Question 1

Figure 16-13  
-Refer to Figure 16-13. Which of the following areas represents the profit for this profit maximizing monopolistically competitive firm?

Accepted Answer

A)  BCHG 
B)  BCIJ 
C)  GHIJ 
D)  0BCL 
A)  BCHG 
B)  BCIJ 
C)  GHIJ 
D)  0BCL

Question 2

The "monopoly" in monopolistically competitive markets is most likely a result of firms having some pricing power due to product differentiation.

Accepted Answer

A) True 
 B)False

Question 3

A monopolistically competitive firm is currently earning a positive economic profit. If other firms enter the market, we would expect that the added competition will cause this firm to adjust its output such that it

Accepted Answer

A)  will operate closer to its efficient scale. 
B)  will operate further from its efficient scale. 
C)  will no longer be at its efficient scale. 
D)  might move either closer to or further from its efficient scale. 
A)  will operate closer to its efficient scale. 
B)  will operate further from its efficient scale. 
C)  will no longer be at its efficient scale. 
D)  might move either closer to or further from its efficient scale.

Question 4

When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium, marginal cost must lie below average total cost.

Accepted Answer

A) True 
 B)False

Question 5

Which market structure(s) is(are) considered highly concentrated?

Accepted Answer

The answer of Which market structure(s) is(are) considered highly concentrated?...

Question 6

Each firm in a monopolistically competitive industry faces a downward-sloping demand curve because

Accepted Answer

A)  there are many other sellers in the market. 
B)  there are very few other sellers in the market. 
C)  the firm's product is different from those offered by other firms in the market. 
D)  the firm faces the threat of entry into the market by new firms. 
A)  there are many other sellers in the market. 
B)  there are very few other sellers in the market. 
C)  the firm's product is different from those offered by other firms in the market. 
D)  the firm faces the threat of entry into the market by new firms.

Question 7

Which of these types of firms can earn a positive economic profit in the long run?

Accepted Answer

A)  monopolies, but not competitive firms or monopolistically competitive firms 
B)  monopolies and monopolistically competitive firms, but not competitive firms 
C)  monopolies, monopolistically competitive firms, and competitive firms 
D)  No firms earn positive economic profit in the long run. Entry will reduce all firms' economic profit to zero in the long run. 
A)  monopolies, but not competitive firms or monopolistically competitive firms 
B)  monopolies and monopolistically competitive firms, but not competitive firms 
C)  monopolies, monopolistically competitive firms, and competitive firms 
D)  No firms earn positive economic profit in the long run. Entry will reduce all firms' economic profit to zero in the long run.

Question 8

AllClean knows that it produces and sells very effective laundry detergent. NotQuiteWhite knows that it produces and sells ineffective laundry detergent. According to the signaling theory of advertising,

Accepted Answer

A)  both AllClean and NotQuiteWhite have incentives to spend large amounts of money on advertising their products. 
B)  AllClean has an incentive to spend a large amount of money on advertising its detergent, but NotQuiteWhite does not. 
C)  NotQuiteWhite has an incentive to spend a large amount of money on advertising its detergent, but AllClean does not. 
D)  neither AllClean nor NotQuiteWhite has an incentive to spend a large amount of money on advertising their detergents. 
A)  both AllClean and NotQuiteWhite have incentives to spend large amounts of money on advertising their products. 
B)  AllClean has an incentive to spend a large amount of money on advertising its detergent, but NotQuiteWhite does not. 
C)  NotQuiteWhite has an incentive to spend a large amount of money on advertising its detergent, but AllClean does not. 
D)  neither AllClean nor NotQuiteWhite has an incentive to spend a large amount of money on advertising their detergents.

Question 9

A monopolistically competitive market could be considered inefficient because

Accepted Answer

A)  marginal revenue exceeds average revenue. 
B)  price exceeds marginal cost. 
C)  the efficient scale of production is only achieved in the long run, not in the short run. 
D)  markup pricing does not occur in any other market structure. 
A)  marginal revenue exceeds average revenue. 
B)  price exceeds marginal cost. 
C)  the efficient scale of production is only achieved in the long run, not in the short run. 
D)  markup pricing does not occur in any other market structure.

Question 10

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 the firm produces its profit-maximizing level of output and there is a constant marginal cost of $7 per unit, which of the following is correct?

Accepted Answer

A)  This firm is operating at its efficient scale. 
B)  This firm should expect its demand curve to shift to the left. 
C)  Firms will leave the market and profits for firms that remain in the market will rise. 
D)  This firm is in a long-run equilibrium. 
A)  This firm is operating at its efficient scale. 
B)  This firm should expect its demand curve to shift to the left. 
C)  Firms will leave the market and profits for firms that remain in the market will rise. 
D)  This firm is in a long-run equilibrium.

Question 11

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 two benefits are conveyed by the brand name Burger Bonanza?

Accepted Answer

information about qu

Question 12

Which of the following statements is not correct?

Accepted Answer

A)  Novels are likely to be produced in a monopolistically competitive industry. 
B)  Cable television is likely to be produced in a monopoly industry. 
C)  Milk is likely to be produced in a monopolistically competitive industry. 
D)  Cigarettes are likely to be produced in an oligopoly industry. 
A)  Novels are likely to be produced in a monopolistically competitive industry. 
B)  Cable television is likely to be produced in a monopoly industry. 
C)  Milk is likely to be produced in a monopolistically competitive industry. 
D)  Cigarettes are likely to be produced in an oligopoly industry.

Question 13

When a new firm enters a monopolistically competitive market, the individual demand curves faced by all existing firms in that market will

Accepted Answer

A)  shift to the left. 
B)  shift to the right. 
C)  shift in a direction that is unpredictable without further information. 
D)  remain unchanged. It is the supply curve that will shift. 
A)  shift to the left. 
B)  shift to the right. 
C)  shift in a direction that is unpredictable without further information. 
D)  remain unchanged. It is the supply curve that will shift.

Question 14

A monopolistically competitive market is like a competitive market 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 15

Suppose that monopolistically competitive firms in a certain market are earning positive profits. In the transition from this initial situation to a long-run equilibrium,

Accepted Answer

A)  the number of firms in the market decreases. 
B)  each existing firm experiences a decrease in demand for its product. 
C)  each existing firm experiences a rightward shift of its marginal revenue curve. 
D)  each existing firm experiences an upward shift in its average total cost curve. 
A)  the number of firms in the market decreases. 
B)  each existing firm experiences a decrease in demand for its product. 
C)  each existing firm experiences a rightward shift of its marginal revenue curve. 
D)  each existing firm experiences an upward shift in its average total cost curve.

Question 16

Which of the following statements is correct?

Accepted Answer

A)  Firms in monopolistic competition and monopoly can earn economic profits in both the short run and the long run. 
B)  Both perfectly competitive and monopolistically competitive firms charge a price equal to marginal cost. 
C)  Firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost. 
D)  Both perfectly competitive and monopolistically competitive firms produce the welfare-maximizing level of output. 
A)  Firms in monopolistic competition and monopoly can earn economic profits in both the short run and the long run. 
B)  Both perfectly competitive and monopolistically competitive firms charge a price equal to marginal cost. 
C)  Firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost. 
D)  Both perfectly competitive and monopolistically competitive firms produce the welfare-maximizing level of output.

Question 17

In a monopolistically competitive industry, a firm's demand curve also represent its

Accepted Answer

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

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. What is the concentration ratio in Industry B?

Accepted Answer

A)  18% 
B)  34% 
C)  61% 
D)  95% 
A)  18% 
B)  34% 
C)  61% 
D)  95%

Question 19

Joe's Juice Shop operates in a monopolistically competitive market. Joe's is currently producing where its average total cost is minimized. In the long run we would expect Joe's output to

Accepted Answer

A)  decrease and average total cost to increase. 
B)  decrease and average total cost to decrease. 
C)  remain unchanged as Joe's is doing the best it can. 
D)  increase and average total costs to decrease. 
A)  decrease and average total cost to increase. 
B)  decrease and average total cost to decrease. 
C)  remain unchanged as Joe's is doing the best it can. 
D)  increase and average total costs to decrease.

Question 20

Monopolistic competition is considered inefficient because

Accepted Answer

A)  price exceeds marginal cost. 
B)  output is excessive. 
C)  long-run profits are positive. 
D)  barriers to entry limit the number of firms in the market. 
A)  price exceeds marginal cost. 
B)  output is excessive. 
C)  long-run profits are positive. 
D)  barriers to entry limit the number of firms in the market.

Exam 16: Monopolistic Competition

Figure 16-13 -Refer to Figure 16-13. Which of the following areas represents the profit for this profit maximizing monopolistically competitive firm?

The "monopoly" in monopolistically competitive markets is most likely a result of firms having some pricing power due to product differentiation.

A monopolistically competitive firm is currently earning a positive economic profit. If other firms enter the market, we would expect that the added competition will cause this firm to adjust its output such that it

When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium, marginal cost must lie below average total cost.

Which market structure(s) is(are) considered highly concentrated?

Each firm in a monopolistically competitive industry faces a downward-sloping demand curve because

Which of these types of firms can earn a positive economic profit in the long run?

AllClean knows that it produces and sells very effective laundry detergent. NotQuiteWhite knows that it produces and sells ineffective laundry detergent. According to the signaling theory of advertising,

A monopolistically competitive market could be considered inefficient because

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 two benefits are conveyed by the brand name Burger Bonanza?

Which of the following statements is not correct?

When a new firm enters a monopolistically competitive market, the individual demand curves faced by all existing firms in that market will

A monopolistically competitive market is like a competitive market in that

Suppose that monopolistically competitive firms in a certain market are earning positive profits. In the transition from this initial situation to a long-run equilibrium,

Which of the following statements is correct?

In a monopolistically competitive industry, a firm's demand curve also represent its

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. What is the concentration ratio in Industry B?

Joe's Juice Shop operates in a monopolistically competitive market. Joe's is currently producing where its average total cost is minimized. In the long run we would expect Joe's output to

Monopolistic competition is considered inefficient because

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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