Question 1

One theory of advertising suggests that

Accepted Answer

A)   advertising is more effective for industrial products than consumer products.
B)   the content of advertising may be irrelevant to product success in the market.
C)   regulations limiting advertising benefit consumers, but not producers.
D)   television advertising is more effective in reducing competition than ads on websites.E) All of the above
F) A) and B)

Question 2

If regulators required firms in monopolistically competitive markets to set price equal to marginal cost,

Accepted Answer

A)   firms would most likely experience economic losses.
B)   firms would also operate at their efficient scale.
C)   new firms would likely to enter the market.
D)   the most efficient firms would not likely to be affected.E) All of the above
F) A) and B)

Question 3

Critics of advertising argue that firms use advertising to manipulate consumers' tastes.

Accepted Answer

A) True 
 B)False

Question 4

A firm is a price taker

Accepted Answer

A)   only when the market is perfectly competitive.
B)   only when the market is perfectly competitive or monopolistic.
C)   only when the market is perfectly competitive or monopolistically competitive.
D)   when the market is perfectly competitive, monopolistically competitive, or monopolistid.E) A) and B)
F) A) and C)

Question 5

The theory of monopolistic competition is somewhat disappointing in that it fails to

Accepted Answer

A)   pinpoint a profit-maximizing level of output for monopolistically competitive firms.
B)   yield simple and compelling advice for public policy.
C)   explain why product differentiation is observed in monopolistically competitive markets.
D)   explain why monopolistically competitive firms have excess capacity.E) All of the above
F) A) and D)

Question 6

With respect to monopolistic competition,

Accepted Answer

A)   both the business-stealing externality and the product-variety externality are positive externalities.
B)   the business-stealing externality is a positive externality, while the product-variety externality is a negative externality.
C)   the business-stealing externality is a negative externality, while the product-variety externality is a positive externality.
D)   both the business-stealing externality and the product-variety externality are negative externalities.E) A) and B)
F) A) and D)

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

The "monopoly" in monopolistically competitive markets is most likely a result of firms having some pricing power due to product differentiation.

Accepted Answer

A) True 
 B)False

Question 9

Scenario 16-2
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 16-2. If the marginal cost of producing this good is 4, what price would a profit-maximizing monopolist charge for the product?

Accepted Answer

A)   P = 4
B)   P = 10
C)   P = 12
D)   P = 20E) A) and D)
F) B) and D)

Question 10

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

Accepted Answer

A)   P > ATC
B)   P = ATC
C)   P 
D)   Any of the above could be correct.E) A) and C)
F) A) and D)

Question 11

Monopolistic competition is characterized by many buyers and sellers, product differentiation, and free entry.

Accepted Answer

A) True 
 B)False

Question 12

hich of the following industries has the highest concentration ratio?

Accepted Answer

A)   dresses
B)   apples
C)   books
D)   cigarettesE) All of the above
F) B) and C)

Question 13

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)   less than 100 units of output.
B)   100 units of output.
C)   between 100 and 133.33 units of output.
D)   more than 133.33 units of output.E) A) and D)
F) None of the above

Question 14

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

Question 15

For a profit-maximizing monopolistically competitive firm, price 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) None of the above
F) A) and C)

Question 16

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. If the government required Beatrice's to produce at the efficient scale of output, how many cakes would Beatrice's sell?

Accepted Answer

A)   4
B)   5
C)   6
D)   7E) B) and D)
F) A) and B)

Question 17

A new Mexican restaurant opened in the town of Manchester. The residents of the town are

Accepted Answer

A)   happy because of the product-variety externality, while other restaurant owners are unhappy because of the business-stealing externality.
B)   happy because of the business-stealing externality, while other restaurant owners are unhappy because of the product-variety externality.
C)   unhappy because of the product-variety externality, while other restaurant owners are happy because of the business-stealing externality.
D)   unhappy because of the business-stealing externality, while other restaurant owners are happy because of the product-variety externality.E) C) and D)
F) All of the above

Question 18

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. If advertising were banned in these markets, what would likely happen to the prices of chips and soda?

Accepted Answer

They would...

Question 19

When consumers are exposed to additional choices that result from the introduction of a new product,

Accepted Answer

A)   their satisfaction is likely to be lowered as a result of their having to make additional choices.
B)   a product-variety externality is said to occur.
C)   an advertising externality is said to occur.
D)   consumers are likely to experience negative consumption externalities.E) A) and B)
F) A) and C)

Question 20

Figure 16-13 
-Refer to Figure 16-13. Use the letters to identify the deadweight loss associated with this firm's profit­maximizing production.

Accepted Answer

The answer of Figure 16-13 
-Refer to Figure 16-13. Use...

Exam 16: Monopolistic Competition

Monopolistic competition is an inefficient market structure because

Correct Answer
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Critics of advertising argue that firms use advertising to manipulate consumers' tastes.

Correct Answer
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Scenario 16-2 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 16-2. If the marginal cost of producing this good is 4, what price would a profit-maximizing monopolist charge for the product?

Correct Answer
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If regulators required firms in monopolistically competitive markets to set price equal to marginal cost,

Correct Answer
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One theory of advertising suggests that

Correct Answer
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The theory of monopolistic competition is somewhat disappointing in that it fails to

Correct Answer
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When consumers are exposed to additional choices that result from the introduction of a new product,

Correct Answer
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For a profit-maximizing monopolistically competitive firm, price exceeds marginal cost in

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

Correct Answer
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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 Answer
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A firm is a price taker

Correct Answer
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The "monopoly" in monopolistically competitive markets is most likely a result of firms having some pricing power due to product differentiation.

Correct Answer
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Figure 16-13 -Refer to Figure 16-13. Use the letters to identify the deadweight loss associated with this firm's profitmaximizing production.

Correct Answer
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Correct Answer
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They would...
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With respect to monopolistic competition,

Correct Answer
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hich of the following industries has the highest concentration ratio?

Correct Answer
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Monopolistic competition is characterized by many buyers and sellers, product differentiation, and free entry.

Correct Answer
verified

A new Mexican restaurant opened in the town of Manchester. The residents of the town are

Correct Answer
verified

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

Correct Answer
verified

Exam 16: Monopolistic Competition

Monopolistic competition is an inefficient market structure because

Correct AnswerverifiedShow Answer

Critics of advertising argue that firms use advertising to manipulate consumers' tastes.

Correct AnswerverifiedShow Answer

Scenario 16-2 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 16-2. If the marginal cost of producing this good is 4, what price would a profit-maximizing monopolist charge for the product?

Correct AnswerverifiedShow Answer

If regulators required firms in monopolistically competitive markets to set price equal to marginal cost,

Correct AnswerverifiedShow Answer

One theory of advertising suggests that

Correct AnswerverifiedShow Answer

The theory of monopolistic competition is somewhat disappointing in that it fails to

Correct AnswerverifiedShow Answer

When consumers are exposed to additional choices that result from the introduction of a new product,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

A firm is a price taker

Correct AnswerverifiedShow Answer

The "monopoly" in monopolistically competitive markets is most likely a result of firms having some pricing power due to product differentiation.

Correct AnswerverifiedShow Answer

Figure 16-13 -Refer to Figure 16-13. Use the letters to identify the deadweight loss associated with this firm's profit­maximizing production.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThey would...View AnswerShow Answer

With respect to monopolistic competition,

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hich of the following industries has the highest concentration ratio?

Correct AnswerverifiedShow Answer

Monopolistic competition is characterized by many buyers and sellers, product differentiation, and free entry.

Correct AnswerverifiedShow Answer

A new Mexican restaurant opened in the town of Manchester. The residents of the town are

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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Figure 16-13 -Refer to Figure 16-13. Use the letters to identify the deadweight loss associated with this firm's profitmaximizing production.

Correct Answer
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Correct Answer
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They would...
View Answer

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