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The government of Italy will not allow any Hard Rock Cafe restaurants to open in Italy. Defenders of the efficiency of brand-name markets would argue that this has hindered restaurant market efficiency in Italy.

A) True
B) False

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In a monopolistically competitive industry, a firm's demand curve also represent its


A) marginal revenue.
B) marginal cost.
C) average revenue.
D) profit.

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

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Which of the following statements is not correct?


A) Both monopolistically competitive and perfectly competitive firms can earn economic profits in the short run.
B) Both monopolies and monopolistically competitive firms can earn economic profits in the long run.
C) Firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost.
D) Only competitive firms produce the welfare-maximizing level of output.

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

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


A) P > MC
B) MC = ATC
C) P < MR
D) All of the above are correct.

E) All of the above
F) None of the above

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Figure 16-10 The figure is drawn for a monopolistically-competitive firm. Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. When the firm is maximizing its profit, A) TR = $9,000 and TC =$16,000. B) TR = $14,000 and TC =$16,000. C) TR = $16,000 and TC =$16,000. D) MC exceeds MR by $66.66 on the last unit of output produced. -Refer to Figure 16-10. When the firm is maximizing its profit,


A) TR = $9,000 and TC =$16,000.
B) TR = $14,000 and TC =$16,000.
C) TR = $16,000 and TC =$16,000.
D) MC exceeds MR by $66.66 on the last unit of output produced.

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

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Figure 16-3 This figure depicts a situation in a monopolistically competitive market. Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. How much profit will the monopolistically competitive firm earn in this situation? A) $0 B) $80 C) $200 D) $400 -Refer to Figure 16-3. How much profit will the monopolistically competitive firm earn in this situation?


A) $0
B) $80
C) $200
D) $400

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

Correct Answer

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Figure 16-5 Figure 16-5 -Refer to Figure 16-5. Panel b is consistent with a firm in a monopolistically competitive market that is A) not in long-run equilibrium. B) in long-run equilibrium. C) producing its efficient scale of output. D) earning a positive economic profit. -Refer to Figure 16-5. Panel b is consistent with a firm in a monopolistically competitive market that is


A) not in long-run equilibrium.
B) in long-run equilibrium.
C) producing its efficient scale of output.
D) earning a positive economic profit.

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

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Figure 16-4 Figure 16-4 -Refer to Figure 16-4. At the profit-maximizing, or loss-minimizing, output level, how many units of output will the firm in this figure produce? A) 20 B) 30 C) 40 D) This firm will choose not to produce. -Refer to Figure 16-4. At the profit-maximizing, or loss-minimizing, output level, how many units of output will the firm in this figure produce?


A) 20
B) 30
C) 40
D) This firm will choose not to produce.

E) None of the above
F) A) and C)

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A monopolistically competitive market is characterized by


A) free entry, but not differentiated products.
B) differentiated products, but not long run profits.
C) long run profits, but not many firms.
D) many firms, but not free entry.

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

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Table 16-5 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. Table 16-5 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-5. Which of the following statements regarding this monopolistically competitive firm is correct? A) New firms will enter this market in the long run since firm profits are greater than zero. B) Firms will leave this market in the long run since firm profits are less than zero. C) This firm is currently in long-run equilibrium. D) This firm is currently in long-run equilibrium, and the firm is producing its efficient scale of output. -Refer to Table 16-5. Which of the following statements regarding this monopolistically competitive firm is correct?


A) New firms will enter this market in the long run since firm profits are greater than zero.
B) Firms will leave this market in the long run since firm profits are less than zero.
C) This firm is currently in long-run equilibrium.
D) This firm is currently in long-run equilibrium, and the firm is producing its efficient scale of output.

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

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A monopolistically competitive market is like a monopoly in that


A) both market structures feature easy entry by new firms in the long run.
B) the main objective of firms in both market structures is something other than profit maximization.
C) firms in both market structures produce the welfare-maximizing level of output.
D) firms in both market structures set price above marginal cost.

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

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Which two curves are tangent to each other in a monopolistically competitive market with zero economic profit?


A) demand and average variable cost
B) demand and average total cost
C) marginal revenue and average variable cost
D) marginal revenue and average total cost

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

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


A) marginal cost exceeds marginal revenue
B) average revenue equals marginal cost
C) price exceeds marginal cost
D) All of the above are correct.

E) A) and C)
F) C) and D)

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Defenders of advertising argue that firms use advertising as a signal of quality, even if the advertising delivers little helpful information about the product.

A) True
B) False

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For a profit-maximizing firm in a monopolistically competitive market, when price is equal to average total cost, price must lie above marginal cost.

A) True
B) False

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Table 16-5 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. Table 16-5 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-5. What price should this firm charge to maximize profit? A) $6 B) $12 C) $18 D) $24 -Refer to Table 16-5. What price should this firm charge to maximize profit?


A) $6
B) $12
C) $18
D) $24

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

Correct Answer

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In a long-run equilibrium,


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) None of the above

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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. 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. Suppose the government forced Beatrice's to produce at the efficient scale of output. Who would be better off as a result of this policy? Who would be worse off as a result of this policy? A) Beatrice's would be better off; consumers would be worse off. B) Consumers would be better off; Beatrice's would be worse off. C) No one would be better off; consumers would be worse off. D) No one would be better off; no one would be worse off. -Refer to Table 16-6. Suppose the government forced Beatrice's to produce at the efficient scale of output. Who would be better off as a result of this policy? Who would be worse off as a result of this policy?


A) Beatrice's would be better off; consumers would be worse off.
B) Consumers would be better off; Beatrice's would be worse off.
C) No one would be better off; consumers would be worse off.
D) No one would be better off; no one would be worse off.

E) A) and D)
F) A) and C)

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A monopolistically competitive firm faces the following demand curve for its product: A monopolistically competitive firm faces the following demand curve for its product: The firm has total fixed costs of $100 and a constant marginal cost of $25 per unit. The firm will maximize profit with the production of A) 4 units of output. B) 10 units of output. C) 16 units of output. D) 22 units of output. The firm has total fixed costs of $100 and a constant marginal cost of $25 per unit. The firm will maximize profit with the production of


A) 4 units of output.
B) 10 units of output.
C) 16 units of output.
D) 22 units of output.

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

Correct Answer

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Figure 16-12 Figure 16-12 -Refer to Figure 16-12. Compare the price and marginal cost in this market with price and marginal cost if this were a perfectly competitive market. -Refer to Figure 16-12. Compare the price and marginal cost in this market with price and marginal cost if this were a perfectly competitive market.

Correct Answer

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Monopolistic competi...

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