Question 1

Figure 16-3 
-Refer to Figure 16-3.How much cost per unit could this firm save by producing the efficient level of output rather than the profit-maximizing level of output?

Accepted Answer

A)   $0
B)   $1
C)   $2
D)   $3E) None of the above
F) B) and C)

Question 2

Which of the following represents the best government policy to reduce the deadweight loss associated with a monopolistically competitive market?

Accepted Answer

A)   The government should regulate firms in a manner similar to natural monopolies.
B)   The government should encourage more firms to enter the industry because without government intervention,there are likely to be "too few" firms.
C)   The government should encourage some firms to exit the industry because without government intervention,there are likely to be "too many" firms.
D)   There is no government policy that can reduce deadweight loss without creating other problems.E) B) and C)
F) A) and B)

Question 3

Edward Chamberlin argued that brand names

Accepted Answer

A)   hampered market efficiency.
B)   were instrumental in enhancing market efficiency.
C)   were useful in enhancing market efficiency when the government enforced the use of exclusive trademarks.
D)   were likely to be more socially efficient when used in conjunction with advertising.E) None of the above
F) A) and C)

Question 4

Because monopolistically competitive firms produce differentiated products,each firm

Accepted Answer

A)   faces a demand curve that is horizontal.
B)   faces a demand curve that is vertical.
C)   has no control over product price.
D)   has some control over product price.E) C) and D)
F) None of the above

Question 5

Evaluate the following statement: "Advertisements that use celebrity endorsements are devoid of any value and do not enhance the efficient functioning of markets."

Accepted Answer

Some people argue that celebrity endorse...

Question 6

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.Which industry is the least competitive?

Accepted Answer

A)   Industry W
B)   Industry X
C)   Industry Y
D)   Industry ZE) C) and D)
F) A) and B)

Question 7

Figure 16-8
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-8.Given this firm's cost curves,if the firm were perfectly competitive rather than monopolistically competitive,then in a long-run equilibrium it would produce

Accepted Answer

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

Question 8

Monopolistic competition is an inefficient market structure because

Accepted Answer

A)   price exceeds marginal cost.
B)   it has a deadweight loss,just as monopoly does.
C)   at the equilibrium,some consumers will value the good at more than the marginal cost of production.
D)   All of the above are correct.E) C) and D)
F) None of the above

Question 9

Figure 16-2 
-Refer to Figure 16-2.If this firm profit-maximizes,how much output will it produce?

Accepted Answer

The answer of Figure 16-2 
-Refer to Figure 16-2.If this...

Question 10

Evaluate the following statement in the context of business-stealing and product-variety externalities: "We have too many student apartments in this town already.Statistics show that vacancy rates average 15 percent during any given semester."

Accepted Answer

Business-stealing effect: if new entrant...

Question 11

Monopolistic competition is the only market structure that features many sellers.

Accepted Answer

A) True 
 B)False

Question 12

A monopolistically competitive market

Accepted Answer

A)   has some features of monopoly and some features of competition.
B)   has one large,dominant firm and many other smaller firms.
C)   is difficult to enter.
D)   occurs whenever firms earn zero economic profit.E) A) and B)
F) A) and C)

Question 13

As new firms enter a monopolistically competitive market,profits of existing firms

Accepted Answer

A)   rise,and product diversity in the market increases.
B)   rise,and product diversity in the market decreases.
C)   decline,and product diversity in the market increases.
D)   decline,and product diversity in the market decreases.E) All of the above
F) C) and D)

Question 14

A firm that would experience higher average total cost by increasing production is operating with excess capacity.

Accepted Answer

A) True 
 B)False

Question 15

Defenders of advertising

Accepted Answer

A)   concede that advertising increases firms' market power.
B)   concede that advertising makes entry by new firms more difficult.
C)   contend that firms use advertising to provide useful information to consumers.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 16

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

Question 17

When quality cannot be easily judged in advance,what provides consumers with information about the quality of a product?

Accepted Answer

A)   a brand name
B)   a tie-in
C)   the quantity available for sale
D)   the amount of deadweight lossE) B) and D)
F) B) and C)

Question 18

Figure 16-2
This figure depicts a situation in a monopolistically competitive market. 
-Refer to Figure 16-2.How much output will the monopolistically competitive firm produce in this situation?

Accepted Answer

A)   20 units
B)   25 units
C)   40 units
D)   80 unitsE) B) and D)
F) None of the above

Question 19

To maximize its profit,a monopolistically competitive firm

Accepted Answer

A)   takes the price as given and chooses its quantity,just as a competitive firm does.
B)   takes the price as given and chooses its quantity,just as a colluding oligopolist does.
C)   chooses its quantity and price,just as a competitive firm does.
D)   chooses its quantity and price,just as a monopoly does.E) A) and B)
F) A) and C)

Question 20

In the long run,a firm in a perfectly competitive market operates

Accepted Answer

A)   at its efficient scale,and a monopolistically competitive firm operates at its efficient scale.
B)   at its efficient scale,and a monopolistically competitive firm operates with excess capacity.
C)   with excess capacity,and a monopolistically competitive firm operates with excess capacity.
D)   with excess capacity,and a monopolistically competitive firm operates at its efficient scale.E) B) and C)
F) A) and B)

Exam 16: Monopolistic Competition

Figure 16-2 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-2.How much output will the monopolistically competitive firm produce in this situation?

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Because monopolistically competitive firms produce differentiated products,each firm

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Which of the following represents the best government policy to reduce the deadweight loss associated with a monopolistically competitive market?

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Evaluate the following statement: "Advertisements that use celebrity endorsements are devoid of any value and do not enhance the efficient functioning of markets."

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Figure 16-8 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-8.Given this firm's cost curves,if the firm were perfectly competitive rather than monopolistically competitive,then in a long-run equilibrium it would produce

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A firm that would experience higher average total cost by increasing production is operating with excess capacity.

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A monopolistically competitive market

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Defenders of advertising

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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.Which industry is the least competitive?

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Monopolistic competition is the only market structure that features many sellers.

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In the long run,a firm in a perfectly competitive market operates

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Edward Chamberlin argued that brand names

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When quality cannot be easily judged in advance,what provides consumers with information about the quality of a product?

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Evaluate the following statement in the context of business-stealing and product-variety externalities: "We have too many student apartments in this town already.Statistics show that vacancy rates average 15 percent during any given semester."

Correct AnswerverifiedBusiness-stealing effect: if new entrant...View AnswerShow Answer

As new firms enter a monopolistically competitive market,profits of existing firms

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To maximize its profit,a monopolistically competitive firm

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Figure 16-3 -Refer to Figure 16-3.How much cost per unit could this firm save by producing the efficient level of output rather than the profit-maximizing level of output?

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Figure 16-2 -Refer to Figure 16-2.If this firm profit-maximizes,how much output will it produce?

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Firms in a monopolistically competitive market

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Monopolistic competition is an inefficient market structure because

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Some people argue that celebrity endorse...
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Business-stealing effect: if new entrant...
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