Question 1

If firms in a monopolistically competitive market are earning economic profits, which of the following scenarios would best describe the change existing firms would face as the market adjusts to the long-run equilibrium?

Accepted Answer

A)  an increase in demand for each firm
B)  a decrease in demand for each firm
C)  a downward shift in the marginal cost curve for each firm
D)  an upward shift in the marginal cost curve for each firmE) A) and B)
F) None of the above

Question 2

​Assume a monopolistically competitive firm encounters a decrease in average variable cost at all output levels.We would expect:

Accepted Answer

A)  ​The price to fall and output to rise
B)  ​The price to fall and output to fall
C)  ​The price to rise and output to rise
D)  ​The price to rise and output to fallE) C) and D)
F) A) and D)

Question 3

Figure 16-5 
-Refer to Figure 16-5. Panel a shows a profit-maximizing monopolistically competitive firm that is

Accepted Answer

A)  earning zero economic profit.
B)  likely to exit the market in the long run.
C)  producing its efficient scale of output.
D)  not maximizing its profit.E) B) and C)
F) A) and C)

Question 4

Economists are unanimous in their belief that advertising is socially inefficient.

Accepted Answer

A) True 
 B)False

Question 5

A monopolistically competitive firm

Accepted Answer

A)  charges a price that is equal to marginal cost.
B)  experiences a zero profit in the long run.
C)  produces at the efficient scale in the long run.
D)  All of the above are correct.E) C) and D)
F) A) and B)

Question 6

If there are many firms participating in a market, the market is either

Accepted Answer

A)  an oligopoly or monopolistically competitive.
B)  perfectly competitive or monopolistically competitive.
C)  an oligopoly or perfectly competitive.
D)  an oligopoly or a cartel.E) B) and C)
F) None of the above

Question 7

Which of the following goods are not likely to be sold in monopolistically competitive markets?

Accepted Answer

A)  jeans
B)  books
C)  tap water
D)  clocksE) A) and B)
F) C) and D)

Question 8

In a monopolistically competitive industry, firms set price

Accepted Answer

A)  equal to marginal cost since each firm is a price taker.
B)  below marginal cost since each firm is a price taker.
C)  above marginal cost since each firm is a price setter.
D)  always a fraction of marginal cost since each firm is a price setter.E) None of the above
F) B) and C)

Question 9

If firms in a monopolistically competitive market are earning positive profits, then

Accepted Answer

A)  firms will likely be subject to regulation.
B)  barriers to entry will be strengthened.
C)  some firms will exit the market.
D)  new firms will enter the market.E) All of the above
F) A) and B)

Question 10

Which of the following statements is correct?

Accepted Answer

A)  Cigarettes are likely to be produced in a monopolistically competitive industry.
B)  Novels are likely to be produced in a monopoly industry.
C)  Movies are likely to be produced in a monopolistically competitive industry.
D)  Milk is likely to be produced in an oligopoly industry.E) C) and D)
F) B) and C)

Question 11

The lower the concentration ratio, the

Accepted Answer

A)  more control an individual firm has to set prices.
B)  more competitive the industry.
C)  less competitive the industry.
D)  Both a and c are correct.E) A) and C)
F) None of the above

Question 12

A monopolistically competitive market is characterized by

Accepted Answer

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 B)
F) A) and C)

Question 13

The "competition" in monopolistically competitive markets is most likely a result of having many sellers in the market.

Accepted Answer

A) True 
 B)False

Question 14

Table 16-4
This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. 
-Refer to Table 16-4. At the profit-maximizing level of output, what is this firm's total cost?

Accepted Answer

A)  $10
B)  $40
C)  $88
D)  $100E) C) and D)
F) B) and C)

Question 15

In both perfect competition and monopolistic competition, each firm

Accepted Answer

A)  has some monopoly power.
B)  sells a product that is at least slightly different from those of other firms.
C)  faces a downward-sloping demand curve.
D)  has many competitors.E) C) and D)
F) A) and B)

Question 16

In a monopolistically competitive market,

Accepted Answer

A)  there are only a few sellers.
B)  each firm takes the price of its product as given.
C)  firms can enter or exit the market without restrictions.
D)  each firm produces a product that is essentially identical to the products of other firms in the market.E) A) and B)
F) C) and D)

Question 17

A monopolistically competitive firm's choice of output level is virtually identical to the choice made by

Accepted Answer

A)  a perfectly competitive firm.
B)  a duopolist.
C)  a monopolist.
D)  an oligopolist.E) All of the above
F) C) and D)

Question 18

Table 16-7
A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20. 
-Refer to Table 16-7. If the firm has a constant marginal cost of $7 per unit, how many units should the firm produce to maximize profit?

Accepted Answer

A)  3 units
B)  4 units
C)  5 units
D)  6 unitsE) A) and B)
F) B) and C)

Question 19

A new Mexican restaurant opens in the city of Manchester. The residents are happy about this new restaurant because they are experiencing what externality?

Accepted Answer

product-va...

Question 20

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

Accepted Answer

A)  P > ATC
B)  P = ATC
C)  P 
D)  Any of the above could be correct.E) B) and C)
F) None of the above

Exam 16: Monopolistic Competition

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

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A new Mexican restaurant opens in the city of Manchester. The residents are happy about this new restaurant because they are experiencing what externality?

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Table 16-7 A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20. -Refer to Table 16-7. If the firm has a constant marginal cost of $7 per unit, how many units should the firm produce to maximize profit?

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Which of the following statements is correct?

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Which of the following goods are not likely to be sold in monopolistically competitive markets?

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A monopolistically competitive firm

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If firms in a monopolistically competitive market are earning positive profits, then

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Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-4. At the profit-maximizing level of output, what is this firm's total cost?

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A monopolistically competitive market is characterized by

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A monopolistically competitive firm's choice of output level is virtually identical to the choice made by

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The lower the concentration ratio, the

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In a monopolistically competitive market,

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If there are many firms participating in a market, the market is either

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The "competition" in monopolistically competitive markets is most likely a result of having many sellers in the market.

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In both perfect competition and monopolistic competition, each firm

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​Assume a monopolistically competitive firm encounters a decrease in average variable cost at all output levels.We would expect:

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If firms in a monopolistically competitive market are earning economic profits, which of the following scenarios would best describe the change existing firms would face as the market adjusts to the long-run equilibrium?

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Economists are unanimous in their belief that advertising is socially inefficient.

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In a monopolistically competitive industry, firms set price

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Figure 16-5 -Refer to Figure 16-5. Panel a shows a profit-maximizing monopolistically competitive firm that is

Correct AnswerverifiedShow Answer

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Assume a monopolistically competitive firm encounters a decrease in average variable cost at all output levels.We would expect:

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