Question 1

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

Question 2

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 M?

Accepted Answer

A)   about 96%
B)   about 52%
C)   about 40%
D)   about 22%E) B) and D)
F) A) and D)

Question 3

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. At the profit­maximizing quantity, what is Beatrice's total profit?

Accepted Answer

A)   $43
B)   $89
C)   $101
D)   $144E) B) and C)
F) All of the above

Question 4

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) C) and D)

Question 5

Figure 16-3
This figure depicts a situation in a monopolistically competitive market. 
-Refer to Figure 16-3. At the profit­maximizing level of output, what is this firm's total cost of production?

Accepted Answer

A)   $1,200
B)   $1,400
C)   $1,600
D)   $1,875E) A) and B)
F) A) and D)

Question 6

Product differentiation always leads to some measure of market power.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is correct?

Accepted Answer

A)   In the long run, both perfectly competitive firms and monopolistically competitive firms operate with excess capacity.
B)   A firm operates with excess capacity when, in the long run, its level of output is below the efficient scale.
C)   For any firm, efficient scale is the level of output at which the average-total-cost curve is tangent to the demand curve.
D)   All of the above are correct.E) All of the above
F) None of the above

Question 8

Which of the following conditions distinguishes monopolistic competition from perfect competition?

Accepted Answer

A)   the number of sellers in the market
B)   the freedom of entry and exit by firms in the market
C)   the size of firms in the market
D)   product differentiationE) All of the above
F) A) and D)

Question 9

A firm that would experience higher average total cost by increasing production is operating with excess capacity.

Accepted Answer

A) True 
 B)False

Question 10

Scenario 16-6
Ike's Ice Cream has decided to open a new ice cream parlor in Mayville, MS. The market for ice cream parlors is monopolistically competitive.
-Refer to Scenario 16-6. As a result of the new Ike's Ice Cream parlor, existing ice cream shops located in Mayville are likely to experience a

Accepted Answer

A)   business-stealing externality, which harms producers.
B)   business-stealing externality, which benefits producers.
C)   product-variety externality, which harms consumers.
D)   product-variety externality, which benefits consumers.E) A) and B)
F) C) and D)

Question 11

Scenario 16-4
Delish, a moderately priced restaurant, has recently announced intentions to open a restaurant in Boston, MA. Assume that the restaurant market in Boston is characterized by monopolistic competition.
-Refer to Scenario 16-4. As a result of the new restaurant, diners in Boston are likely to experience a

Accepted Answer

A)   product-variety externality, which is a negative externality.
B)   product-variety externality, which is a positive externality.
C)   business-stealing externality, which is a negative externality.
D)   business-stealing externality, which is a positive externality.E) A) and B)
F) C) and D)

Question 12

In a monopolistically competitive market,

Accepted Answer

A)   strategic interactions among the firms are very important.
B)   the threat of entry by new firms is not an important consideration.
C)   the attainment of a Nash equilibrium is an important objective.
D)   firms may enter even though they will earn zero economic profit in the long run.E) A) and B)
F) A) and C)

Question 13

According to one theory, advertising sends a signal to consumers about the quality of the product being offered. An implication of this theory is that

Accepted Answer

A)   the actual quality of the product is irrelevant.
B)   the content of the advertisement is irrelevant.
C)   advertising is not in the best interest of society.
D)   it is irrational for firms to pay famous people large amounts of money to appear in their advertisements.E) A) and C)
F) C) and D)

Question 14

According to the signaling theory of advertising, consumers

Accepted Answer

A)   pay little or no attention to which firms advertise and which firms do not advertise.
B)   are often more impressed by a firm's willingness to spend money on advertising than they are by the content of the advertisement.
C)   are often more impressed by low-cost advertisements than they are by high-cost advertisements.
D)   gain little or no information about product quality from advertisements.E) All of the above
F) B) and D)

Question 15

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Accepted Answer

A)   firms are more likely to operate at efficient scale.
B)   there are likely to be too many firms in a monopolistically competitive market.
C)   market efficiency is likely to be enhanced by the entry of new firms.
D)   all firms are earning zero economic profit.E) A) and B)
F) All of the above

Question 16

If advertising decreases the elasticity of demand for specific brand names of hard liquor, we would expect firms to be able to charge a larger markup over marginal cost.

Accepted Answer

A) True 
 B)False

Question 17

In a monopolistically competitive market, social welfare would be enhanced if

Accepted Answer

A)   price equaled marginal cost.
B)   government regulation eliminated the product-variety externality.
C)   the government raised taxes to subsidize firms that price below average total cost.
D)   there were fewer firms, making the industry closer to an oligopoly.E) A) and B)
F) B) and D)

Question 18

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

Accepted Answer

The answer of Figure 16-11 
-Refer to Figure 16-11. If...

Question 19

Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e., on an average night, 80 percent of the hotel rooms are full) . This kind of excess capacity is indicative of what kind of market?

Accepted Answer

A)   monopoly
B)   perfect competition
C)   monopolistic competition
D)   oligopolyE) B) and D)
F) A) and B)

Question 20

The "competition" in monopolistically competitive markets is most likely a result of having many sellers in the market.

Accepted Answer

A) True 
 B)False

Exam 16: Monopolistic Competition

If advertising decreases the elasticity of demand for specific brand names of hard liquor, we would expect firms to be able to charge a larger markup over marginal cost.

Correct Answer
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In a monopolistically competitive market, social welfare would be enhanced if

Correct Answer
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A firm that would experience higher average total cost by increasing production is operating with excess capacity.

Correct Answer
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In a monopolistically competitive market,

Correct Answer
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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. At the profitmaximizing quantity, what is Beatrice's total profit?

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e., on an average night, 80 percent of the hotel rooms are full) . This kind of excess capacity is indicative of what kind of market?

Correct Answer
verified

The "competition" in monopolistically competitive markets is most likely a result of having many sellers in the market.

Correct Answer
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According to one theory, advertising sends a signal to consumers about the quality of the product being offered. An implication of this theory is that

Correct Answer
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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. What is the concentration ratio for Industry M?

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

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

Correct Answer
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When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Correct Answer
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Figure 16-11 -Refer to Figure 16-11. If this firm profit-maximizes, how much cost will it incur?

Correct Answer
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Which of the following conditions distinguishes monopolistic competition from perfect competition?

Correct Answer
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Scenario 16-6 Ike's Ice Cream has decided to open a new ice cream parlor in Mayville, MS. The market for ice cream parlors is monopolistically competitive. -Refer to Scenario 16-6. As a result of the new Ike's Ice Cream parlor, existing ice cream shops located in Mayville are likely to experience a

Correct Answer
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Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. At the profitmaximizing level of output, what is this firm's total cost of production?

Correct Answer
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Product differentiation always leads to some measure of market power.

Correct Answer
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According to the signaling theory of advertising, consumers

Correct Answer
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Exam 16: Monopolistic Competition

If advertising decreases the elasticity of demand for specific brand names of hard liquor, we would expect firms to be able to charge a larger markup over marginal cost.

Correct AnswerverifiedShow Answer

In a monopolistically competitive market, social welfare would be enhanced if

Correct AnswerverifiedShow Answer

A firm that would experience higher average total cost by increasing production is operating with excess capacity.

Correct AnswerverifiedShow Answer

In a monopolistically competitive market,

Correct AnswerverifiedShow Answer

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. At the profit­maximizing quantity, what is Beatrice's total profit?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e., on an average night, 80 percent of the hotel rooms are full) . This kind of excess capacity is indicative of what kind of market?

Correct AnswerverifiedShow Answer

The "competition" in monopolistically competitive markets is most likely a result of having many sellers in the market.

Correct AnswerverifiedShow Answer

According to one theory, advertising sends a signal to consumers about the quality of the product being offered. An implication of this theory is that

Correct AnswerverifiedShow Answer

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 M?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following conditions distinguishes monopolistic competition from perfect competition?

Correct AnswerverifiedShow Answer

Scenario 16-6 Ike's Ice Cream has decided to open a new ice cream parlor in Mayville, MS. The market for ice cream parlors is monopolistically competitive. -Refer to Scenario 16-6. As a result of the new Ike's Ice Cream parlor, existing ice cream shops located in Mayville are likely to experience a

Correct AnswerverifiedShow Answer

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. At the profit­maximizing level of output, what is this firm's total cost of production?

Correct AnswerverifiedShow Answer

Product differentiation always leads to some measure of market power.

Correct AnswerverifiedShow Answer

According to the signaling theory of advertising, consumers

Correct AnswerverifiedShow Answer

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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. At the profitmaximizing quantity, what is Beatrice's total profit?

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Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. At the profitmaximizing level of output, what is this firm's total cost of production?

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