Question 1

In which of the following markets is economic profit driven to zero in the long run?

Accepted Answer

A)  oligopoly 
B)  monopoly 
C)  monopolistic competition 
D)  cartels 
A)  oligopoly 
B)  monopoly 
C)  monopolistic competition 
D)  cartels

Question 2

Scenario 16-2
Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q.
-Refer to Scenario 16-2. If the marginal cost of producing this good is 4, how much total consumer surplus would consumers receive in this market?

Accepted Answer

A)  8 
B)  12 
C)  32 
D)  64 
A)  8 
B)  12 
C)  32 
D)  64

Question 3

One thing that both critics of advertising and defenders of advertising agree on is that advertising fosters competition.

Accepted Answer

A) True 
 B)False

Question 4

Compared to other firms, firms that sell highly differentiated products likely incur significant costs associated with

Accepted Answer

A)  advertising. 
B)  the product-variety externality. 
C)  intermediate materials. 
D)  taxes and regulation. 
A)  advertising. 
B)  the product-variety externality. 
C)  intermediate materials. 
D)  taxes and regulation.

Question 5

Evidence from the market for eyeglasses suggests that advertising leads to

Accepted Answer

A)  lower-quality products for consumers. 
B)  lower prices for consumers. 
C)  higher prices for consumers. 
D)  less concern on the part of consumers about price differences among similar goods. 
A)  lower-quality products for consumers. 
B)  lower prices for consumers. 
C)  higher prices for consumers. 
D)  less concern on the part of consumers about price differences among similar goods.

Question 6

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. What price should Peter charge to maximize his profits?

Accepted Answer

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

Question 7

Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profit-maximizing firm charge a price that exceeds marginal cost?

Accepted Answer

A)  monopoly only 
B)  monopoly and monopolistic competition only 
C)  monopoly, monopolistic competition, and perfect competition 
D)  The answer cannot be determined without knowing whether the market is in the long run or short run. 
A)  monopoly only 
B)  monopoly and monopolistic competition only 
C)  monopoly, monopolistic competition, and perfect competition 
D)  The answer cannot be determined without knowing whether the market is in the long run or short run.

Question 8

Figure 16-6  
-Refer to Figure 16-6. Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is doing its best but still losing money?

Accepted Answer

A)  panel a 
B)  panel b 
C)  panel c 
D)  panel d 
A)  panel a 
B)  panel b 
C)  panel c 
D)  panel d

Question 9

Firms can freely enter a market

Accepted Answer

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

Question 10

Figure 16-1        
-Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D

Question 11

In the long run, a monopolistically competitive firm produces a quantity that is

Accepted Answer

A)  equal to the efficient scale. 
B)  less than the efficient scale. 
C)  greater than the efficient scale. 
D)  consistent with diseconomies of scale. 
A)  equal to the efficient scale. 
B)  less than the efficient scale. 
C)  greater than the efficient scale. 
D)  consistent with diseconomies of scale.

Question 12

Scenario 16-6
Ike's Ice Cream has decided to open a new ice cream parlor in Mayville, MS. The market for ice cream parlors is monopolistically competitive.
-Refer to Scenario 16-6. As a result of the new Ike's Ice Cream parlor, existing ice cream shops located in Mayville are likely to experience a

Accepted Answer

A)  business-stealing externality, which harms producers. 
B)  business-stealing externality, which benefits producers. 
C)  product-variety externality, which harms consumers. 
D)  product-variety externality, which benefits consumers. 
A)  business-stealing externality, which harms producers. 
B)  business-stealing externality, which benefits producers. 
C)  product-variety externality, which harms consumers. 
D)  product-variety externality, which benefits consumers.

Question 13

Which market structure(s) is(are) imperfectly competitive?

Accepted Answer

oligopoly

Question 14

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. At the profit­maximizing level of output, what is this firm's total cost?

Accepted Answer

A)  $10 
B)  $40 
C)  $88 
D)  $100 
A)  $10 
B)  $40 
C)  $88 
D)  $100

Question 15

Which of the following conditions is characteristic of a monopolistically competitive firm in short-run equilibrium?

Accepted Answer

A)  P = AR 
B)  MR = MC 
C)  P > MC 
D)  All of the above are correct. 
A)  P = AR 
B)  MR = MC 
C)  P > MC 
D)  All of the above are correct.

Question 16

Because a monopolistically competitive firm has some market power, in the long-run the price of its product exceeds its

Accepted Answer

A)  average revenue. 
B)  average total cost. 
C)  marginal cost. 
D)  None of the above is correct. 
A)  average revenue. 
B)  average total cost. 
C)  marginal cost. 
D)  None of the above is correct.

Question 17

The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

Accepted Answer

A)  business-stealing externality that is observed in monopolistically competitive markets. 
B)  product-variety externality that is observed in monopolistically competitive markets. 
C)  inefficiencies of the long-term losses earned by monopolistically competitive firms. 
D)  persistence of positive profits into the long run for monopolistically competitive firms. 
A)  business-stealing externality that is observed in monopolistically competitive markets. 
B)  product-variety externality that is observed in monopolistically competitive markets. 
C)  inefficiencies of the long-term losses earned by monopolistically competitive firms. 
D)  persistence of positive profits into the long run for monopolistically competitive firms.

Question 18

Figure 16-12  
-Refer to Figure 16-12. If this firm profit-maximizes, how much output will it produce?

Accepted Answer

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

Question 19

In the short run, a firm operating in a monopolistically competitive market

Accepted Answer

A)  produces an efficient output level. 
B)  chooses the maximum price to maximize profits. 
C)  produces where marginal cost is minimized. 
D)  chooses a price that exceeds marginal revenue. 
A)  produces an efficient output level. 
B)  chooses the maximum price to maximize profits. 
C)  produces where marginal cost is minimized. 
D)  chooses a price that exceeds marginal revenue.

Question 20

Product differentiation causes the seller of a good to face what type of demand curve?

Accepted Answer

A)  downward sloping 
B)  vertical 
C)  horizontal 
D)  Any of the above could be correct since product differentiation does not affect the shape of the demand curve. 
A)  downward sloping 
B)  vertical 
C)  horizontal 
D)  Any of the above could be correct since product differentiation does not affect the shape of the demand curve.

Exam 16: Monopolistic Competition

In which of the following markets is economic profit driven to zero in the long run?

Scenario 16-2 Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q. -Refer to Scenario 16-2. If the marginal cost of producing this good is 4, how much total consumer surplus would consumers receive in this market?

One thing that both critics of advertising and defenders of advertising agree on is that advertising fosters competition.

Compared to other firms, firms that sell highly differentiated products likely incur significant costs associated with

Evidence from the market for eyeglasses suggests that advertising leads to

Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profit-maximizing firm charge a price that exceeds marginal cost?

Figure 16-6 -Refer to Figure 16-6. Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is doing its best but still losing money?

Firms can freely enter a market

Figure 16-1 -Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?

In the long run, a monopolistically competitive firm produces a quantity that is

Scenario 16-6 Ike's Ice Cream has decided to open a new ice cream parlor in Mayville, MS. The market for ice cream parlors is monopolistically competitive. -Refer to Scenario 16-6. As a result of the new Ike's Ice Cream parlor, existing ice cream shops located in Mayville are likely to experience a

Which market structure(s) is(are) imperfectly competitive?

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. At the profit­maximizing level of output, what is this firm's total cost?

Which of the following conditions is characteristic of a monopolistically competitive firm in short-run equilibrium?

Because a monopolistically competitive firm has some market power, in the long-run the price of its product exceeds its

The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

Figure 16-12 -Refer to Figure 16-12. If this firm profit-maximizes, how much output will it produce?

In the short run, a firm operating in a monopolistically competitive market

Product differentiation causes the seller of a good to face what type of demand curve?

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 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-4. At the profitmaximizing level of output, what is this firm's total cost?