Question 1

Figure 16-1.The figure is drawn for a monopolistically competitive firm. 
-Refer to Figure 16-1.If the average variable cost is $13 at the profit-maximizing quantity,and if the firm's profit is $20 at that quantity,then its fixed costs amount to

Accepted Answer

A)   $12.
B)   $22.
C)   $40.
D)   $60.E) B) and C)
F) B) and D)

Question 2

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) A) and B)
F) All of the above

Question 3

In a long-run equilibrium,both perfectly competitive markets and monopolistically competitive markets have price equal to average total cost.

Accepted Answer

A) True 
 B)False

Question 4

A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

Accepted Answer

A)   no change in profits for all hotels/motels.
B)   reduced efficiency of local lodging markets.
C)   a request by consumers to increase the number of billboards.
D)   increased price competition among hotels/motels in the community.E) All of the above
F) None of the above

Question 5

Advertising that uses celebrity endorsements is most likely intended to

Accepted Answer

A)   increase elasticity of demand for the advertised product.
B)   reduce the ability of markets to allocate resources efficiently.
C)   provide a signal of product quality.
D)   be useful only for psychological effects.E) A) and C)
F) None of the above

Question 6

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 7

In which of the following market structures do firms produce the welfare-maximizing level of output?

Accepted Answer

A)   perfect competition
B)   monopolistic competition
C)   monopoly
D)   Both a and b are correct.E) C) and D)
F) B) and D)

Question 8

A monopolistically competitive industry is characterized by

Accepted Answer

A)   many firms,differentiated products,and barriers to entry.
B)   many firms,differentiated products,and free entry.
C)   a few firms,identical products,and free entry.
D)   a few firms,differentiated products,and barriers to entry.E) None of the above
F) B) and C)

Question 9

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 Y?

Accepted Answer

A)   29%
B)   39%
C)   44%
D)   58%E) B) and C)
F) A) and D)

Question 10

Figure 16-3 
-Refer to Figure 16-3.What price will the monopolistically competitive firm charge in this market?

Accepted Answer

A)   $15
B)   $400
C)   $500
D)   $700E) A) and D)
F) B) and C)

Question 11

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) None of the above

Question 12

Which of the following statements is not correct?

Accepted Answer

A)   Critics of advertising argue that firms advertise to manipulate consumers' tastes.
B)   Defenders of advertising argue that advertising provides valuable product information to consumers.
C)   An industry with many brand name products will be more competitive than one with many generic products.
D)   The willingness of a firm to spend a large amount of money on advertising can signal the quality of the product.E) None of the above
F) B) and C)

Question 13

Compared to other firms,firms that sell highly differentiated products likely incur significant costs associated with

Accepted Answer

A)   advertising.
B)   the product-variety externality.
C)   intermediate materials.
D)   taxes and regulation.E) B) and C)
F) A) and D)

Question 14

Which of the following statements is correct?

Accepted Answer

A)   The more similar Firm A's product is to Firm B's product,the more likely Firm A is to advertise.
B)   Monopolistically competitive firms advertise in order to increase the elasticity of the demand curve they face.
C)   According to the signaling theory,the more product information an advertisement contains,the more effective it is.
D)   Brand names may help consumers if they provide information about the quality of a product when acquiring such information is difficult.E) None of the above
F) B) and C)

Question 15

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

Accepted Answer

A)   P > MR and P = MC
B)   ATC = demand and MR = MC
C)   P 
D)   P > ATC and demand > MRE) B) and D)
F) A) and C)

Question 16

A similarity between monopoly and monopolistic competition is that in both market structures

Accepted Answer

A)   strategic interactions among sellers are important.
B)   there are a small number of sellers.
C)   sellers are price makers rather than price takers.
D)   there are only a few buyers but many sellers.E) C) and D)
F) None of the above

Question 17

In a market that is characterized by imperfect competition,

Accepted Answer

A)   firms are price takers.
B)   there are always a large number of firms.
C)   there are at least a few firms that compete with one another.
D)   the actions of one firm in the market never have any impact on the other firms' profits.E) A) and B)
F) None of the above

Question 18

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) All of the above
F) A) and B)

Question 19

Figure 16-1    
-Refer to Figure 16-1.Which of the graphs illustrates a relatively elastic,though not perfectly elastic,demand curve consistent with a market that has many substitute products?

Accepted Answer

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

Question 20

Monopolistically competitive markets differ from perfectly competitive markets due to (i) 
The number of sellers.
(ii) 
The barriers to entry.
(iii) 
The product differentiation among the sellers.

Accepted Answer

A)   (i) only
B)   (iii) only
C)   (i) and (iii) only
D)   (ii) and (iii) onlyE) A) and B)
F) B) and C)

Exam 16: Monopolistic Competition

Figure 16-1.The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.If the average variable cost is $13 at the profit-maximizing quantity,and if the firm's profit is $20 at that quantity,then its fixed costs amount to

Correct Answer
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In a long-run equilibrium,

Correct Answer
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A similarity between monopoly and monopolistic competition is that in both market structures

Correct Answer
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Monopolistically competitive markets differ from perfectly competitive markets due to (i) The number of sellers. (ii) The barriers to entry. (iii) The product differentiation among the sellers.

Correct Answer
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In which of the following market structures do firms produce the welfare-maximizing level of output?

Correct Answer
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Figure 16-1 -Refer to Figure 16-1.Which of the graphs illustrates a relatively elastic,though not perfectly elastic,demand curve consistent with a market that has many substitute products?

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 Y?

Correct Answer
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In a market that is characterized by imperfect competition,

Correct Answer
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A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

Correct Answer
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Which of the following statements is correct?

Correct Answer
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In the case of the examples given,demand...
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Figure 16-3 -Refer to Figure 16-3.What price will the monopolistically competitive firm charge in this market?

Correct Answer
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Advertising that uses celebrity endorsements is most likely intended to

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Compared to other firms,firms that sell highly differentiated products likely incur significant costs associated with

Correct Answer
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Which of the following statements is not correct?

Correct Answer
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A monopolistically competitive industry is characterized by

Correct Answer
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In a long-run equilibrium,both perfectly competitive markets and monopolistically competitive markets have price equal to average total cost.

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

Correct Answer
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In monopolistically competitive markets,free entry and exit suggests that

Correct Answer
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Exam 16: Monopolistic Competition

Figure 16-1.The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.If the average variable cost is $13 at the profit-maximizing quantity,and if the firm's profit is $20 at that quantity,then its fixed costs amount to

Correct AnswerverifiedShow Answer

In a long-run equilibrium,

Correct AnswerverifiedShow Answer

A similarity between monopoly and monopolistic competition is that in both market structures

Correct AnswerverifiedShow Answer

Monopolistically competitive markets differ from perfectly competitive markets due to (i) The number of sellers. (ii) The barriers to entry. (iii) The product differentiation among the sellers.

Correct AnswerverifiedShow Answer

In which of the following market structures do firms produce the welfare-maximizing level of output?

Correct AnswerverifiedShow Answer

Figure 16-1 -Refer to Figure 16-1.Which of the graphs illustrates a relatively elastic,though not perfectly elastic,demand curve consistent with a market that has many substitute products?

Correct AnswerverifiedShow Answer

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 Y?

Correct AnswerverifiedShow Answer

In a market that is characterized by imperfect competition,

Correct AnswerverifiedShow Answer

A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

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Which of the following statements is correct?

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

Figure 16-3 -Refer to Figure 16-3.What price will the monopolistically competitive firm charge in this market?

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Advertising that uses celebrity endorsements is most likely intended to

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Which of the following statements is correct?

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Compared to other firms,firms that sell highly differentiated products likely incur significant costs associated with

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

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A monopolistically competitive industry is characterized by

Correct AnswerverifiedShow Answer

In a long-run equilibrium,both perfectly competitive markets and monopolistically competitive markets have price equal to average total cost.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In monopolistically competitive markets,free entry and exit suggests that

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