Question 1

Figure 16-4 
-Refer to Figure 16-4.Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into a monopolistically competitive industry?

Accepted Answer

A)   panel a
B)   panel b
C)   panel c
D)   panel dE) B) and C)
F) A) and B)

Question 2

For a monopolistically competitive firm,

Accepted Answer

A)   marginal revenue and price are the same.
B)   average revenue and price are the same.
C)   at the profit-maximizing quantity of output,price equals marginal cost.
D)   at the profit-maximizing quantity of output,price equals the minimum of average total cost.E) All of the above
F) A) and D)

Question 3

Crude oil is primarily supplied to the world market by a few Middle Eastern countries.Such a market is an example of a(n)  (i) 
Imperfectly competitive market.
(ii) 
Monopoly market.
(iii) 
Oligopoly market.

Accepted Answer

A)   (i) and (ii) only
B)   (ii) and (iii) only
C)   (i) and (iii) only
D)   (iii) onlyE) A) and D)
F) A) and C)

Question 4

Advertising

Accepted Answer

A)   provides information about products,including prices and seller locations.
B)   has been proven to increase competition and reduce prices compared to markets without advertising.
C)   signals quality to consumers,because advertising is expensive.
D)   All of the above are correct.E) B) and C)
F) A) and B)

Question 5

Examples of monopolistically competitive markets include the markets for

Accepted Answer

A)   restaurants and furniture.
B)   wheat and corn.
C)   postage stamps and wooden pencils.
D)   All of the above are correct.E) B) and D)
F) None of the above

Question 6

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

Question 7

A monopolistically competitive firm faces a downward-sloping demand curve because there are few firms in the market.

Accepted Answer

A) True 
 B)False

Question 8

Figure 16-5 
-Refer to Figure 16-5.Which of the graphs shown would be consistent with a profit maximizing firm in a monopolistically competitive market that is earning a positive profit?

Accepted Answer

A)   panel a
B)   panel b
C)   panel c
D)   panel dE) None of the above
F) A) and B)

Question 9

Figure 16-3 
-Refer to Figure 16-3.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.E) A) and D)
F) None of the above

Question 10

When a market is monopolistically competitive,the typical firm in the market is likely to experience a

Accepted Answer

A)   positive profit in the short run and in the long run.
B)   positive or negative profit in the short run and a zero profit in the long run.
C)   zero profit in the short run and a positive or negative profit in the long run.
D)   zero profit in the short run and in the long run.E) C) and D)
F) A) and B)

Question 11

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

Question 12

A firm in a monopolistically competitive market can earn short-run profits but not long-run profits.

Accepted Answer

A) True 
 B)False

Question 13

In the long run,a monopolistically competitive firm produces a quantity that is

Accepted Answer

A)   equal to the efficient scale.
B)   less than the efficient scale.
C)   greater than the efficient scale.
D)   consistent with diseconomies of scale.E) None of the above
F) A) and D)

Question 14

A profit-maximizing firm operating in a monopolistically competitive market that is in a long-run equilibrium has

Accepted Answer

A)   minimized average total cost.
B)   chosen to produce where demand is unitary elastic.
C)   produced the efficient scale of output.
D)   chosen a quantity of output where average revenue equals average total cost.E) A) and D)
F) C) and D)

Question 15

Table 16-4
This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm.
 
-Refer to Table 16-4.At the profit maximizing level of output,what is this firm's total cost?

Accepted Answer

A)   $0
B)   $14
C)   $20
D)   $27E) A) and B)
F) B) and C)

Question 16

The debate over whether advertising serves a valuable purpose in society is definitively answered by economists who study the tastes and preferences of individuals.

Accepted Answer

A) True 
 B)False

Question 17

Regulation of a firm in a monopolistically competitive market

Accepted Answer

A)   usually implies a very small administrative burden.
B)   will lower the firm's costs.
C)   is commonly used to enhance market efficiency.
D)   is unlikely to improve market efficiency.E) C) and D)
F) A) and B)

Question 18

Which of the following markets impose deadweight losses on society? (i) 
Perfect competition
(ii) 
Monopolistic competition
(iii) 
Monopoly

Accepted Answer

A)   (i) and (ii) only
B)   (ii) and (iii) only
C)   (i) and (iii) only
D)   (i) onlyE) All of the above
F) C) and D)

Question 19

The product-variety externality arises in monopolistically competitive markets because

Accepted Answer

A)   firms produce with excess capacity.
B)   firms try to differentiate their products.
C)   firms would like to produce homogeneous products,but the large number of firms prohibits it.
D)   entry and exit is restricted.E) A) and C)
F) None of the above

Question 20

The relationship between advertising and product differentiation is

Accepted Answer

A)   positive;the more differentiated the product,the more a firm is likely to spend on advertising.
B)   negative;the more differentiated the product,the less a firm is likely to spend on advertising.
C)   zero;there is no relationship between product differentiation and advertising.
D)   irrelevant;firms with differentiated products do not need to advertise.E) B) and C)
F) None of the above

Exam 16: Monopolistic Competition

A firm in a monopolistically competitive market can earn short-run profits but not long-run profits.

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Advertising

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Examples of monopolistically competitive markets include the markets for

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Regulation of a firm in a monopolistically competitive market

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Figure 16-3 -Refer to Figure 16-3.Which of the following will occur in the long run in this industry?

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Figure 16-5 -Refer to Figure 16-5.Which of the graphs shown would be consistent with a profit maximizing firm in a monopolistically competitive market that is earning a positive profit?

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Figure 16-4 -Refer to Figure 16-4.Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into a monopolistically competitive industry?

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Crude oil is primarily supplied to the world market by a few Middle Eastern countries.Such a market is an example of a(n) (i) Imperfectly competitive market. (ii) Monopoly market. (iii) Oligopoly market.

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The relationship between advertising and product differentiation is

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

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In the long run,a monopolistically competitive firm produces a quantity that is

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Which of the following statements is correct?

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For a monopolistically competitive firm,

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The product-variety externality arises in monopolistically competitive markets because

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A profit-maximizing firm operating in a monopolistically competitive market that is in a long-run equilibrium has

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A monopolistically competitive firm faces a downward-sloping demand curve because there are few firms in the market.

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Which of the following markets impose deadweight losses on society? (i) Perfect competition (ii) Monopolistic competition (iii) Monopoly

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The debate over whether advertising serves a valuable purpose in society is definitively answered by economists who study the tastes and preferences of individuals.

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Table 16-4 This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm. -Refer to Table 16-4.At the profit maximizing level of output,what is this firm's total cost?

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When a market is monopolistically competitive,the typical firm in the market is likely to experience a

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