Question 1

A firm is a price taker

Accepted Answer

A)  only when the market is perfectly competitive. 
B)  only when the market is perfectly competitive or monopolistic. 
C)  only when the market is perfectly competitive or monopolistically competitive. 
D)  when the market is perfectly competitive, monopolistically competitive, or monopolistic. 
A)  only when the market is perfectly competitive. 
B)  only when the market is perfectly competitive or monopolistic. 
C)  only when the market is perfectly competitive or monopolistically competitive. 
D)  when the market is perfectly competitive, monopolistically competitive, or monopolistic.

Question 2

A monopolistically competitive firm faces the following demand curve for its product:   The firm has total fixed costs of $100 and a constant marginal cost of $25 per unit. The firm will maximize profit with the production of

Accepted Answer

A)  4 units of output. 
B)  10 units of output. 
C)  16 units of output. 
D)  22 units of output. 
A)  4 units of output. 
B)  10 units of output. 
C)  16 units of output. 
D)  22 units of output.

Question 3

Among the following situations, which one is least likely to apply to a monopolistically competitive firm?

Accepted Answer

A)  profit is positive in the short run 
B)  total cost exceeds total revenue in the short run 
C)  profit is positive in the long run 
D)  total revenue equals total cost in the long run 
A)  profit is positive in the short run 
B)  total cost exceeds total revenue in the short run 
C)  profit is positive in the long run 
D)  total revenue equals total cost in the long run

Question 4

Empirical evidence suggests that advertising usually leads to an increase in the price for advertised products.

Accepted Answer

A) True 
 B)False

Question 5

As new firms enter a monopolistically competitive market, profits of existing firms

Accepted Answer

A)  rise, and product diversity in the market increases. 
B)  rise, and product diversity in the market decreases. 
C)  decline, and product diversity in the market increases. 
D)  decline, and product diversity in the market decreases. 
A)  rise, and product diversity in the market increases. 
B)  rise, and product diversity in the market decreases. 
C)  decline, and product diversity in the market increases. 
D)  decline, and product diversity in the market decreases.

Question 6

Figure 16-11  
-Refer to Figure 16-11. If this firm profit-maximizes, what price will it charge?

Accepted Answer

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

Question 7

The market for novels is

Accepted Answer

A)  perfectly competitive. 
B)  a monopoly. 
C)  monopolistically competitive. 
D)  an oligopoly. 
A)  perfectly competitive. 
B)  a monopoly. 
C)  monopolistically competitive. 
D)  an oligopoly.

Question 8

Which of the following is a characteristic of monopolistic competition?

Accepted Answer

A)  ownership of a key resource by a single firm 
B)  free entry 
C)  identical product 
D)  patents 
A)  ownership of a key resource by a single firm 
B)  free entry 
C)  identical product 
D)  patents

Question 9

A monopolistically competitive firm chooses

Accepted Answer

A)  the quantity of output to produce, but the market determines price. 
B)  the price, but competition in the market determines the quantity. 
C)  price, but output is determined by a cartel production quota. 
D)  the quantity of output to produce and the price at which it will sell its output. 
A)  the quantity of output to produce, but the market determines price. 
B)  the price, but competition in the market determines the quantity. 
C)  price, but output is determined by a cartel production quota. 
D)  the quantity of output to produce and the price at which it will sell its output.

Question 10

Table 16-3
The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries.  
-Refer to Table 16-3. Which industry has the lowest concentration ratio?

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 11

The administrative burden of regulating price in a monopolistically competitive market is

Accepted Answer

A)  small due to economies of scale. 
B)  large because price is usually below marginal cost. 
C)  large because of the large number of firms that produce differentiated products. 
D)  small because firms produce with excess capacity. 
A)  small due to economies of scale. 
B)  large because price is usually below marginal cost. 
C)  large because of the large number of firms that produce differentiated products. 
D)  small because firms produce with excess capacity.

Question 12

Table 16-3
The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries.  
-Refer to Table 16-3. What is the concentration ratio for Industry C?

Accepted Answer

A)  approximately 44% 
B)  approximately 48% 
C)  approximately 53% 
D)  approximately 56% 
A)  approximately 44% 
B)  approximately 48% 
C)  approximately 53% 
D)  approximately 56%

Question 13

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Accepted Answer

A)  firms are more likely to operate at efficient scale. 
B)  there are likely to be too many firms in a monopolistically competitive market. 
C)  market efficiency is likely to be enhanced by the entry of new firms. 
D)  all firms are earning zero economic profit. 
A)  firms are more likely to operate at efficient scale. 
B)  there are likely to be too many firms in a monopolistically competitive market. 
C)  market efficiency is likely to be enhanced by the entry of new firms. 
D)  all firms are earning zero economic profit.

Question 14

Suppose for some firm that average total cost is minimized at Q1 units of output. For a monopolistically competitive firm in long-run equilibrium, Q1

Accepted Answer

A)  is also the level of output at which marginal cost equals average total cost. 
B)  exceeds the level of output at which there is a point of tangency between the demand curve and the average total cost curve. 
C)  exceeds the level of output at which marginal revenue equals marginal cost. 
D)  All of the above are correct. 
A)  is also the level of output at which marginal cost equals average total cost. 
B)  exceeds the level of output at which there is a point of tangency between the demand curve and the average total cost curve. 
C)  exceeds the level of output at which marginal revenue equals marginal cost. 
D)  All of the above are correct.

Question 15

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

Accepted Answer

A)  marginal revenue is equal to marginal cost. 
B)  average total cost is minimized. 
C)  marginal revenue is tangent to average total cost. 
D)  All of the above are correct. 
A)  marginal revenue is equal to marginal cost. 
B)  average total cost is minimized. 
C)  marginal revenue is tangent to average total cost. 
D)  All of the above are correct.

Question 16

The general term for market structures that fall somewhere between monopoly and perfect competition is

Accepted Answer

A)  incomplete markets. 
B)  imperfectly competitive markets. 
C)  oligopoly markets. 
D)  monopolistically competitive markets. 
A)  incomplete markets. 
B)  imperfectly competitive markets. 
C)  oligopoly markets. 
D)  monopolistically competitive markets.

Question 17

Although monopolistically competitive markets offer consumers a wide variety of differentiated products, there may still be insufficient variety if

Accepted Answer

A)  there are large fixed costs in the market. 
B)  there are no barriers to entry in the market. 
C)  the business-stealing externality is present in the market. 
D)  the government does not impose regulations on the market. 
A)  there are large fixed costs in the market. 
B)  there are no barriers to entry in the market. 
C)  the business-stealing externality is present in the market. 
D)  the government does not impose regulations on the market.

Question 18

Figure 16-2. The figure is drawn for a monopolistically competitive firm.  
-Refer to Figure 16-2. Suppose ATC = $36 when Q = 24. Then the

Accepted Answer

A)  firm is in a long-run equilibrium when it produces 24 units of output. 
B)  firm is in a long-run equilibrium when it produces 32 units of output. 
C)  best the firm can do is sustain a loss of $48. 
D)  best the firm can do is earn a profit of $96. 
A)  firm is in a long-run equilibrium when it produces 24 units of output. 
B)  firm is in a long-run equilibrium when it produces 32 units of output. 
C)  best the firm can do is sustain a loss of $48. 
D)  best the firm can do is earn a profit of $96.

Question 19

Figure 16-12  
-Refer to Figure 16-12. If this firm profit-maximizes, what price will it charge?

Accepted Answer

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

Question 20

Table 16-4
This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm.  
-Refer to Table 16-4. Which of the following is likely to happen in the long run in this market?

Accepted Answer

A)  The market is currently in a long-run equilibrium. 
B)  The market price is likely to rise. 
C)  Firms are likely to enter the market since firms are earning a positive economic profit. 
D)  Firms are likely to leave the market since firms are earning a negative economic profit. 
A)  The market is currently in a long-run equilibrium. 
B)  The market price is likely to rise. 
C)  Firms are likely to enter the market since firms are earning a positive economic profit. 
D)  Firms are likely to leave the market since firms are earning a negative economic profit.

Exam 16: Monopolistic Competition

A firm is a price taker

A monopolistically competitive firm faces the following demand curve for its product: The firm has total fixed costs of $100 and a constant marginal cost of $25 per unit. The firm will maximize profit with the production of

Among the following situations, which one is least likely to apply to a monopolistically competitive firm?

Empirical evidence suggests that advertising usually leads to an increase in the price for advertised products.

As new firms enter a monopolistically competitive market, profits of existing firms

Figure 16-11 -Refer to Figure 16-11. If this firm profit-maximizes, what price will it charge?

The market for novels is

Which of the following is a characteristic of monopolistic competition?

A monopolistically competitive firm chooses

Table 16-3 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. -Refer to Table 16-3. Which industry has the lowest concentration ratio?

The administrative burden of regulating price in a monopolistically competitive market is

Table 16-3 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. -Refer to Table 16-3. What is the concentration ratio for Industry C?

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Suppose for some firm that average total cost is minimized at Q1 units of output. For a monopolistically competitive firm in long-run equilibrium, Q1

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

The general term for market structures that fall somewhere between monopoly and perfect competition is

Although monopolistically competitive markets offer consumers a wide variety of differentiated products, there may still be insufficient variety if

Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. Suppose ATC = $36 when Q = 24. Then the

Figure 16-12 -Refer to Figure 16-12. If this firm profit-maximizes, what price will it charge?

Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-4. Which of the following is likely to happen in the long run in this 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

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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