Question 1

In a long-run equilibrium,

Accepted Answer

A)   only a perfectly competitive firm operates at its efficient scale.
B)   only a monopolistically competitive firm operates at its efficient scale.
C)   neither a competitive firm nor a monopolistically competitive firm charges a markup over marginal cost.
D)   both a perfectly competitive firm and a monopolistically competitive firm operate at their efficient scale of production.E) All of the above
F) A) and B)

Question 2

In some countries,brand name fast-food restaurants are not allowed to operate.Such restrictions are likely to

Accepted Answer

A)   enhance the social welfare of society.
B)   increase the number of fast-food restaurants.
C)   reduce barriers to entry in imperfect markets.
D)   reduce the competitive nature of local fast-food markets.E) All of the above
F) B) and C)

Question 3

Figure 16-3 
-Refer to Figure 16-3.At the profit-maximizing,or loss-minimizing,output level,the firm in this figure has total revenue of approximately

Accepted Answer

A)   $6,000.
B)   $9,000.
C)   $10,500.
D)   $12,500.E) A) and D)
F) None of the above

Question 4

Because a monopolistically competitive firm has some market power,in the long-run the price of its product exceeds its

Accepted Answer

A)   average revenue.
B)   average total cost.
C)   marginal cost.
D)   None of the above is correct.E) A) and D)
F) All of the above

Question 5

The government may not be able to improve the inefficiencies of a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 6

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Accepted Answer

A)   highly-differentiated consumer goods.
B)   goods produced by natural monopolies.
C)   agricultural products.
D)   products with a limited shelf life such as milk and lettuce.E) B) and D)
F) A) and B)

Question 7

Figure 16-2 
-Refer to Figure 16-2.If this firm profit-maximizes,how much profit or loss will it earn?

Accepted Answer

The answer of Figure 16-2 
-Refer to Figure 16-2.If this...

Question 8

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 9

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

Accepted Answer

A)   P > AR
B)   MR > MC
C)   P > MC
D)   All of the above are correct.E) None of the above
F) A) and D)

Question 10

Economists defend brand names as useful to consumers because brand names

Accepted Answer

A)   provide consumers with information about quality when quality cannot easily be judged in advance of purchase.
B)   give firms a financial incentive to maintain the high quality associated with their brand name.
C)   convince consumers to spend more for products nearly identical to generic versions.
D)   Both a and b are correct.E) A) and B)
F) All of the above

Question 11

Monopolistic competition is a type of

Accepted Answer

A)   oligopoly.
B)   market structure.
C)   price discrimination.
D)   advertising strategy.E) B) and D)
F) All of the above

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Figure 16-3 
-Refer to Figure 16-3.Compare the price and marginal cost in this market with price and marginal cost if this were a perfectly competitive market.

Accepted Answer

Monopolistic competi...

Question 14

In the long run,

Accepted Answer

A)   monopolistically competitive firms earn a higher profit than perfectly competitive firms because monopolistically competitive firms have some monopoly power.
B)   monopolistically competitive firms produce a higher output than perfectly competitive firms because competition drives the perfectly competitive firms' output down.
C)   both monopolistically competitive and perfectly competitive firms produce where P = MC.
D)   both monopolistically competitive and perfectly competitive firms produce where P = ATC.E) None of the above
F) B) and C)

Question 15

Figure 16-4 
-Refer to Figure 16-4.Panel b is consistent with a firm in a monopolistically competitive market that is

Accepted Answer

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 C)
F) A) and B)

Question 16

A concentration ratio

Accepted Answer

A)   measures the percentage of total sales of the top firm in the industry.
B)   reflects the level of competition in an industry.
C)   is inversely related to the price charged by the top firm in the industry.
D)   All of the above are correct.E) B) and C)
F) B) and D)

Question 17

Table 16-2
The following table shows the total output produced by the top six firms as well as the total industry output for each industry.
 
-Refer to Table 16-2.Which industry is the most competitive?

Accepted Answer

A)   Industry A
B)   Industry B
C)   Industry C
D)   Industry DE) A) and C)
F) B) and C)

Question 18

Monopolistic competition is an

Accepted Answer

A)   inefficient market structure because there is deadweight loss.
B)   inefficient market structure because price exceeds marginal cost.
C)   efficient market structure because free entry drives long-run profits to zero.
D)   Both a and b are correct.E) A) and B)
F) All of the above

Question 19

Which of the following is unique to a monopolistically competitive firm when compared to an oligopoly?

Accepted Answer

A)   The monopolistically competitive firm advertises.
B)   The monopolistically competitive firm produces a quantity of output that falls short of the socially optimal level.
C)   Monopolistic competition features many buyers.
D)   Monopolistic competition features many sellers.E) B) and C)
F) A) and B)

Question 20

Select the type of market that is described by the following attributes: many firms,differentiated products,and free entry.

Accepted Answer

A)   natural monopoly
B)   perfectly competition
C)   monopolistic competition
D)   monopolyE) A) and D)
F) A) and B)

Exam 16: Monopolistic Competition

Figure 16-4 -Refer to Figure 16-4.Panel b is consistent with a firm in a monopolistically competitive market that is

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In some countries,brand name fast-food restaurants are not allowed to operate.Such restrictions are likely to

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Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2.Which industry is the most competitive?

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Economists defend brand names as useful to consumers because brand names

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Figure 16-3 -Refer to Figure 16-3.Compare the price and marginal cost in this market with price and marginal cost if this were a perfectly competitive market.

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

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In the long run,

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A concentration ratio

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Select the type of market that is described by the following attributes: many firms,differentiated products,and free entry.

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

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The government may not be able to improve the inefficiencies of a monopolistically competitive market.

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In a long-run equilibrium,

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

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Monopolistic competition is an

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Because a monopolistically competitive firm has some market power,in the long-run the price of its product exceeds its

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Figure 16-2 -Refer to Figure 16-2.If this firm profit-maximizes,how much profit or loss will it earn?

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Monopolistic competition is a type of

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Figure 16-3 -Refer to Figure 16-3.At the profit-maximizing,or loss-minimizing,output level,the firm in this figure has total revenue of approximately

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Which of the following is unique to a monopolistically competitive firm when compared to an oligopoly?

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Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

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Monopolistic competi...
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