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Exam 16: Monopolistic Competition

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Question 121

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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 B?

A) 18%
B) 34%
C) 61%
D) 95%

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

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Question 122

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Scenario 16-9 Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products. -Refer to Scenario 16-9. If advertising were banned in these markets, what would likely happen to the prices of chips and soda?

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Question 123

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Television advertisements aired during major sporting events are very expensive. A theory asserting that people buy a product simply because it is advertised would suggest that information on the high cost of advertising

When a firm exits a monopolistically competitive market, the individual demand curves faced by all remaining firms in that market will

Scenario 16-9 Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products. -Refer to Scenario 16-9. If Dean bought the brand name because of advertising he saw for the product, a defender of advertising would say

Figure 16-12 -Refer to Figure 16-12. If this firm profit-maximizes, what price will it charge?

According to the signaling theory of advertising, consumers

A firm has the following cost structure: If this firm is in a typical monopolistically competitive market, in the long run it will likely produce

Figure 16-13 -Refer to Figure 16-13. What is the first step in this industry's adjustment to long run equilibrium?

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

Long-run profit earned by a monopolistically competitive firm is driven to the competitive level due to a(n)

Figure 16-12 -Refer to Figure 16-12. What, if any, long run adjustment will take place in this industry?

Figure 16-14 -Refer to Figure 16-14. The deadweight loss from production for this firm is represented by which of the following areas?

Figure 16-12 -Refer to Figure 16-12. When this firm profit-maximizes, what is the amount of the firm's profit or loss?

Scenario 16-2 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 16-2. If the marginal cost of producing this good is 0, what price would a profit-maximizing monopolist charge for the product?

Entry of new firms in monopolistically competitive industries can convey a positive externality on consumers because new products result in more consumer surplus. This externality is called the

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.

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures features entry in the long run?

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?

Product differentiation in monopolistically competitive markets ensures that, for profit-maximizing firms,