device, it provides potential customers with:

Accepted Answer

A)  the idea that the product is expected to be very popular for a long time. 
B)  information on price. 
C)  information on quality. 
D)  information on availability. 
A)  the idea that the product is expected to be very popular for a long time. 
B)  information on price. 
C)  information on quality. 
D)  information on availability.

Question 18

Advertising can create market power by product differentiation.

Accepted Answer

A) True 
 B)False

Question 19

Owning a small oil well is a good example of a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 20

As more firms enter a monopolistically competitive market, the market demand curve:

Accepted Answer

A)  increases, shifts to the right. 
B)  stays the same. 
C)  decreases, shifts to the left. 
D)  It will vary greatly depending on the industry. 
A)  increases, shifts to the right. 
B)  stays the same. 
C)  decreases, shifts to the left. 
D)  It will vary greatly depending on the industry.

Exam 17: Monopolistic Competition and Advertising

Monopolistic competition features _____ products.

Which of the following is NOT an example of product differentiation?

When does a monopolistic competitive industry experience other entrants into the market?

Persuasion ads can deepen our enjoyment of products by evoking good memories.

Products are identical in the case of monopolistic competition.

Which of the following is NOT true about advertising?

Persuasive advertising:

Monopolistic competition is a:

Use the following to answer questions: Figure: Monopolistic Competition -(Figure: Monopolistic Competition) Refer to the figure. Suppose the figure represents a firm that operates in a monopolistically competitive market. In the long run you would expect:

Advertising is sometimes simply about trying to change our minds.

Consumers benefit from advertising: I. by gaining product information. II. by being persuaded to try a new product they might like. III. when the ad provides a signal of the product's quality. IV. if the ad leads to a lower price for the product.

Monopolistic competitive products are usually _____ advertised.

Advertising can make potential customers more interested in buying, or at least sampling the product.

Perfectly competitive firms will not advertise because there is no gain from selling additional units of the product.

Monopolistically competitive firms set price:

When an advertisement serves as a signaling device, it provides potential customers with:

Advertising can create market power by product differentiation.

Owning a small oil well is a good example of a monopolistically competitive market.

As more firms enter a monopolistically competitive market, the market demand curve:

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

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