Question 1

Firms in monopolistically competitive markets and monopolies can earn long-run profits due to barriers to entry.

Accepted Answer

A) True 
 B)False

Question 2

Economists are unanimous in their belief that advertising is socially inefficient.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

The debate over whether advertising serves a valuable purpose in society is definitively answered by economists who study the tastes and preferences of individuals.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a key feature of monopolistic competition?

Accepted Answer

A)   Excess capacity
B)   A markup of price over marginal cost
C)   Positive economic profits for firms in the long run
D)   Differentiated products among firms in the marketE) A) and B)
F) B) and D)

Question 6

List five goods that are likely sold in a monopolistically competitive market.

Accepted Answer

Books, CDs, movies, ...

Question 7

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

Accepted Answer

A)   P > demand and P = MR
B)   ATC > demand and MR = MC
C)   P > MC and demand = ATC
D)   P  MRE) B) and D)
F) B) and C)

Question 8

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

Question 9

Which of the following is not an example of Joel Waldfogel's "Tyranny of the Market"?

Accepted Answer

A)   A daily newspaper tailored to appeal to the majority of readers in an area.
B)   Nike creating specialized shoes for American Indians' wider feet.
C)   Pharmaceutical companies spending research and development funds on drugs for common diseases.
D)   Airlines offering daily direct flights from one large city to another.E) None of the above
F) A) and B)

Question 10

Figure 16-10
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-10. As the figure is drawn, the firm is in

Accepted Answer

A)   a short-run equilibrium but it is not in a long-run equilibrium.
B)   a long-run equilibrium but it is not in a short-run equilibrium.
C)   a short-run equilibrium as well as a long-run equilibrium.
D)   neither a short-run equilibrium nor a long-run equilibrium.E) A) and C)
F) A) and D)

Question 11

When advertising is used to relay information about price, each firm is able to enhance market power.

Accepted Answer

A) True 
 B)False

Question 12

In markets where the government imposes an excise tax on unit sales, it also has a tendency to dabble with restrictions on advertising (for example, cigarettes and hard liquor). Do potential (or actual) restrictions on advertising in these markets serve the interest of a government that is interested in maximizing its tax revenue from the sale of these products? Explain your answer.

Accepted Answer

In the case of the examples given, deman...

Question 13

Monopolistic competition is the only market structure that features many sellers.

Accepted Answer

A) True 
 B)False

Question 14

As developing countries make a transition to market-based economies, one of the first major capital investments is in "Western-quality" hotels. Explain why brand-name hotel accommodations are a critical step in attracting foreign investment.

Accepted Answer

Brand-name hotels are a critic...

Question 15

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)   between 100 and 133.33 units.
C)   at 133.33 units.
D)   beyond 133.33 units.E) All of the above
F) C) and D)

Question 16

Table 16-4
This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. 
-Refer to Table 16-4. How much profit will this firm earn when it chooses its output to maximize profit?

Accepted Answer

A)   a $12 loss
B)   an $8 profit
C)   a $25 profit
D)   a $32 profitE) All of the above
F) A) and D)

Question 17

A concentration ratio

Accepted Answer

A)   measures the percentage of total sales of the top firm in the industry.
B)   reflects the level of competition in an industry.
C)   is inversely related to the price charged by the top firm in the industry.
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 18

When quality cannot be easily judged in advance, what provides consumers with information about the quality of a product?

Accepted Answer

A)   a brand name
B)   a tie-in
C)   the quantity available for sale
D)   the amount of deadweight lossE) A) and B)
F) All of the above

Question 19

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

Question 20

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 B)
F) B) and D)

Exam 16: Monopolistic Competition

When advertising is used to relay information about price, each firm is able to enhance market power.

Correct Answer
verified

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

Correct Answer
verified

Firms in monopolistically competitive markets and monopolies can earn long-run profits due to barriers to entry.

Correct Answer
verified

According to the signaling theory of advertising, consumers

Correct Answer
verified

Correct Answer
verified
In the case of the examples given, deman...
View Answer

As developing countries make a transition to market-based economies, one of the first major capital investments is in "Western-quality" hotels. Explain why brand-name hotel accommodations are a critical step in attracting foreign investment.

Correct Answer
verified
Brand-name hotels are a critic...
View Answer

To maximize its profit, a monopolistically competitive firm

Correct Answer
verified

Which of the following is not an example of Joel Waldfogel's "Tyranny of the Market"?

Correct Answer
verified

Economists are unanimous in their belief that advertising is socially inefficient.

Correct Answer
verified

The debate over whether advertising serves a valuable purpose in society is definitively answered by economists who study the tastes and preferences of individuals.

Correct Answer
verified

Which of the following is not a key feature of monopolistic competition?

Correct Answer
verified

List five goods that are likely sold in a monopolistically competitive market.

Correct Answer
verified
Books, CDs, movies, ...
View Answer

When quality cannot be easily judged in advance, what provides consumers with information about the quality of a product?

Correct Answer
verified

Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-4. How much profit will this firm earn when it chooses its output to maximize profit?

Correct Answer
verified

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. As the figure is drawn, the firm is in

Correct Answer
verified

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

Correct Answer
verified

A concentration ratio

Correct Answer
verified

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
verified

Monopolistic competition is the only market structure that features many sellers.

Correct Answer
verified

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

Correct Answer
verified

Exam 16: Monopolistic Competition

When advertising is used to relay information about price, each firm is able to enhance market power.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Firms in monopolistically competitive markets and monopolies can earn long-run profits due to barriers to entry.

Correct AnswerverifiedShow Answer

According to the signaling theory of advertising, consumers

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIn the case of the examples given, deman...View AnswerShow Answer

As developing countries make a transition to market-based economies, one of the first major capital investments is in "Western-quality" hotels. Explain why brand-name hotel accommodations are a critical step in attracting foreign investment.

Correct AnswerverifiedBrand-name hotels are a critic...View AnswerShow Answer

To maximize its profit, a monopolistically competitive firm

Correct AnswerverifiedShow Answer

Which of the following is not an example of Joel Waldfogel's "Tyranny of the Market"?

Correct AnswerverifiedShow Answer

Economists are unanimous in their belief that advertising is socially inefficient.

Correct AnswerverifiedShow Answer

The debate over whether advertising serves a valuable purpose in society is definitively answered by economists who study the tastes and preferences of individuals.

Correct AnswerverifiedShow Answer

Which of the following is not a key feature of monopolistic competition?

Correct AnswerverifiedShow Answer

List five goods that are likely sold in a monopolistically competitive market.

Correct AnswerverifiedBooks, CDs, movies, ...View AnswerShow Answer

When quality cannot be easily judged in advance, what provides consumers with information about the quality of a product?

Correct AnswerverifiedShow Answer

Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-4. How much profit will this firm earn when it chooses its output to maximize profit?

Correct AnswerverifiedShow Answer

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. As the figure is drawn, the firm is in

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A concentration ratio

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

Monopolistic competition is the only market structure that features many sellers.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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In the case of the examples given, deman...
View Answer

Correct Answer
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Brand-name hotels are a critic...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Books, CDs, movies, ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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