Question 1

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

Question 2

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 20. 
-Refer to Table 16-7. If this firm has a constant marginal cost of $7, what is the profit-maximizing level of output?

Accepted Answer

The answer of Table 16-7
A monopolistically competitive firm faces the...

Question 3

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. Which of the following statements regarding this monopolistically competitive firm is correct?

Accepted Answer

A)  New firms will enter this market in the long run since firm profits are greater than zero.
B)  Firms will leave this market in the long run since firm profits are less than zero.
C)  This firm is currently in long-run equilibrium.
D)  This firm is currently in long-run equilibrium, and the firm is producing its efficient scale of output.E) A) and C)
F) B) and C)

Question 4

Monopolistic competition differs from perfect competition because in monopolistically competitive markets

Accepted Answer

A)  there are barriers to entry.
B)  all firms can eventually earn economic profits.
C)  each of the sellers offers a somewhat different product.
D)  strategic interactions between firms are important.E) C) and D)
F) B) and C)

Question 5

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

Accepted Answer

A)  price is equal to average total cost.
B)  price is equal to marginal cost.
C)  price is equal to marginal revenue.
D)  the firm operates at its efficient scale.E) A) and C)
F) A) and B)

Question 6

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 B?

Accepted Answer

A)  approximately 46%
B)  approximately 54%
C)  approximately 57%
D)  approximately 61%E) A) and B)
F) A) and C)

Question 7

Table 16-6
Beatrice's Birthday Cakes is one bakery among many in the market for birthday cakes. The following table presents cost and revenue data for birthday cakes at Beatrice's. 
-Refer to Table 16-6. Given the cost and revenue data, Beatrice's is

Accepted Answer

A)  not in a long-run equilibrium. More businesses will enter the bakery market in the long-run.
B)  not in a short-run equilibrium.
C)  not in a long-run equilibrium. Some businesses currently in the bakery market will exit the market in the long-run.
D)  in a long-run equilibrium.E) B) and C)
F) C) and D)

Question 8

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. What is the concentration ratio in Industry A?

Accepted Answer

A)  38%
B)  71%
C)  92%
D)  98%E) B) and D)
F) A) and B)

Question 9

In a long-run equilibrium, a firm in a monopolistically competitive market operates

Accepted Answer

A)  where marginal revenue is zero.
B)  where marginal revenue is negative.
C)  on the rising portion of its average total cost curve.
D)  on the declining portion of its average total cost curve.E) None of the above
F) A) and C)

Question 10

A monopolistically competitive firm is currently producing 20 units of output. At this level of output the firm is charging a price equal to $20, has marginal revenue equal to $12, has marginal cost equal to $12, and has average total cost equal to $18. From this information we can infer that

Accepted Answer

A)  the firm is currently maximizing its profit.
B)  the profits of the firm are negative.
C)  firms are likely to leave this market in the long run.
D)  All of the above are correct.E) B) and C)
F) A) and D)

Question 11

When an industry has many firms, the industry is

Accepted Answer

A)  an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products.
B)  an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products.
C)  monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products.
D)  perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products.E) B) and C)
F) A) and D)

Question 12

In markets where restrictions on advertising have been used to curtail competition, the U.S. courts have generally

Accepted Answer

A)  referred the matters of advertising restrictions to executive regulators.
B)  enforced industry-wide agreements to restrict advertising.
C)  been silent on the effect of explicit advertising restrictions.
D)  overturned laws that prohibit advertising.E) None of the above
F) B) and C)

Question 13

A study of the market for optometrists' services in the 1960s showed that

Accepted Answer

A)  all states in the United States prohibited advertising by optometrists.
B)  almost all professional optometrists opposed legal restrictions on their rights to advertise.
C)  the average price of eyeglasses would decrease if the legal restrictions on advertising by optometrists were removed.
D)  advertising on eyeglasses limited competition among optometrists.E) A) and B)
F) A) and C)

Question 14

Figure 16-5 
-Refer to Figure 16-5. Which of the panels depicts a firm in a monopolistically competitive market earning positive economic profits?

Accepted Answer

A)  panel a
B)  panel b
C)  panel c
D)  panel dE) All of the above
F) C) and D)

Question 15

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 16

In the debate between the critics and defenders of advertising, what conclusion have policymakers come to regarding the effect of advertising on competition - advertising makes markets more competitive or less competitive?

Accepted Answer

The answer of In the debate between the critics and...

Question 17

In a long-run equilibrium,

Accepted Answer

A)  only a perfectly competitive firm operates at its efficient scale.
B)  only a monopolistically competitive firm operates at its efficient scale.
C)  neither a competitive firm nor a monopolistically competitive firm charges a markup over marginal cost.
D)  both a perfectly competitive firm and a monopolistically competitive firm operate at their efficient scale of production.E) A) and B)
F) A) and C)

Question 18

Excess capacity characterizes firms in monopolistically competitive markets, even in situations of long-run equilibrium.

Accepted Answer

A) True 
 B)False

Question 19

When a firm operates with excess capacity, it must be in a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 20

For a profit-maximizing monopolistically competitive firm, marginal revenue 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.E) B) and D)
F) A) and B)

Exam 16: Monopolistic Competition

To maximize its profit, a monopolistically competitive firm

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When a firm operates with excess capacity, it must be in a monopolistically competitive market.

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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. What is the concentration ratio in Industry A?

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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. Which of the following statements regarding this monopolistically competitive firm is correct?

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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. -Refer to Table 16-3. What is the concentration ratio for Industry B?

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Figure 16-5 -Refer to Figure 16-5. Which of the panels depicts a firm in a monopolistically competitive market earning positive economic profits?

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In markets where restrictions on advertising have been used to curtail competition, the U.S. courts have generally

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

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When an industry has many firms, the industry is

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A study of the market for optometrists' services in the 1960s showed that

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A monopolistically competitive firm is currently producing 20 units of output. At this level of output the firm is charging a price equal to $20, has marginal revenue equal to $12, has marginal cost equal to $12, and has average total cost equal to $18. From this information we can infer that

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

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

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Table 16-6 Beatrice's Birthday Cakes is one bakery among many in the market for birthday cakes. The following table presents cost and revenue data for birthday cakes at Beatrice's. -Refer to Table 16-6. Given the cost and revenue data, Beatrice's is

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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 20. -Refer to Table 16-7. If this firm has a constant marginal cost of $7, what is the profit-maximizing level of output?

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In a long-run equilibrium, a firm in a monopolistically competitive market operates

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In a long-run equilibrium,

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Excess capacity characterizes firms in monopolistically competitive markets, even in situations of long-run equilibrium.

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Monopolistic competition differs from perfect competition because in monopolistically competitive markets

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In the debate between the critics and defenders of advertising, what conclusion have policymakers come to regarding the effect of advertising on competition - advertising makes markets more competitive or less competitive?

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