Question 1

Critics of advertising argue that advertising leads to less elastic demand for products and a larger markup of price over marginal cost.

Accepted Answer

A) True 
 B)False

Question 2

As new firms enter a monopolistically competitive market,profits of existing firms

Accepted Answer

A)  rise and product diversity in the market increases.
B)  rise and product diversity in the market decreases.
C)  decline and product diversity in the market increases.
D)  decline and product diversity in the market decreases.E) A) and B)
F) None of the above

Question 3

Which of the following statements is correct? Among arguments for and against advertising,both sides agree that advertising leads to

Accepted Answer

A)  higher prices and less competitive markets.
B)  higher prices and more competitive markets.
C)  lower prices and more competitive markets.
D)  None of the above is correct.The debate fails to resolve the question of advertising's effect on prices and competition.E) B) and C)
F) A) and C)

Question 4

Evaluate the following statement in the context of business-stealing and product-variety externalities: "We have too many student apartments in this town already.Statistics show that vacancy rates average 15 percent during any given semester."

Accepted Answer

Business-stealing effect: if new entrant...

Question 5

To maximize its profit,a monopolistically competitive firm chooses its level of output by looking for the

Accepted Answer

A)  level of output at which price equals marginal cost.
B)  level of output at which marginal revenue equals marginal cost.
C)  level of output at which marginal revenue equals zero.
D)  level of output at which average total cost is minimized.E) C) and D)
F) B) and D)

Question 6

Scenario 17-1
Vacation Inns of America (VIA)  has recently announced intentions of building a new hotel/resort complex in Myrtle Beach, South Carolina. Assume that the hotel/resort market in Myrtle Beach is characterized by monopolistic competition.
-Refer to Scenario 17-1.As a result of the new VIA hotel/resort,tourists who stay in Myrtle Beach are likely to experience a

Accepted Answer

A)  product-variety externality, which harms consumers.
B)  product-variety externality, which benefits consumers.
C)  business-stealing externality, which harms consumers.
D)  business-stealing externality, which benefits consumers.E) None of the above
F) All of the above

Question 7

The deadweight loss that is associated with a monopolistically competitive market is a result of

Accepted Answer

A)  price falling short of marginal cost in order to increase market share.
B)  price exceeding marginal cost.
C)  the firm operating in a regulated industry.
D)  excessive advertising costs.E) A) and B)
F) None of the above

Question 8

A profit-maximizing firm in a monopolistically competitive market always operates on the downward-sloping portion of its marginal cost curve.

Accepted Answer

A) True 
 B)False

Question 9

In a long-run equilibrium,a firm in a monopolistically competitive market operates

Accepted Answer

A)  where marginal revenue is zero.
B)  where marginal revenue is negative.
C)  on the rising portion of its average total cost curve.
D)  on the declining portion of its average total cost curve.E) C) and D)
F) B) and D)

Question 10

In monopolistically competitive markets,positive economic profits

Accepted Answer

A)  suggest that some existing firms will exit the market.
B)  suggest that new firms will enter the market.
C)  are sustained through government-imposed barriers to entry.
D)  are never possible.E) All of the above
F) A) and D)

Question 11

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 12

Table 17-2
 
-Refer to Table 17-2.This table shows the demand schedule,marginal cost,and average cost for a monopolistically competitive firm.How much profit will this firm earn at the monopolistically competitive price?

Accepted Answer

A)  $0
B)  $5
C)  $12
D)  $16E) All of the above
F) A) and B)

Question 13

In monopolistically competitive markets,free entry and exit suggests that

Accepted Answer

A)  the market structure will eventually be characterized by perfect competition in the long run.
B)  all firms earn zero economic profits in the long run.
C)  some firms will be able to earn economic profits in the long run.
D)  some firms will be forced to incur economic losses in the long run.E) A) and B)
F) C) and D)

Question 14

Product differentiation always leads to some measure of market power.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following markets is not likely characterized by a monopolistically competitive market?

Accepted Answer

A)  The market for piano lessons
B)  The market for corn
C)  The market for cookies
D)  The market for clothingE) B) and C)
F) B) and D)

Question 16

In a long-run equilibrium,

Accepted Answer

A)  "excess capacity" applies to monopolistically competitive firms, but not to competitive firms.
B)  "zero economic profit" applies to competitive firms, but not to monopolistically competitive firms.
C)  "markup over marginal cost" applies to both monopolistically competitive and competitive firms.
D)  "product variety externalities" apply to both perfectly competitive firms and monopolistically competitive firms.E) All of the above
F) A) and C)

Question 17

Figure 17-4
 
-Refer to Figure 17-4.Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm?

Accepted Answer

A)  Panel a
B)  Panel b
C)  Panel c
D)  All of the above are correct.E) All of the above
F) None of the above

Question 18

Figure 17-1
 
-Refer to Figure 17-1.If a firm in a monopolistically competitive market was producing the level of output depicted as Qd in panel (d) ,it would

Accepted Answer

A)  not be maximizing its profit.
B)  be minimizing its losses.
C)  be losing market share to other firms in the market.
D)  be operating at excess capacity.E) A) and D)
F) None of the above

Question 19

Consider a monopolistically competitive firm in a market in long-run equilibrium.This firm is likely

Accepted Answer

A)  earning a positive economic profit since it is charging a price above marginal cost.
B)  earning no economic profit since it is charging a price equal to its marginal cost.
C)  earning a positive economic profit since it is charging a price above its average total cost.
D)  earning no economic profit since it is charging a price equal to it average total cost.E) None of the above
F) A) and D)

Question 20

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Accepted Answer

A)  Average revenue exceeds marginal revenue
B)  Marginal revenue exceeds average revenue
C)  Average revenue is equal to marginal revenue
D)  Revenue is always maximized along with profitE) A) and C)
F) None of the above

Exam 17: Monopolistic Competition

A profit-maximizing firm in a monopolistically competitive market always operates on the downward-sloping portion of its marginal cost curve.

Correct Answer
verified

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Correct Answer
verified

Product differentiation always leads to some measure of market power.

Correct Answer
verified

The deadweight loss that is associated with a monopolistically competitive market is a result of

Correct Answer
verified

Correct Answer
verified

Figure 17-1 -Refer to Figure 17-1.If a firm in a monopolistically competitive market was producing the level of output depicted as Qd in panel (d) ,it would

Correct Answer
verified

Consider a monopolistically competitive firm in a market in long-run equilibrium.This firm is likely

Correct Answer
verified

Evaluate the following statement in the context of business-stealing and product-variety externalities: "We have too many student apartments in this town already.Statistics show that vacancy rates average 15 percent during any given semester."

Correct Answer
verified
Business-stealing effect: if new entrant...
View Answer

To maximize its profit,a monopolistically competitive firm chooses its level of output by looking for the

Correct Answer
verified

Critics of advertising argue that advertising leads to less elastic demand for products and a larger markup of price over marginal cost.

Correct Answer
verified

As new firms enter a monopolistically competitive market,profits of existing firms

Correct Answer
verified

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

Which of the following statements is correct? Among arguments for and against advertising,both sides agree that advertising leads to

Correct Answer
verified

Table 17-2 -Refer to Table 17-2.This table shows the demand schedule,marginal cost,and average cost for a monopolistically competitive firm.How much profit will this firm earn at the monopolistically competitive price?

Correct Answer
verified

In monopolistically competitive markets,free entry and exit suggests that

Correct Answer
verified

In a long-run equilibrium,a firm in a monopolistically competitive market operates

Correct Answer
verified

Which of the following markets is not likely characterized by a monopolistically competitive market?

Correct Answer
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In a long-run equilibrium,

Correct Answer
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Figure 17-4 -Refer to Figure 17-4.Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm?

Correct Answer
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In monopolistically competitive markets,positive economic profits

Correct Answer
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Exam 17: Monopolistic Competition

A profit-maximizing firm in a monopolistically competitive market always operates on the downward-sloping portion of its marginal cost curve.

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Correct AnswerverifiedShow Answer

Product differentiation always leads to some measure of market power.

Correct AnswerverifiedShow Answer

The deadweight loss that is associated with a monopolistically competitive market is a result of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 17-1 -Refer to Figure 17-1.If a firm in a monopolistically competitive market was producing the level of output depicted as Qd in panel (d) ,it would

Correct AnswerverifiedShow Answer

Consider a monopolistically competitive firm in a market in long-run equilibrium.This firm is likely

Correct AnswerverifiedShow Answer

Evaluate the following statement in the context of business-stealing and product-variety externalities: "We have too many student apartments in this town already.Statistics show that vacancy rates average 15 percent during any given semester."

Correct AnswerverifiedBusiness-stealing effect: if new entrant...View AnswerShow Answer

To maximize its profit,a monopolistically competitive firm chooses its level of output by looking for the

Correct AnswerverifiedShow Answer

Critics of advertising argue that advertising leads to less elastic demand for products and a larger markup of price over marginal cost.

Correct AnswerverifiedShow Answer

As new firms enter a monopolistically competitive market,profits of existing firms

Correct AnswerverifiedShow Answer

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

Which of the following statements is correct? Among arguments for and against advertising,both sides agree that advertising leads to

Correct AnswerverifiedShow Answer

Table 17-2 -Refer to Table 17-2.This table shows the demand schedule,marginal cost,and average cost for a monopolistically competitive firm.How much profit will this firm earn at the monopolistically competitive price?

Correct AnswerverifiedShow Answer

In monopolistically competitive markets,free entry and exit suggests that

Correct AnswerverifiedShow Answer

In a long-run equilibrium,a firm in a monopolistically competitive market operates

Correct AnswerverifiedShow Answer

Which of the following markets is not likely characterized by a monopolistically competitive market?

Correct AnswerverifiedShow Answer

In a long-run equilibrium,

Correct AnswerverifiedShow Answer

Figure 17-4 -Refer to Figure 17-4.Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm?

Correct AnswerverifiedShow Answer

In monopolistically competitive markets,positive economic profits

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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Correct Answer
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Correct Answer
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Business-stealing effect: if new entrant...
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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In the case of the examples given,demand...
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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