Question 1

Figure 16-6
 
-Refer to Figure 16-6.Which of the graphs depicts the situation for a profit-maximizing firm in a monopolistically competitive market?

Accepted Answer

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

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.
 
-Refer to Figure 16-9.Efficient scale is reached

Accepted Answer

A)   at 100 units.
B)   at 133.33 units.
C)   between 133.33 units and 154.92 units.
D)   at 154.92 units.E) None of the above
F) A) and B)

Question 4

It has been said that many of the patrons in McDonald's restaurants in foreign locations are American tourists.A likely reason why many Americans dine at McDonald's while vacationing abroad is

Accepted Answer

A)   they can't get enough McDonald's food when they are at home.
B)   they know and trust the quality associated with the McDonald's brand name.
C)   the food at local restaurants is of inferior quality.
D)   that Americans, by their nature, are not very adventurous.E) A) and D)
F) None of the above

Question 5

Figure 16-2
This figure depicts a situation in a monopolistically competitive market.
 
-Refer to Figure 16-2.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) B) and C)
F) None of the above

Question 6

Brand names are rarely used to convey information about product quality.

Accepted Answer

A) True 
 B)False

Question 7

Which two curves are tangent to each other in a monopolistically competitive market with zero economic profit?

Accepted Answer

A)   demand and average variable cost
B)   demand and average total cost
C)   marginal revenue and average variable cost
D)   marginal revenue and average total costE) None of the above
F) B) and C)

Question 8

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

Question 9

Which of the following statements is not correct?

Accepted Answer

A)   Both monopolistically competitive and perfectly competitive firms can earn economic profits in the short run.
B)   Both monopolies and monopolistically competitive firms can earn economic profits in the long run.
C)   Firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost.
D)   Only competitive firms produce the welfare-maximizing level of output.E) None of the above
F) B) and C)

Question 10

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) B) and C)
F) None of the above

Question 11

When a profit-maximizing firm in a monopolistically competitive market is producing the long-run equilibrium quantity,

Accepted Answer

A)   its average revenue will equal its marginal cost.
B)   its marginal revenue will exceed its marginal cost.
C)   it will be earning positive economic profits.
D)   its demand curve will be tangent to its average total cost curve.E) C) and D)
F) None of the above

Question 12

Figure 16-3
 
-Refer to Figure 16-3.At the profit-maximizing,or loss-minimizing,output level,how many units of output will the firm in this figure produce?

Accepted Answer

A)   15
B)   20
C)   25
D)   This firm will choose not to produce.E) A) and B)
F) A) and D)

Question 13

Monopolistically competitive markets may be socially inefficient because

Accepted Answer

A)   most firms produce inferior products.
B)   government programs cannot effectively regulate price.
C)   firms earn zero economic profit.
D)   the market may have too much or too little entry by new firms.E) A) and B)
F) None of the above

Question 14

Scenario 16-3
Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q.
-Refer to Scenario 16-3.If the marginal cost of producing this good is 4,how much total consumer surplus would consumers receive in this market?

Accepted Answer

A)   8
B)   12
C)   32
D)   64E) A) and B)
F) A) and C)

Question 15

Professional organizations (for example,the American Medical Association and the American Bar Association)have been active advocates for regulation to restrict the right of professionals to advertise.Describe what economic incentives might exist for existing professionals to restrict advertising.

Accepted Answer

If advertising increases information abo...

Question 16

In a monopolistically competitive market,the demand curves faced by incumbent firms are unaffected by the entry of new firms into the market.

Accepted Answer

A) True 
 B)False

Question 17

In a long-run equilibrium,

Accepted Answer

A)   excess capacity applies to monopolistically competitive firms but not to competitive firms.
B)   zero economic profit applies to competitive firms but not to monopolistically competitive firms.
C)   markup over marginal cost applies to both monopolistically competitive and competitive firms.
D)   product variety externalities apply to both perfectly competitive firms and monopolistically competitive firms.E) A) and C)
F) C) and D)

Question 18

A market structure in which there are many firms selling products that are similar but not identical is known as

Accepted Answer

A)   oligopoly.
B)   monopoly.
C)   monopolistic competition.
D)   perfect competition.E) A) and D)
F) B) and D)

Question 19

Entry by new firms into a monopolistically competitive market

Accepted Answer

A)   creates additional consumer surplus.
B)   imposes a positive externality on existing firms.
C)   leads to the same externalities that are observed when new firms enter a perfectly competitive market.
D)   increases the demand for existing firms' products.E) A) and D)
F) A) and C)

Question 20

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.Which industry has the highest concentration ratio?

Accepted Answer

A)   Industry A
B)   Industry B
C)   Industry C
D)   Industry DE) All of the above
F) A) and D)

Exam 16: Monopolistic Competition.

Figure 16-6 -Refer to Figure 16-6.Which of the graphs depicts the situation for a profit-maximizing firm in a monopolistically competitive market?

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Which two curves are tangent to each other in a monopolistically competitive market with zero economic profit?

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In a long-run equilibrium,

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Entry by new firms into a monopolistically competitive market

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It has been said that many of the patrons in McDonald's restaurants in foreign locations are American tourists.A likely reason why many Americans dine at McDonald's while vacationing abroad is

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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.Which industry has the highest concentration ratio?

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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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A market structure in which there are many firms selling products that are similar but not identical is known as

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Scenario 16-3 Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q. -Refer to Scenario 16-3.If the marginal cost of producing this good is 4,how much total consumer surplus would consumers receive in this market?

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Brand names are rarely used to convey information about product quality.

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Which of the following statements is not correct?

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Monopolistically competitive markets may be socially inefficient because

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Monopolistic competition is an inefficient market structure because

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Figure 16-2 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-2.Which of the following will occur in the long run in this industry?

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Professional organizations (for example,the American Medical Association and the American Bar Association)have been active advocates for regulation to restrict the right of professionals to advertise.Describe what economic incentives might exist for existing professionals to restrict advertising.

Correct AnswerverifiedIf advertising increases information abo...View AnswerShow Answer

Figure 16-3 -Refer to Figure 16-3.At the profit-maximizing,or loss-minimizing,output level,how many units of output will the firm in this figure produce?

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

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In a monopolistically competitive market,the demand curves faced by incumbent firms are unaffected by the entry of new firms into the market.

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Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9.Efficient scale is reached

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When a profit-maximizing firm in a monopolistically competitive market is producing the long-run equilibrium quantity,

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If advertising increases information abo...
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