Question 1

Firms in industries that have competitors but do not face so much competition that they are price takers are operating in either a(n)

Accepted Answer

A)   oligopoly or perfectly competitive market.
B)   oligopoly or monopoly market.
C)   oligopoly or monopolistically competitive market.
D)   monopoly or monopolistically competitive market.E) C) and D)
F) A) and C)

Question 2

Figure 16-1. The figure is drawn for a monopolistically competitive firm.
 
-Refer to Figure 16-1.If the ATC=20 at the profit-maximizing level of output,which of the following will occur in the long run in this industry?

Accepted Answer

A)   Firms will exit this industry.
B)   Firms will enter this industry.
C)   This firm will continue to earn positive economic profits.
D)   This firm will incur losses.E) B) and C)
F) A) and C)

Question 3

Which of the following statements is correct?

Accepted Answer

A)   Monopolistic competition is similar to monopoly because both market structures are characterized by patents.
B)   Monopolistic competition is similar to perfect competition because both market structures are characterized by each seller being small compared to the market.
C)   Monopolistic competition is similar to oligopoly because both market structures are characterized by free entry.
D)   Monopolistic competition is similar to perfect competition because both market structures are characterized by excess capacity.E) All of the above
F) A) and D)

Question 4

Firms can freely enter a market

Accepted Answer

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

Question 5

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) None of the above
F) C) and D)

Question 6

Which of the following goods are not likely to be sold in monopolistically competitive markets?

Accepted Answer

A)   jeans
B)   books
C)   tap water
D)   clocksE) C) and D)
F) A) and B)

Question 7

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.What is the concentration ratio in Industry W?

Accepted Answer

A)   26%
B)   58%
C)   72%
D)   82%E) A) and B)
F) None of the above

Question 8

Which of the following statements regarding brand names in advertising is not correct?

Accepted Answer

A)   Brand names provide consumers with information about quality when quality cannot be easily judged in advance of purchase.
B)   Brand names give firms an incentive to maintain high quality to maintain the reputation of the firm.
C)   Brand names allow firms to produce and sell inferior products in the long run since people will continue to purchase the brand-name product.
D)   Brand names can cause consumers to perceive differences in products that do not actually exist.E) A) and B)
F) B) and C)

Question 9

In the long run,monopolistically competitive firms produce where demand equals average total cost.

Accepted Answer

A) True 
 B)False

Question 10

The term excess capacity refers to the fact that a firm operates on the upward-sloping portion of its average-total-cost curve.

Accepted Answer

A) True 
 B)False

Question 11

Figure 16-3
 
-Refer to Figure 16-3.Assume the firm in the figure is currently producing 10 units of output and charging $600.The firm

Accepted Answer

A)   will increase its profits if it raises its price and reduces its production level.
B)   will increase its profits if it lowers its price and expands its production level.
C)   is maximizing profits.
D)   will increase its profits if it raises its prices and expands its production level.E) B) and D)
F) A) and C)

Question 12

Which of the following statements is correct?

Accepted Answer

A)   Cigarettes are likely to be produced in a monopolistically competitive industry.
B)   Novels are likely to be produced in a monopoly industry.
C)   Movies are likely to be produced in a monopolistically competitive industry.
D)   Milk is likely to be produced in an oligopoly industry.E) All of the above
F) B) and D)

Question 13

The product-variety externality is associated with the

Accepted Answer

A)   producer surplus that accrues to incumbent firms in a monopolistically competitive industry.
B)   loss of consumer surplus from exposure to additional advertising.
C)   consumer surplus that is generated from the introduction of a new product.
D)   opportunity cost of firms exiting a monopolistically competitive industry.E) B) and C)
F) C) and D)

Question 14

Scenario 16-3
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 16-3.If the marginal cost of producing this good is 0,what quantity would a profit-maximizing monopolist produce?

Accepted Answer

A)   Q = 0
B)   Q = 2
C)   Q = 5
D)   Q = 10E) A) and B)
F) B) and D)

Question 15

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,demand...

Question 16

Figure 16-8
The figure is drawn for a monopolistically-competitive firm.
 
-Refer to Figure 16-8.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) All of the above
F) B) and C)

Question 17

The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which

Accepted Answer

A)   marginal revenue is equal to marginal cost.
B)   average total cost is equal to marginal revenue.
C)   average total cost is equal to price.
D)   average revenue exceeds average total cost.E) All of the above
F) B) and C)

Question 18

Product differentiation causes the seller of a good to face what type of demand curve?

Accepted Answer

A)   downward sloping
B)   vertical
C)   horizontal
D)   Any of the above could be correct since product differentiation does not affect the shape of the demand curve.E) A) and D)
F) A) and C)

Question 19

In the short run,a firm operating in a monopolistically competitive market

Accepted Answer

A)   produces an output level where marginal revenue equals average total cost.
B)   maximizes revenues as well as profits.
C)   can earn zero economic profits.
D)   sets price equal to marginal cost.E) B) and D)
F) B) and C)

Question 20

Critics of markets that are characterized by firms that sell brand name products argue that brand names encourage consumers to pay more for branded products that

Accepted Answer

A)   have elastic demand curves.
B)   are very different from generic products.
C)   are indistinguishable from generic products.
D)   consumer-advocate groups have found to be inferior.E) A) and C)
F) B) and C)

Exam 16: Monopolistic Competition.

In the long run,monopolistically competitive firms produce where demand equals average total cost.

Correct Answer
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Figure 16-1. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.If the ATC=20 at the profit-maximizing level of output,which of the following will occur in the long run in this industry?

Correct Answer
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Firms can freely enter a market

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Critics of markets that are characterized by firms that sell brand name products argue that brand names encourage consumers to pay more for branded products that

Correct Answer
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The product-variety externality is associated with the

Correct Answer
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The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which

Correct Answer
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Which of the following goods are not likely to be sold in monopolistically competitive markets?

Correct Answer
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In the short run,a firm operating in a monopolistically competitive market

Correct Answer
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Firms in industries that have competitors but do not face so much competition that they are price takers are operating in either a(n)

Correct Answer
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Correct Answer
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In the case of the examples given,demand...
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The term excess capacity refers to the fact that a firm operates on the upward-sloping portion of its average-total-cost curve.

Correct Answer
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Which of the following statements is correct?

Correct Answer
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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.What is the concentration ratio in Industry W?

Correct Answer
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Which of the following statements regarding brand names in advertising is not correct?

Correct Answer
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Product differentiation causes the seller of a good to face what type of demand curve?

Correct Answer
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Figure 16-3 -Refer to Figure 16-3.Assume the firm in the figure is currently producing 10 units of output and charging $600.The firm

Correct Answer
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Scenario 16-3 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 16-3.If the marginal cost of producing this good is 0,what quantity would a profit-maximizing monopolist produce?

Correct Answer
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Figure 16-8 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-8.In order to maximize its profit,the firm will choose to produce

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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Exam 16: Monopolistic Competition.

In the long run,monopolistically competitive firms produce where demand equals average total cost.

Correct AnswerverifiedShow Answer

Figure 16-1. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.If the ATC=20 at the profit-maximizing level of output,which of the following will occur in the long run in this industry?

Correct AnswerverifiedShow Answer

Firms can freely enter a market

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Critics of markets that are characterized by firms that sell brand name products argue that brand names encourage consumers to pay more for branded products that

Correct AnswerverifiedShow Answer

The product-variety externality is associated with the

Correct AnswerverifiedShow Answer

The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which

Correct AnswerverifiedShow Answer

Which of the following goods are not likely to be sold in monopolistically competitive markets?

Correct AnswerverifiedShow Answer

In the short run,a firm operating in a monopolistically competitive market

Correct AnswerverifiedShow Answer

Firms in industries that have competitors but do not face so much competition that they are price takers are operating in either a(n)

Correct AnswerverifiedShow Answer

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

The term excess capacity refers to the fact that a firm operates on the upward-sloping portion of its average-total-cost curve.

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

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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.What is the concentration ratio in Industry W?

Correct AnswerverifiedShow Answer

Which of the following statements regarding brand names in advertising is not correct?

Correct AnswerverifiedShow Answer

Product differentiation causes the seller of a good to face what type of demand curve?

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Figure 16-3 -Refer to Figure 16-3.Assume the firm in the figure is currently producing 10 units of output and charging $600.The firm

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Scenario 16-3 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 16-3.If the marginal cost of producing this good is 0,what quantity would a profit-maximizing monopolist produce?

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Figure 16-8 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-8.In order to maximize its profit,the firm will choose to produce

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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In the case of the examples given,demand...
View Answer

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