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Exam 16: Monopolistic Competition

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Question 131

Multiple Choice

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Two bottles of body wash sit side-by-side in a grocery store: Olay (a brand name) sells for $6.00, while Up and Up (not a brand name) sells for $3.00. Even defenders of brand names would have to admit that

A) no rational consumer would spend twice as much for Olay as she would for Up and Up.
B) the side-by-side presence of these two body washes conveys no useful information to consumers.
C) Olay has no incentive to maintain the quality of its product just because of the Olay brand name.
D) None of the above is correct.

E) B) and D)
F) None of the above

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Question 132

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Empirical evidence suggests that advertising usually leads to an increase in the price for advertised products.

A) True
B) False

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Question 133

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Suppose there is a market in which the firms hold the following market shares: 25%, 20%, 18%, 15%, 8%, 7%, 4%, 2%, 1%. What is the concentration ratio for this market?

Evidence from the market for eyeglasses suggests that advertising leads to

Figure 16-14 -Refer to Figure 16-14. If this firm were operating in a perfectly competitive market, it would charge a price equal to point

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 profit-maximizing quantity, what is Beatrice's total profit?

When a market is monopolistically competitive, the typical firm in the market is likely to experience a

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. What is the concentration ratio for Industry D?

Entry and exit drive each firm in a monopolistically competitive market to a point of tangency between its

When a new firm enters a monopolistically competitive market, the individual demand curves faced by all existing firms in that market will

A monopolistically competitive firm chooses

Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. If the average variable cost is $26 at the profit-maximizing quantity, and if the firm's profit is $40 at that quantity, then its fixed costs amount to

Which of the following industries has the lowest concentration ratio?

If we observe a great deal of advertising of men's shaving products, we can infer that

Figure 16-7 -Refer to Figure 16-7. Suppose a firm is operating in the situation depicted in panel (a) . Which of the following statements is correct?

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. Efficient scale is reached

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. When the firm is maximizing its profit, the markup over marginal cost amounts to

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. When maximizing profit, what price does Beatrice's charge for a cake?

Figure 16-14 -Refer to Figure 16-14. Use the letters to identify the deadweight loss from this firm producing at its profit-maximizing level of output.

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 Dean bought the brand name because of advertising he saw for the product, a defender of advertising would say