Question 1

In which of the following market structures is(are)  there a large number of sellers? (i) 
Monopolistic competition
(ii) 
Perfect competition
(iii) 
Oligopoly

Accepted Answer

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

Question 2

A monopolistically competitive firm

Accepted Answer

A)  charges a price that is equal to marginal cost.
B)  experiences a zero profit in the long run.
C)  produces at the efficient scale in the long run.
D)  All of the above are correct.E) All of the above
F) None of the above

Question 3

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

Question 4

Table 16-5
This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. 
-Refer to Table 16-5. What price should this firm charge to maximize profit?

Accepted Answer

A)  $6
B)  $12
C)  $18
D)  $24E) A) and C)
F) B) and C)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)  average revenue exceeds marginal revenue
B)  marginal revenue exceeds average revenue
C)  average revenue is equal to marginal revenue
D)  revenue is always maximized along with profitE) A) and B)
F) C) and D)

Question 7

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. If...

Question 8

Scenario 16-3
Peter operates an ice cream shop in the center of Fairfield. He sells several unusual flavors of organic, homemade ice cream so he has a monopoly over his own ice cream, though he competes with many other firms selling ice cream in Fairfield for the same customers. Peter's demand and cost values for sales per day are given in the table below. (Everyone who purchases Peter's ice cream buys a double scoop cone because it's so delicious.) 
-Refer to Scenario 16-3. What price should Peter charge to maximize his profits?

Accepted Answer

The answer of Scenario 16-3
Peter operates an ice cream shop...

Question 9

A monopolistically competitive firm is currently earning a positive economic profit. If other firms enter the market, we would expect that the added competition will cause this firm to adjust its output such that it

Accepted Answer

A)  will operate closer to its efficient scale.
B)  will operate further from its efficient scale.
C)  will no longer be at its efficient scale.
D)  might move either closer to or further from its efficient scale.E) A) and B)
F) A) and C)

Question 10

If advertising reduces a consumer's price sensitivity between identical goods, it is likely to

Accepted Answer

A)  increase the elasticity of demand for differentiated products.
B)  enhance competition and encourage more product diversity.
C)  reduce competition and reduce social welfare.
D)  encourage the consumption of all homogenous goods.E) B) and D)
F) B) and C)

Question 11

If firms in a monopolistically competitive market are earning economic profits, which of the following scenarios would best describe the change existing firms would face as the market adjusts to the long-run equilibrium?

Accepted Answer

A)  an increase in demand for each firm
B)  a decrease in demand for each firm
C)  a downward shift in the marginal cost curve for each firm
D)  an upward shift in the marginal cost curve for each firmE) B) and C)
F) A) and C)

Question 12

Figure 16-7 
-Refer to Figure 16-7. Suppose a firm is operating in the situation depicted in panel (a) . Which of the following statements is correct?

Accepted Answer

A)  The firm is earning a positive short-run profit.
B)  The firm is earning a negative short-run profit.
C)  The firm is earning zero short-run profit.
D)  We cannot determine profit because we do not know the firm's average total cost.E) B) and C)
F) A) and D)

Question 13

When a monopolistically competitive firm is in long-run equilibrium,

Accepted Answer

A)  marginal revenue is equal to marginal cost.
B)  average total cost is minimized.
C)  marginal revenue is tangent to average total cost.
D)  All of the above are correct.E) All of the above
F) A) and C)

Question 14

Your company has recently requested that you travel to Dhaka, Bangladesh, to work on negotiations for a new factory to be located in one of the port cities. Your travel agent provides a list of several hundred local hotels and a Sheraton. In this case, the Sheraton brand-name is likely to be used as a signal of

Accepted Answer

A)  perceived differences that are not likely to exist among your various options.
B)  quality when quality cannot be easily judged.
C)  inefficiency in markets characterized by recognizable brand names.
D)  the quality of general lodging accommodations in Dhaka.E) B) and C)
F) B) and D)

Question 15

Figure 16-10
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-10. The firm's maximum profit is

Accepted Answer

A)  $-7,000.
B)  $-5,000.
C)  $-2,000.
D)  The firm's maximum profit cannot be determined from the figure.E) A) and D)
F) B) and D)

Question 16

Firms that sell highly differentiated consumer goods, such as over-the-counter drugs, soft drinks, breakfast cereals, and dog food, typically spend between 10 and 20 percent of revenue for

Accepted Answer

The answer of Firms that sell highly differentiated consumer goods,...

Question 17

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)  100 units of output, and its profit will be positive.
B)  100 units of output, and its profit will be zero.
C)  133.33 units of output, and its profit will be negative.
D)  133.33 units of output, and its profit will be zero.E) All of the above
F) A) and B)

Question 18

In a monopolistically competitive industry, firms set price

Accepted Answer

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

Question 19

When a new firm considers entering a market, it takes into account only the profit it would make. What are the two external effects that occur in the market that the firm does not consider?

Accepted Answer

product-variety exte...

Question 20

Product differentiation always leads to some measure of market power.

Accepted Answer

A) True 
 B)False

Exam 16: Monopolistic Competition

Firms that sell highly differentiated consumer goods, such as over-the-counter drugs, soft drinks, breakfast cereals, and dog food, typically spend between 10 and 20 percent of revenue for

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

If advertising reduces a consumer's price sensitivity between identical goods, it is likely to

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

When a monopolistically competitive firm is in long-run equilibrium,

Correct Answer
verified

Table 16-5 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-5. What price should this firm charge to maximize profit?

Correct Answer
verified

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. The firm's maximum profit is

Correct Answer
verified

Product differentiation always leads to some measure of market power.

Correct Answer
verified

Correct Answer
verified

A monopolistically competitive firm is currently earning a positive economic profit. If other firms enter the market, we would expect that the added competition will cause this firm to adjust its output such that it

Correct Answer
verified

In which of the following market structures is(are) there a large number of sellers? (i) Monopolistic competition (ii) Perfect competition (iii) Oligopoly

Correct Answer
verified

A monopolistically competitive firm

Correct Answer
verified

In a monopolistically competitive industry, firms set price

Correct Answer
verified

If firms in a monopolistically competitive market are earning economic profits, which of the following scenarios would best describe the change existing firms would face as the market adjusts to the long-run equilibrium?

Correct Answer
verified

Figure 16-7 -Refer to Figure 16-7. Suppose a firm is operating in the situation depicted in panel (a) . Which of the following statements is correct?

Correct Answer
verified

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

Correct Answer
verified

When a new firm considers entering a market, it takes into account only the profit it would make. What are the two external effects that occur in the market that the firm does not consider?

Correct Answer
verified
product-variety exte...
View Answer

Exam 16: Monopolistic Competition

Firms that sell highly differentiated consumer goods, such as over-the-counter drugs, soft drinks, breakfast cereals, and dog food, typically spend between 10 and 20 percent of revenue for

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If advertising reduces a consumer's price sensitivity between identical goods, it is likely to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a monopolistically competitive firm is in long-run equilibrium,

Correct AnswerverifiedShow Answer

Table 16-5 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-5. What price should this firm charge to maximize profit?

Correct AnswerverifiedShow Answer

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. The firm's maximum profit is

Correct AnswerverifiedShow Answer

Product differentiation always leads to some measure of market power.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A monopolistically competitive firm is currently earning a positive economic profit. If other firms enter the market, we would expect that the added competition will cause this firm to adjust its output such that it

Correct AnswerverifiedShow Answer

In which of the following market structures is(are) there a large number of sellers? (i) Monopolistic competition (ii) Perfect competition (iii) Oligopoly

Correct AnswerverifiedShow Answer

A monopolistically competitive firm

Correct AnswerverifiedShow Answer

In a monopolistically competitive industry, firms set price

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If firms in a monopolistically competitive market are earning economic profits, which of the following scenarios would best describe the change existing firms would face as the market adjusts to the long-run equilibrium?

Correct AnswerverifiedShow Answer

Figure 16-7 -Refer to Figure 16-7. Suppose a firm is operating in the situation depicted in panel (a) . Which of the following statements is correct?

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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

Correct AnswerverifiedShow Answer

When a new firm considers entering a market, it takes into account only the profit it would make. What are the two external effects that occur in the market that the firm does not consider?

Correct Answerverifiedproduct-variety exte...View AnswerShow Answer

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product-variety exte...
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