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Exam 16: Monopolistic Competition

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Question 71

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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. Which industry has the highest concentration ratio?

A) Industry A
B) Industry B
C) Industry C
D) Industry D

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

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Question 72

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A market structure with only a few sellers, each offering similar or identical products, is known as

A) oligopoly.
B) monopoly.
C) monopolistic competition.
D) perfect competition.

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

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Question 73

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Figure 16-11 -Refer to Figure 16-11. The graph depicts a monopolistically competitive firm in the short run. Which of the following explanations best describes the long run adjustment?

Compared to other firms, firms that sell highly differentiated products likely incur significant costs associated with

Figure 16-12 -Refer to Figure 16-12. How much cost per unit could this firm save by producing the efficient level of output rather than the profit-maximizing level of output?

Most businesses advertise their products and services. Some business use SPAM emails to advertise because the cost of a mass e-mail is close to zero. Other business spend millions of dollars to advertise in a 30-second spot during the Super Bowl. Having observed this real world data, economists argue that the amount of money that a business spends on advertising is a proxy for a good or service's

Scenario 16-9 Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products. -Refer to Scenario 16-9. Martina offers two reasons for agreeing with Dean's decision. What are they?

​A monopolistically competitive firm cannot earn an economic profit in the long run.

Figure 16-5 -Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into a monopolistically competitive industry?

Which of the following conditions is characteristic of a monopolistically competitive firm in short-run equilibrium?

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. Which of the following will occur in the long run in this industry?

​Which of the following is true about a monopolistically competitive firm?

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 profit maximizes and faces a constant marginal cost of $7, does it have excess capacity? How do you know?

Monopolistically competitive firms have excess capacity. To maximize profits, firms will

​A monopolistically competitive firm is a price-taker.

Economists defend brand names as useful to consumers because brand names

Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2. What is the concentration ratio for Industry L?

Under which of the following market structures would consumers likely pay the highest price for a product?

In a long-run equilibrium, both perfectly competitive markets and monopolistically competitive markets have price equal to average total cost.

In which of the following product markets are we likely to observe the largest amount of advertising?