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Which of the following is not a characteristic of monopolistic competition?


A) a large number of sellers
B) firms are price takers
C) free entry into the market
D) a differentiated product

E) All of the above
F) A) and B)

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


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

E) None of the above
F) A) and D)

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The product-variety externality and the business-stealing externality are both spillover costs of new firms entering a monopolistically competitive market.

A) True
B) False

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If regulators required firms in monopolistically competitive markets to set price equal to marginal cost,


A) firms would respond by lowering their costs.
B) firms would require a subsidy to stay in business
C) new firms that enter the market would operate at efficient scale.
D) the most efficient firms would not be affected.

E) A) and C)
F) None of the above

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For a profit-maximizing monopolistically competitive firm,marginal revenue equals marginal cost in


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.

E) A) and B)
F) C) and D)

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Entry of firms in a monopolistically competitive industry is characterized by two externalities.List them and briefly describe how consumers and existing firms are influenced by them.

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Business-stealing effect: incumbent firm...

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Figure 16-3 Figure 16-3 -Refer to Figure 16-3.The maximum total short-run economic profit for the monopolistically competitive firm in this figure is A) $1,500. B) $6,000. C) $10,500. D) $12,500. -Refer to Figure 16-3.The maximum total short-run economic profit for the monopolistically competitive firm in this figure is


A) $1,500.
B) $6,000.
C) $10,500.
D) $12,500.

E) A) and B)
F) All of the above

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Critics of advertising argue that firms use advertising to manipulate consumers' tastes.

A) True
B) False

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Figure 16-2 Figure 16-2 -Refer to Scenario 16-2.As a result of the new Ike's Ice Cream parlor,consumers living in and visiting Mayville are likely to experience a 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. -Refer to Scenario 16-2.As a result of the new Ike's Ice Cream parlor,consumers living in and visiting Mayville are likely to experience a


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.

E) All of the above
F) B) and D)

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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. 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 D? A) approximately 48% B) approximately 54% C) approximately 60% D) approximately 66% -Refer to Table 16-3.What is the concentration ratio for Industry D?


A) approximately 48%
B) approximately 54%
C) approximately 60%
D) approximately 66%

E) A) and B)
F) None of the above

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Which market structure would likely have the highest concentration ratio?


A) Monopoly
B) Oligopoly
C) Monopolistic competition
D) Perfect competition

E) B) and C)
F) A) and B)

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Figure 16-6 Figure 16-6 -Refer to Figure 16-6.The firm depicted in panel b faces a horizontal demand curve.If panel b depicts a profit-maximizing firm, A) it could be operating in either a perfectly competitive market or in a monopolistically competitive market. B) it would not have excess capacity in its production as long as it is earning zero economic profit. C) it is able to choose the price at which it sells its product. D) the firm can always raise its profit by increasing production since consumers will buy as much as the firm can produce. -Refer to Figure 16-6.The firm depicted in panel b faces a horizontal demand curve.If panel b depicts a profit-maximizing firm,


A) it could be operating in either a perfectly competitive market or in a monopolistically competitive market.
B) it would not have excess capacity in its production as long as it is earning zero economic profit.
C) it is able to choose the price at which it sells its product.
D) the firm can always raise its profit by increasing production since consumers will buy as much as the firm can produce.

E) C) and D)
F) A) and D)

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A monopolistically competitive industry is characterized by


A) many firms selling products that are similar but not identical.
B) many firms selling identical products.
C) a few firms selling products that are similar but not identical.
D) a few firms selling highly different products.

E) C) and D)
F) A) and D)

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In a monopolistically competitive industry,firms set price


A) equal to marginal cost since each firm is a price taker.
B) below marginal cost since each firm is a price taker.
C) above marginal cost since each firm is a price setter.
D) always a fraction of marginal cost since each firm is a price setter.

E) A) and B)
F) A) and D)

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A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?


A) marginal cost exceeds marginal revenue
B) average revenue equals marginal cost
C) price exceeds marginal cost
D) All of the above are correct.

E) None of the above
F) B) and C)

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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 $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 $10. -Refer to Table 16-7.If the firm has a constant marginal cost of $5 per unit,how much profit will the firm earn at the profit-maximizing level of output? A) $4 B) $6 C) $8 D) $10 -Refer to Table 16-7.If the firm has a constant marginal cost of $5 per unit,how much profit will the firm earn at the profit-maximizing level of output?


A) $4
B) $6
C) $8
D) $10

E) A) and B)
F) All of the above

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Figure 16-9 The figure is drawn for a monopolistically-competitive firm. Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9.At what quantity of output does average revenue exceed marginal revenue by $66.66? A) at 100 units of output B) somewhere between 100 and 133.33 units of output C) at 133.33 units of output D) at 154.92 units of output -Refer to Figure 16-9.At what quantity of output does average revenue exceed marginal revenue by $66.66?


A) at 100 units of output
B) somewhere between 100 and 133.33 units of output
C) at 133.33 units of output
D) at 154.92 units of output

E) A) and B)
F) All of the above

Correct Answer

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Figure 16-9 The figure is drawn for a monopolistically-competitive firm. Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9.Efficient scale is reached A) at 100 units. B) at 133.33 units. C) between 133.33 units and 154.92 units. D) at 154.92 units. -Refer to Figure 16-9.Efficient scale is reached


A) at 100 units.
B) at 133.33 units.
C) between 133.33 units and 154.92 units.
D) at 154.92 units.

E) None of the above
F) B) and C)

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The Mikati Philippines Hard Rock Cafe has the exact same menu as the Hard Rock Cafe in New York.This is an example of a brand name enhancing market efficiency for U.S.tourists visiting the Philippines.

A) True
B) False

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A monopolistically competitive market is characterized by barriers to entry.

A) True
B) False

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