Question 1

If we observe a great deal more advertising for Mucinex, an over-the-counter drug, than for a Grainger drill press, we can infer that

Accepted Answer

A)  more money is spent on Mucinex than on Grainger drill presses. 
B)  the market for Mucinex is more highly differentiated than the market for Grainger drill presses. 
C)  Grainger has lower costs of production than Mucinex. 
D)  Mucinex operates in an oligopoly, while Grainger operates in a monopolistically competitive market. 
A)  more money is spent on Mucinex than on Grainger drill presses. 
B)  the market for Mucinex is more highly differentiated than the market for Grainger drill presses. 
C)  Grainger has lower costs of production than Mucinex. 
D)  Mucinex operates in an oligopoly, while Grainger operates in a monopolistically competitive market.

Question 2

Figure 16-3
This figure depicts a situation in a monopolistically competitive market.  
-Refer to Figure 16-3. How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

Accepted Answer

A)  $200 
B)  $312.50 
C)  $4000 
D)  $800 
A)  $200 
B)  $312.50 
C)  $4000 
D)  $800

Question 3

If a monopolistically competitive firm can increase its level of production and lower its average total cost of production at the same time then

Accepted Answer

A)  the firm has a product-variety opportunity. 
B)  the firm has excess capacity. 
C)  the firm has a business-stealing opportunity. 
D)  the firm is producing a quantity of output higher than its efficient scale of production. 
A)  the firm has a product-variety opportunity. 
B)  the firm has excess capacity. 
C)  the firm has a business-stealing opportunity. 
D)  the firm is producing a quantity of output higher than its efficient scale of production.

Question 4

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

Accepted Answer

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

Question 5

A firm charges a price that exceeds marginal cost

Accepted Answer

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

Question 6

Scenario 16-9
Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products.
-Refer to Scenario 16-9. Which friend is a critic of brand names?

Accepted Answer

The answer of Scenario 16-9
Dean goes to the grocery store...

Question 7

Figure 16-5  
-Refer to Figure 16-5. Panel b is consistent with a firm in a monopolistically competitive market that is

Accepted Answer

A)  not in long-run equilibrium. 
B)  in long-run equilibrium. 
C)  producing its efficient scale of output. 
D)  earning a positive economic profit. 
A)  not in long-run equilibrium. 
B)  in long-run equilibrium. 
C)  producing its efficient scale of output. 
D)  earning a positive economic profit.

Question 8

An oligopoly is a market in which

Accepted Answer

A)  there are only a few sellers, each offering a product similar or identical to the products offered by other firms in the market. 
B)  firms are price takers. 
C)  the actions of one seller in the market have no impact on the other sellers' profits. 
D)  there are many price-taking firms, each offering a product similar or identical to the products offered by other firms in the market. 
A)  there are only a few sellers, each offering a product similar or identical to the products offered by other firms in the market. 
B)  firms are price takers. 
C)  the actions of one seller in the market have no impact on the other sellers' profits. 
D)  there are many price-taking firms, each offering a product similar or identical to the products offered by other firms in the market.

Question 9

Figure 16-14  
-Refer to Figure 16-14. Which letter identifies the profit-maximizing level of output for this firm?

Accepted Answer

The answer of Figure 16-14  
-Refer to Figure 16-14....

Question 10

The market for wheat is most likely considered a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 11

How does advertising signal to consumers that the product is a good one?

Accepted Answer

A)  By seeing famous people using the product, consumers infer that they too can be famous. 
B)  By being willing to spend money on advertising, firms let consumers know the product is likely a good one since firms would not likely advertise a poor product. 
C)  By making consumers laugh during commercials, firms are associating positive experiences with the product. 
D)  Without allowing consumers to actually use the product, it is not possible for firms to signal to consumers the product's quality. 
A)  By seeing famous people using the product, consumers infer that they too can be famous. 
B)  By being willing to spend money on advertising, firms let consumers know the product is likely a good one since firms would not likely advertise a poor product. 
C)  By making consumers laugh during commercials, firms are associating positive experiences with the product. 
D)  Without allowing consumers to actually use the product, it is not possible for firms to signal to consumers the product's quality.

Question 12

Figure 16-10
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-10. In response to the situation represented by the figure, we would expect

Accepted Answer

A)  some of the firms that are currently in the market to exit. 
B)  the demand for this firm's product to increase, assuming this firm does not exit. 
C)  this firm's profit to move from its current value toward zero. 
D)  All of the above are correct. 
A)  some of the firms that are currently in the market to exit. 
B)  the demand for this firm's product to increase, assuming this firm does not exit. 
C)  this firm's profit to move from its current value toward zero. 
D)  All of the above are correct.

Question 13

Figure 16-12  
-Refer to Figure 16-12. What, if any, long run adjustment will take place in this industry?

Accepted Answer

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

Question 14

Figure 16-12  
-Refer to Figure 16-12. What is the efficient scale of production?

Accepted Answer

A)  This firm cannot produce efficiently. 
B)  12 units 
C)  22 units 
D)  28 units 
A)  This firm cannot produce efficiently. 
B)  12 units 
C)  22 units 
D)  28 units

Question 15

A profit-maximizing firm in a monopolistically competitive market can earn positive, negative, or zero profits in the short run.

Accepted Answer

A) True 
 B)False

Question 16

Table 16-2
The following table shows the total output produced by the top six firms as well as the total industry output for each industry.  
-Refer to Table 16-2. What is the concentration ratio for Industry K?

Accepted Answer

A)  about 8% 
B)  about 36% 
C)  about 48% 
D)  about 84% 
A)  about 8% 
B)  about 36% 
C)  about 48% 
D)  about 84%

Question 17

If advertising decreases the elasticity of demand for specific brand names of hard liquor, we would expect firms to be able to charge a larger markup over marginal cost.

Accepted Answer

A) True 
 B)False

Question 18

Figure 16-4  
-Refer to Figure 16-4. Which of the following will occur in the long run in this industry?

Accepted Answer

A)  Firms will exit this industry. 
B)  Firms will enter this industry. 
C)  This firm will continue to earn positive economic profits. 
D)  This firm will incur losses. 
A)  Firms will exit this industry. 
B)  Firms will enter this industry. 
C)  This firm will continue to earn positive economic profits. 
D)  This firm will incur losses.

Question 19

Scenario 16-9
Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products.
-Refer to Scenario 16-9. If Dean bought the brand name because of advertising he saw for the product, a defender of advertising would say

Accepted Answer

the advertising conv

Question 20

Firms that sell highly differentiated consumer goods, such as soft drinks, breakfast cereals, and dog food, typically spend what percent of their revenues on advertising?

Accepted Answer

A)  0-1 
B)  2-4 
C) 10-20 
D)  over 50 
A)  0-1 
B)  2-4 
C) 10-20 
D)  over 50

Exam 16: Monopolistic Competition

If we observe a great deal more advertising for Mucinex, an over-the-counter drug, than for a Grainger drill press, we can infer that

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

If a monopolistically competitive firm can increase its level of production and lower its average total cost of production at the same time then

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

A firm charges a price that exceeds marginal cost

Figure 16-5 -Refer to Figure 16-5. Panel b is consistent with a firm in a monopolistically competitive market that is

An oligopoly is a market in which

Figure 16-14 -Refer to Figure 16-14. Which letter identifies the profit-maximizing level of output for this firm?

The market for wheat is most likely considered a monopolistically competitive market.

How does advertising signal to consumers that the product is a good one?

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. In response to the situation represented by the figure, we would expect

Figure 16-12 -Refer to Figure 16-12. What, if any, long run adjustment will take place in this industry?

Figure 16-12 -Refer to Figure 16-12. What is the efficient scale of production?

A profit-maximizing firm in a monopolistically competitive market can earn positive, negative, or zero profits in the short run.

Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2. What is the concentration ratio for Industry K?

If advertising decreases the elasticity of demand for specific brand names of hard liquor, we would expect firms to be able to charge a larger markup over marginal cost.

Figure 16-4 -Refer to Figure 16-4. Which of the following will occur in the long run in this industry?

Firms that sell highly differentiated consumer goods, such as soft drinks, breakfast cereals, and dog food, typically spend what percent of their revenues on advertising?

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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