Question 1

Critics of advertising argue that firms use advertising to manipulate consumers' tastes.

Accepted Answer

A) True 
 B)False

Question 2

A market is comprised of many firms as opposed to just one firm or a few firms

Accepted Answer

A)  only when it is perfectly competitive. 
B)  only when it is perfectly competitive or oligopolistic. 
C)  only when it is perfectly competitive or monopolistically competitive. 
D)  when it is perfectly competitive, monopolistically competitive, or oligopolistic. 
A)  only when it is perfectly competitive. 
B)  only when it is perfectly competitive or oligopolistic. 
C)  only when it is perfectly competitive or monopolistically competitive. 
D)  when it is perfectly competitive, monopolistically competitive, or oligopolistic.

Question 3

Figure 16-8
The lines in the figures below illustrate the potential effect of entry and exit in a monopolistically competitive market on either the demand curve or the marginal cost curve of existing firms.  
-Refer to Figure 16-8. Panel (d) illustrates the change that would occur if existing firms faced

Accepted Answer

A)  long-run economic losses. 
B)  a decrease in the diversity of products offered in the market. 
C)  new entrants in the market. 
D)  firms exiting the market. 
A)  long-run economic losses. 
B)  a decrease in the diversity of products offered in the market. 
C)  new entrants in the market. 
D)  firms exiting the market.

Question 4

A monopolistically competitive market is like a monopoly in that

Accepted Answer

A)  both market structures feature easy entry by new firms in the long run. 
B)  the main objective of firms in both market structures is something other than profit maximization. 
C)  firms in both market structures produce the welfare-maximizing level of output. 
D)  firms in both market structures set price above marginal cost. 
A)  both market structures feature easy entry by new firms in the long run. 
B)  the main objective of firms in both market structures is something other than profit maximization. 
C)  firms in both market structures produce the welfare-maximizing level of output. 
D)  firms in both market structures set price above marginal cost.

Question 5

New firms will likely enter a monopolistically competitive market when price exceeds

Accepted Answer

A)  marginal revenue. 
B)  average revenue. 
C)  marginal cost. 
D)  average total cost. 
A)  marginal revenue. 
B)  average revenue. 
C)  marginal cost. 
D)  average total cost.

Question 6

Economists who argue that advertising enhances market efficiency suggest that celebrity advertising signals inferior product quality.

Accepted Answer

A) True 
 B)False

Question 7

Figure 16-14  
-Refer to Figure 16-14. The deadweight loss from production for this firm is represented by which of the following areas?

Accepted Answer

A)  ABC 
B)  IJK 
C)  BHJ 
D)  BCIJ 
A)  ABC 
B)  IJK 
C)  BHJ 
D)  BCIJ

Question 8

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.

Question 9

If "too much choice" is a problem for consumers, it would occur in which market structure(s)?

Accepted Answer

A)  perfect competition 
B)  monopoly 
C)  monopolistic competition 
D)  perfect competition and monopolistic competition 
A)  perfect competition 
B)  monopoly 
C)  monopolistic competition 
D)  perfect competition and monopolistic competition

Question 10

Evidence suggests that, in markets with differentiated products but little advertising,

Accepted Answer

A)  consumers are not confused by conflicting signals. 
B)  firms are generally less profitable. 
C)  markets are less efficient. 
D)  consumers make better choices. 
A)  consumers are not confused by conflicting signals. 
B)  firms are generally less profitable. 
C)  markets are less efficient. 
D)  consumers make better choices.

Question 11

Scenario 16-7
Consider the problem facing two firms, YumYum and Bertollini, in the frozen food market. Each firm has just come up with an idea for a new "frozen meal for two" which it would sell for $9. Assume that the marginal cost for each new product is a constant $2, and the only fixed cost is for advertising. Each company knows that if it spends $12 million on advertising it will get 1.5 million consumers to try its new product. YumYum has done market research which suggests that its product does not have any "staying" power in the market. Even though it could get 1.5 million consumers to buy the product once, it is unlikely that they will continue to buy the product in the future. Bertollini's market research suggests that its product is very good, and consumers who try the product will continue to be consumers over the ensuing year. On the basis of its market research, Bertollini estimates that its initial 1.5 million customers will buy one unit of the product each month in the coming year, for a total of 18 million units.
-Refer to Scenario 16-7. On the basis of a theory that people buy a product because it is advertised, the content of advertisements for Bertollini's product

Accepted Answer

A)  must show a consumer taste-test to be successful. 
B)  must include celebrity endorsements to be successful. 
C)  is irrelevant to the success of the advertisement. 
D)  Both a and b would be equally successful. 
A)  must show a consumer taste-test to be successful. 
B)  must include celebrity endorsements to be successful. 
C)  is irrelevant to the success of the advertisement. 
D)  Both a and b would be equally successful.

Question 12

Scenario 16-9
Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products.
-Refer to Scenario 16-9. Martina offers two reasons for agreeing with Dean's decision. What are they?

Accepted Answer

brand names provide informatio

Question 13

Figure 16-14  
-Refer to Figure 16-14. Which letter identifies the efficient level of output for this firm?

Accepted Answer

The answer of Figure 16-14  
-Refer to Figure 16-14....

Question 14

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

Accepted Answer

A)  the demand curve will be perfectly elastic. 
B)  price exceeds marginal cost. 
C)  marginal cost must be falling. 
D)  marginal revenue exceeds marginal cost. 
A)  the demand curve will be perfectly elastic. 
B)  price exceeds marginal cost. 
C)  marginal cost must be falling. 
D)  marginal revenue exceeds marginal cost.

Question 15

Crude oil is primarily supplied to the world market by a few Middle Eastern countries. Such a market is an example of a(n)

Accepted Answer

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

Question 16

A market structure in which there are many firms selling products that are similar but not identical is known as

Accepted Answer

A)  oligopoly. 
B)  monopoly. 
C)  monopolistic competition. 
D)  perfect competition. 
A)  oligopoly. 
B)  monopoly. 
C)  monopolistic competition. 
D)  perfect competition.

Question 17

When firms in a monopolistically competitive market engage in price-related advertising, defenders of advertising argue that

Accepted Answer

A)  the quality of products sold in the market always increases. 
B)  customers are less likely to be informed about other characteristics of the product. 
C)  new firms are discouraged from entering the market. 
D)  each firm has less market power. 
A)  the quality of products sold in the market always increases. 
B)  customers are less likely to be informed about other characteristics of the product. 
C)  new firms are discouraged from entering the market. 
D)  each firm has less market power.

Question 18

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 least 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 19

Which of the following market structures is considered a differentiated products market?

Accepted Answer

A)  Perfect competition 
B)  Monopolistic competition 
C)  Monopoly 
D)  Both a and b are differentiated products markets. 
A)  Perfect competition 
B)  Monopolistic competition 
C)  Monopoly 
D)  Both a and b are differentiated products markets.

Question 20

Figure 16-12  
-Refer to Figure 16-12. Does this monopolistically competitive market produce the welfare-maximizing level of output?

Accepted Answer

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

Exam 16: Monopolistic Competition

Critics of advertising argue that firms use advertising to manipulate consumers' tastes.

A market is comprised of many firms as opposed to just one firm or a few firms

A monopolistically competitive market is like a monopoly in that

New firms will likely enter a monopolistically competitive market when price exceeds

Economists who argue that advertising enhances market efficiency suggest that celebrity advertising signals inferior product quality.

Figure 16-14 -Refer to Figure 16-14. The deadweight loss from production for this firm is represented by which of the following areas?

Monopolistic competition differs from perfect competition because in monopolistically competitive markets

If "too much choice" is a problem for consumers, it would occur in which market structure(s)?

Evidence suggests that, in markets with differentiated products but little advertising,

Figure 16-14 -Refer to Figure 16-14. Which letter identifies the efficient level of output for this firm?

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

Crude oil is primarily supplied to the world market by a few Middle Eastern countries. Such a market is an example of a(n)

A market structure in which there are many firms selling products that are similar but not identical is known as

When firms in a monopolistically competitive market engage in price-related advertising, defenders of advertising argue that

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 least competitive?

Which of the following market structures is considered a differentiated products market?

Figure 16-12 -Refer to Figure 16-12. Does this monopolistically competitive market produce the welfare-maximizing level of output?

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

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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