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Exam 16: Monopolistic Competition

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Question 51

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In the long run, a profit-maximizing firm in a monopolistically competitive market operates at

A) efficient scale.
B) a level of output at which average total cost is rising.
C) a level of output at which average total cost is falling.
D) the level of output at which total revenue is maximized.

E) B) and D)
F) C) and D)

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Question 52

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Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. -Refer to Table 16-1. Which industry has the lowest concentration ratio?

A) Industry A
B) Industry B
C) Industry C
D) Industry D

E) All of the above
F) C) and D)

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Question 53

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Scenario 16-8 Burger Bonanza, a major national burger chain, recently decided to spend $4 million on an advertising campaign featuring a world famous actor to promote its new Bomber Burger. -Refer to Scenario 16-8. What two benefits are conveyed by the brand name Burger Bonanza?

In monopolistic competition as well as in monopoly,

Scenario 16-1 Suppose the following are the sales for all of the firms in two different industries. -Refer to Scenario 16-1. Which of the following statements is correct regarding the competitiveness of these two industries?

In which of the following market structures is(are) there a large number of sellers? (i) monopolistic competition (ii) perfect competition (iii) oligopoly

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. What is the profit-maximizing price, quantity, and resulting profit?

Scenario 16-7 Consider the problem facing two firms, YumYum and Bertollini, in the frozen food market. Each firm has just come up with an idea for a new "frozen meal for two" which it would sell for $9. Assume that the marginal cost for each new product is a constant $2, and the only fixed cost is for advertising. Each company knows that if it spends $12 million on advertising it will get 1.5 million consumers to try its new product. YumYum has done market research which suggests that its product does not have any "staying" power in the market. Even though it could get 1.5 million consumers to buy the product once, it is unlikely that they will continue to buy the product in the future. Bertollini's market research suggests that its product is very good, and consumers who try the product will continue to be consumers over the ensuing year. On the basis of its market research, Bertollini estimates that its initial 1.5 million customers will buy one unit of the product each month in the coming year, for a total of 18 million units. -Refer to Scenario 16-7. On the basis of a theory that people buy a product because it is advertised, the content of advertisements for Bertollini's product

The administrative burden of regulating price in a monopolistically competitive market is

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. What price will this firm charge to maximize profit?

When a firm operates at efficient scale, it is producing at the minimum point on its average total cost curve.

The general term for market structures that fall somewhere between monopoly and perfect competition is

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

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

Scenario 16-3 Peter operates an ice cream shop in the center of Fairfield. He sells several unusual flavors of organic, homemade ice cream so he has a monopoly over his own ice cream, though he competes with many other firms selling ice cream in Fairfield for the same customers. Peter's demand and cost values for sales per day are given in the table below. (Everyone who purchases Peter's ice cream buys a double scoop cone because it's so delicious.) -Refer to Scenario 16-3. When Peter maximizes his profits, what is his total cost per day?

Monopolistic competition is characterized by a few sellers offering similar products, whereas oligopoly is characterized by many sellers offering differentiated products.

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

A concentration ratio

Figure 16-12 -Refer to Figure 16-12. How much excess capacity does this firm have?

Which of the following is a characteristic of monopolistic competition?