Question 1

When an industry has many firms, the industry is

Accepted Answer

A)  an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. 
B)  an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
C)  monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
D)  perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. 
A)  an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. 
B)  an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
C)  monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 
D)  perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products.

Question 2

Figure 16-7  
-Refer to Figure 16-7. The firm depicted in panel b faces a horizontal demand curve. If panel b depicts a profit- maximizing firm,

Accepted Answer

A)  it could be operating in either a perfectly competitive market or in a monopolistically competitive market. 
B)  it would not have excess capacity in its production as long as it is earning zero economic profit. 
C)  it is able to choose the price at which it sells its product. 
D)  the firm can always raise its profit by increasing production since consumers will buy as much as the firm can produce. 
A)  it could be operating in either a perfectly competitive market or in a monopolistically competitive market. 
B)  it would not have excess capacity in its production as long as it is earning zero economic profit. 
C)  it is able to choose the price at which it sells its product. 
D)  the firm can always raise its profit by increasing production since consumers will buy as much as the firm can produce.

Question 3

Table 16-7
A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20.  
-Refer to Table 16-7. If this firm profit maximizes and faces a constant marginal cost of $7, does it have excess capacity? How do you know?

Accepted Answer

Yes, avera

Question 4

A typical firm in the US economy would be classified as

Accepted Answer

A)  perfectly competitive. 
B)  imperfectly competitive. 
C)  a duopolist. 
D)  an oligopolist. 
A)  perfectly competitive. 
B)  imperfectly competitive. 
C)  a duopolist. 
D)  an oligopolist.

Question 5

Scenario 16-8
Burger Bonanza, a major national burger chain, recently decided to spend $4 million on an advertising campaign featuring a world famous actor to promote its new Bomber Burger.
-Refer to Scenario 16-8. What can consumers conclude from Burger Bonanza's willingness to spend $4 million on an advertising campaign?

Accepted Answer

high quali

Question 6

Imperfectly competitive firms are characterized by

Accepted Answer

A)  horizontal demand curves. 
B)  standardized products. 
C)  a large number of small firms. 
D)  price making ability. 
A)  horizontal demand curves. 
B)  standardized products. 
C)  a large number of small firms. 
D)  price making ability.

Question 7

A market structure with only a few sellers, each offering similar or identical products, 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 8

In the long run, monopolistically competitive firms produce where demand equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 9

A firm in a monopolistically competitive market can earn both short-run and long-run profits.

Accepted Answer

A) True 
 B)False

Question 10

Table 16-5
This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm.  
-Refer to Table 16-5. What is this firm's total cost at the profit­maximizing quantity?

Accepted Answer

A)  $12 
B)  $18 
C)  $32 
D)  $36 
A)  $12 
B)  $18 
C)  $32 
D)  $36

Question 11

There is general disagreement among economists about the role of advertising, but there is widespread agreement about the role of brand names on market efficiency.

Accepted Answer

A) True 
 B)False

Question 12

For a profit-maximizing firm in a monopolistically competitive market, when price is equal to average total cost, price must lie above marginal cost.

Accepted Answer

A) True 
 B)False

Question 13

Monopolistic competition is an inefficient market structure because

Accepted Answer

A)  price exceeds marginal cost. 
B)  it has a deadweight loss, just as monopoly does. 
C)  at the equilibrium, some consumers will value the good at more than the marginal cost of production. 
D)  All of the above are correct. 
A)  price exceeds marginal cost. 
B)  it has a deadweight loss, just as monopoly does. 
C)  at the equilibrium, some consumers will value the good at more than the marginal cost of production. 
D)  All of the above are correct.

Question 14

A recent outbreak of hepatitis was linked to a national fast-food restaurant chain. This is an example of a case in which

Accepted Answer

A)  brand name identity increases the effectiveness of markets. 
B)  brand name identity can be detrimental to the profitability of a firm. 
C)  advertising is ineffective in salvaging perceptions of product quality. 
D)  advertising cannot be used to establish brand loyalty. 
A)  brand name identity increases the effectiveness of markets. 
B)  brand name identity can be detrimental to the profitability of a firm. 
C)  advertising is ineffective in salvaging perceptions of product quality. 
D)  advertising cannot be used to establish brand loyalty.

Question 15

Defenders of advertising argue that it is not rational for profit-maximizing firms to spend money on advertising for products that have

Accepted Answer

A)  superior quality. 
B)  inferior or mediocre quality. 
C)  low prices. 
D)  limited availability. 
A)  superior quality. 
B)  inferior or mediocre quality. 
C)  low prices. 
D)  limited availability.

Question 16

A monopolistically competitive firm has the following cost structure:   The firm faces the following demand curve:   To maximize profit (or minimize losses), the firm will produce

Accepted Answer

A)  20 units. 
B)  30 units. 
C)  40 units. 
D)  50 units. 
A)  20 units. 
B)  30 units. 
C)  40 units. 
D)  50 units.

Question 17

In the long run, a firm in a perfectly competitive market operates

Accepted Answer

A)  at its efficient scale, and a monopolistically competitive firm operates at its efficient scale. 
B)  at its efficient scale, and a monopolistically competitive firm operates with excess capacity. 
C)  with excess capacity, and a monopolistically competitive firm operates with excess capacity. 
D)  with excess capacity, and a monopolistically competitive firm operates at its efficient scale. 
A)  at its efficient scale, and a monopolistically competitive firm operates at its efficient scale. 
B)  at its efficient scale, and a monopolistically competitive firm operates with excess capacity. 
C)  with excess capacity, and a monopolistically competitive firm operates with excess capacity. 
D)  with excess capacity, and a monopolistically competitive firm operates at its efficient scale.

Question 18

Monopolistic competition is characterized by

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 19

The term excess capacity refers to the fact that a firm operates on the upward-sloping portion of its average-total- cost curve.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

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

Exam 16: Monopolistic Competition

When an industry has many firms, the industry is

Figure 16-7 -Refer to Figure 16-7. The firm depicted in panel b faces a horizontal demand curve. If panel b depicts a profit- maximizing firm,

Table 16-7 A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20. -Refer to Table 16-7. If this firm profit maximizes and faces a constant marginal cost of $7, does it have excess capacity? How do you know?

A typical firm in the US economy would be classified as

Imperfectly competitive firms are characterized by

A market structure with only a few sellers, each offering similar or identical products, is known as

In the long run, monopolistically competitive firms produce where demand equals marginal cost.

A firm in a monopolistically competitive market can earn both short-run and long-run profits.

Table 16-5 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-5. What is this firm's total cost at the profit­maximizing quantity?

There is general disagreement among economists about the role of advertising, but there is widespread agreement about the role of brand names on market efficiency.

For a profit-maximizing firm in a monopolistically competitive market, when price is equal to average total cost, price must lie above marginal cost.

Monopolistic competition is an inefficient market structure because

A recent outbreak of hepatitis was linked to a national fast-food restaurant chain. This is an example of a case in which

Defenders of advertising argue that it is not rational for profit-maximizing firms to spend money on advertising for products that have

A monopolistically competitive firm has the following cost structure: The firm faces the following demand curve: To maximize profit (or minimize losses), the firm will produce

In the long run, a firm in a perfectly competitive market operates

Monopolistic competition is characterized by

The term excess capacity refers to the fact that a firm operates on the upward-sloping portion of its average-total- cost curve.

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

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

Filters

Table 16-5 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-5. What is this firm's total cost at the profitmaximizing quantity?