Question 1

The product-variety externality states that entry of a new firm conveys a negative externality on consumers.

Accepted Answer

A) True 
 B)False

Question 2

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-9. In order to maximize its profit, the firm will choose to produce

Accepted Answer

A)  less than 100 units of output. 
B)  100 units of output. 
C)  between 100 and 133.33 units of output. 
D)  more than 133.33 units of output. 
A)  less than 100 units of output. 
B)  100 units of output. 
C)  between 100 and 133.33 units of output. 
D)  more than 133.33 units of output.

Question 3

For a profit-maximizing monopolistically competitive firm, price exceeds marginal cost in

Accepted Answer

A)  the short run but not in the long run. 
B)  the long run but not in the short run. 
C)  both the short run and the long run. 
D)  neither the short run nor the long run. 
A)  the short run but not in the long run. 
B)  the long run but not in the short run. 
C)  both the short run and the long run. 
D)  neither the short run nor the long run.

Question 4

Oligopoly and monopolistic competition are examples of a market structure called imperfect competition.

Accepted Answer

A) True 
 B)False

Question 5

Critics of advertising argue that advertising

Accepted Answer

A)  creates desires that otherwise might not exist. 
B)  hinders competition. 
C)  often fails to convey substantive information. 
D)  All of the above are correct. 
A)  creates desires that otherwise might not exist. 
B)  hinders competition. 
C)  often fails to convey substantive information. 
D)  All of the above are correct.

Question 6

Figure 16-2. The figure is drawn for a monopolistically competitive firm.  
-Refer to Figure 16-2. Suppose that average total cost is $36 when Q=24. What is the profit-maximizing price and resulting profit?

Accepted Answer

A)  P=$24, profit=$0 
B)  P=$36, profit=$48 
C)  P=$36, profit=$0 
D)  P=$36, profit=$144 
A)  P=$24, profit=$0 
B)  P=$36, profit=$48 
C)  P=$36, profit=$0 
D)  P=$36, profit=$144

Question 7

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. Based on the concentration ratio, which industry is the least competitive?

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 8

In monopolistic competition as well as in monopoly,

Accepted Answer

A)  price exceeds marginal revenue for each firm. 
B)  profit is zero in a long-run equilibrium for each firm. 
C)  entry and exit by firms are unrestricted. 
D)  there are at most a few firms in each market. 
A)  price exceeds marginal revenue for each firm. 
B)  profit is zero in a long-run equilibrium for each firm. 
C)  entry and exit by firms are unrestricted. 
D)  there are at most a few firms in each market.

Question 9

Figure 16-13  
-Refer to Figure 16-13. Which letter represents the profit-maximizing price?

Accepted Answer

The answer of Figure 16-13  
-Refer to Figure 16-13....

Question 10

Firms in a monopolistically competitive market

Accepted Answer

A)  are price takers. 
B)  produce an output level that minimizes average total cost in the long run. 
C)  maximize profits by producing where price equals marginal cost. 
D)  cannot earn economic profits in the long run. 
A)  are price takers. 
B)  produce an output level that minimizes average total cost in the long run. 
C)  maximize profits by producing where price equals marginal cost. 
D)  cannot earn economic profits in the long run.

Question 11

Figure 16-7  
-Refer to Figure 16-7. Which of the graphs depicts the situation for a profit-maximizing 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 12

Advertising during the Super Bowl is an example of information about quality contained primarily in the existence and expense of the advertising.

Accepted Answer

A) True 
 B)False

Question 13

Scenario 16-4
Delish, a moderately priced restaurant, has recently announced intentions to open a restaurant in Boston, MA. Assume that the restaurant market in Boston is characterized by monopolistic competition.
-Refer to Scenario 16-4. As a result of the new restaurant, existing restauranteurs in Boston are likely to experience a

Accepted Answer

A)  product-variety externality, which is a negative externality. 
B)  product-variety externality, which is a positive externality. 
C)  business-stealing externality, which is a negative externality. 
D)  business-stealing externality, which is a positive externality. 
A)  product-variety externality, which is a negative externality. 
B)  product-variety externality, which is a positive externality. 
C)  business-stealing externality, which is a negative externality. 
D)  business-stealing externality, which is a positive externality.

Question 14

When McDonald's opens a store in Dhaka, Bangladesh, it has a strong incentive to enforce product quality consistent with stores in the United States.

Accepted Answer

A) True 
 B)False

Question 15

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.  
-Refer to Figure 16-9. The firm's maximum profit is

Accepted Answer

A)  $-5,000.00. 
B)  $0. 
C)  $5,000.00. 
D)  $8,887.78. 
A)  $-5,000.00. 
B)  $0. 
C)  $5,000.00. 
D)  $8,887.78.

Question 16

A monopolistically competitive firm faces the following demand schedule for its product:   The firm has total fixed costs of $9 and a constant marginal cost of $3 per unit. The firm will maximize profit with

Accepted Answer

A)  9 units of output. 
B)  15 units of output. 
C)  21 units of output. 
D)  30 units of output. 
A)  9 units of output. 
B)  15 units of output. 
C)  21 units of output. 
D)  30 units of output.

Question 17

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

Accepted Answer

A)  perfectly competitive market. 
B)  monopolistically competitive market. 
C)  oligopoly. 
D)  monopoly. 
A)  perfectly competitive market. 
B)  monopolistically competitive market. 
C)  oligopoly. 
D)  monopoly.

Question 18

Under which of the following market structures would consumers likely receive the most product variety?

Accepted Answer

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

Question 19

In which of the following market structures do firms produce the welfare-maximizing level of output?

Accepted Answer

A)  perfect competition 
B)  monopolistic competition 
C)  monopoly 
D)  Both a and b are correct. 
A)  perfect competition 
B)  monopolistic competition 
C)  monopoly 
D)  Both a and b are correct.

Question 20

The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.

Accepted Answer

A) True 
 B)False

Exam 16: Monopolistic Competition

The product-variety externality states that entry of a new firm conveys a negative externality on consumers.

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. In order to maximize its profit, the firm will choose to produce

For a profit-maximizing monopolistically competitive firm, price exceeds marginal cost in

Oligopoly and monopolistic competition are examples of a market structure called imperfect competition.

Critics of advertising argue that advertising

Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. Suppose that average total cost is $36 when Q=24. What is the profit-maximizing price and resulting profit?

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. Based on the concentration ratio, which industry is the least competitive?

In monopolistic competition as well as in monopoly,

Figure 16-13 -Refer to Figure 16-13. Which letter represents the profit-maximizing price?

Firms in a monopolistically competitive market

Figure 16-7 -Refer to Figure 16-7. Which of the graphs depicts the situation for a profit-maximizing firm in a monopolistically competitive market?

Advertising during the Super Bowl is an example of information about quality contained primarily in the existence and expense of the advertising.

When McDonald's opens a store in Dhaka, Bangladesh, it has a strong incentive to enforce product quality consistent with stores in the United States.

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. The firm's maximum profit is

A monopolistically competitive firm faces the following demand schedule for its product: The firm has total fixed costs of $9 and a constant marginal cost of $3 per unit. The firm will maximize profit with

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

Under which of the following market structures would consumers likely receive the most product variety?

In which of the following market structures do firms produce the welfare-maximizing level of output?

The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.

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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