Question 1

Discuss how brand names may enhance the efficiency of markets in a less developed country.

Accepted Answer

Recognizable brand names signal quality

Question 2

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

Accepted Answer

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

Question 3

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. When Peter maximizes his profits, what is his total cost per day?

Accepted Answer

The answer of Scenario 16-3
Peter operates an ice cream shop...

Question 4

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 5

Figure 16-10
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-10. At what quantity of output does average revenue exceed marginal revenue by $66.66?

Accepted Answer

A)  at 100 units of output 
B)  somewhere between 100 and 133.33 units of output 
C)  at 133.33 units of output 
D)  at 154.92 units of output 
A)  at 100 units of output 
B)  somewhere between 100 and 133.33 units of output 
C)  at 133.33 units of output 
D)  at 154.92 units of output

Question 6

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Accepted Answer

A)  industrial products. 
B)  homogeneous products. 
C)  consumer goods for which there are no close substitutes. 
D)  highly-differentiated consumer goods. 
A)  industrial products. 
B)  homogeneous products. 
C)  consumer goods for which there are no close substitutes. 
D)  highly-differentiated consumer goods.

Question 7

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 8

A monopolistically competitive firm faces the following demand curve for its product:   The firm has total fixed costs of $120 and a constant marginal cost of $12 per unit. We can conclude that

Accepted Answer

A)  firms will exit this market. 
B)  firms will enter this market. 
C)  this market is in long-run equilibrium. 
D)  this firm is operating at its efficient scale. 
A)  firms will exit this market. 
B)  firms will enter this market. 
C)  this market is in long-run equilibrium. 
D)  this firm is operating at its efficient scale.

Question 9

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

Accepted Answer

A)  price is equal to average total cost. 
B)  price is equal to marginal cost. 
C)  price is equal to marginal revenue. 
D)  the firm operates at its efficient scale. 
A)  price is equal to average total cost. 
B)  price is equal to marginal cost. 
C)  price is equal to marginal revenue. 
D)  the firm operates at its efficient scale.

Question 10

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 11

Which of the following statements is not correct?

Accepted Answer

A)  Critics of advertising argue that firms advertise to manipulate consumers' tastes. 
B)  Defenders of advertising argue that advertising provides valuable product information to consumers. 
C)  An industry with many brand name products will be more competitive than one with many generic products. 
D)  The willingness of a firm to spend a large amount of money on advertising can signal the quality of the product. 
A)  Critics of advertising argue that firms advertise to manipulate consumers' tastes. 
B)  Defenders of advertising argue that advertising provides valuable product information to consumers. 
C)  An industry with many brand name products will be more competitive than one with many generic products. 
D)  The willingness of a firm to spend a large amount of money on advertising can signal the quality of the product.

Question 12

When existing firms lose customers and profits due to entry of a new competitor, a

Accepted Answer

A)  predatory-pricing externality occurs. 
B)  consumption externality occurs. 
C)  business-stealing externality occurs. 
D)  product-variety externality occurs. 
A)  predatory-pricing externality occurs. 
B)  consumption externality occurs. 
C)  business-stealing externality occurs. 
D)  product-variety externality occurs.

Question 13

When a monopolistically competitive firm raises its price,

Accepted Answer

A)  quantity demanded falls to zero. 
B)  quantity demanded declines but not to zero. 
C)  the market supply curve shifts outward. 
D)  quantity demanded remains constant. 
A)  quantity demanded falls to zero. 
B)  quantity demanded declines but not to zero. 
C)  the market supply curve shifts outward. 
D)  quantity demanded remains constant.

Question 14

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 15

Monopolistic competition is an

Accepted Answer

A)  inefficient market structure because there is deadweight loss. 
B)  inefficient market structure because price exceeds marginal cost. 
C)  efficient market structure because free entry drives long-run profits to zero. 
D)  Both a and b are correct. 
A)  inefficient market structure because there is deadweight loss. 
B)  inefficient market structure because price exceeds marginal cost. 
C)  efficient market structure because free entry drives long-run profits to zero. 
D)  Both a and b are correct.

Question 16

In a long-run equilibrium,

Accepted Answer

A)  excess capacity applies to monopolistically competitive firms but not to competitive firms. 
B)  zero economic profit applies to competitive firms but not to monopolistically competitive firms. 
C)  markup over marginal cost applies to both monopolistically competitive and competitive firms. 
D)  product variety externalities apply to both perfectly competitive firms and monopolistically competitive firms. 
A)  excess capacity applies to monopolistically competitive firms but not to competitive firms. 
B)  zero economic profit applies to competitive firms but not to monopolistically competitive firms. 
C)  markup over marginal cost applies to both monopolistically competitive and competitive firms. 
D)  product variety externalities apply to both perfectly competitive firms and monopolistically competitive firms.

Question 17

The LookGood BePopular (LGBP) Clothing Company embarked on a new advertising campaign in which a group of young beautiful people are having fun eating out at a restaurant wearing the company's clothes. Critics of advertising argue that this advertisement

Accepted Answer

A)  causes demand for LGBP Clothing to be less elastic. 
B)  is more effective than other forms of advertisement because of its content. 
C)  will cause the market to be more competitive. 
D)  Both a and b are correct. 
A)  causes demand for LGBP Clothing to be less elastic. 
B)  is more effective than other forms of advertisement because of its content. 
C)  will cause the market to be more competitive. 
D)  Both a and b are correct.

Question 18

Which of the following markets impose deadweight losses on society?

Accepted Answer

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

Question 19

If regulators required firms in monopolistically competitive markets to set price equal to marginal cost,

Accepted Answer

A)  firms would respond by lowering their costs. 
B)  firms would require a subsidy to stay in business 
C)  new firms that enter the market would operate at efficient scale. 
D)  the most efficient firms would not be affected. 
A)  firms would respond by lowering their costs. 
B)  firms would require a subsidy to stay in business 
C)  new firms that enter the market would operate at efficient scale. 
D)  the most efficient firms would not be affected.

Question 20

Which of the following industries has the highest concentration ratio?

Accepted Answer

A)  jeans 
B)  fruit 
C)  household laundry equipment 
D)  restaurants 
A)  jeans 
B)  fruit 
C)  household laundry equipment 
D)  restaurants

Exam 16: Monopolistic Competition

Discuss how brand names may enhance the efficiency of markets in a less developed country.

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

Advertising

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. At what quantity of output does average revenue exceed marginal revenue by $66.66?

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

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

A monopolistically competitive firm faces the following demand curve for its product: The firm has total fixed costs of $120 and a constant marginal cost of $12 per unit. We can conclude that

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

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

Which of the following statements is not correct?

When existing firms lose customers and profits due to entry of a new competitor, a

When a monopolistically competitive firm raises its price,

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

Monopolistic competition is an

In a long-run equilibrium,

The LookGood BePopular (LGBP) Clothing Company embarked on a new advertising campaign in which a group of young beautiful people are having fun eating out at a restaurant wearing the company's clothes. Critics of advertising argue that this advertisement

Which of the following markets impose deadweight losses on society?

If regulators required firms in monopolistically competitive markets to set price equal to marginal cost,

Which of the following industries has the highest concentration ratio?

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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