Question 1

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

Question 2

In the short run, a firm operating in a monopolistically competitive market

Accepted Answer

A)   produces an output level where marginal revenue equals average total cost.
B)   sets price equal to demand where marginal revenue equals marginal cost.
C)   must earn zero economic profits.
D)   maximizes revenues as well as profits.E) A) and B)
F) All of the above

Question 3

A monopolistically competitive market could be considered inefficient because

Accepted Answer

A)   marginal revenue exceeds average revenue.
B)   price exceeds marginal cost.
C)   the efficient scale of production is only achieved in the long run, not in the short run.
D)   markup pricing does not occur in any other market structure.E) B) and D)
F) A) and B)

Question 4

Which of the following statements is correct?

Accepted Answer

A)   Monopolistic competition is similar to monopoly because both market structures are characterized by firms being price makers rather than price takers.
B)   Monopolistic competition is similar to perfect competition because both market structures are characterized by differentiated products.
C)   Monopolistic competition is similar to oligopoly because both market structures are characterized by strategic interaction between firms in the market.
D)   Monopolistic competition is similar to perfect competition because both market structures are characterized by perfectly elastic demand curves for firms.E) A) and B)
F) All of the above

Question 5

When a firm's demand curve is tangent to its average total cost curve, the

Accepted Answer

A)   firm's economic profit is zero.
B)   firm must be earning economic profits.
C)   firm must be incurring economic losses.
D)   firm must be operating at its efficient scale.E) B) and D)
F) A) and D)

Question 6

On a vacation to China, you find yourself eating every meal at the local Burger King rather than buying a meal from one of the street vendors. Your traveling companion claims that you are irrational, since you never eat Burger King hamburgers when you are home, and Burger King's hamburgers cost more than the meals prepared and sold by China's street vendors. An economist would most likely explain your behavior by suggesting that

Accepted Answer

A)   your behavior is rational, but your friend's behavior is clearly irrational.
B)   you are clearly irrational, but your friend's behavior is rational.
C)   the Burger King brand name suggests consistent quality.
D)   the advertising by Burger King in China is more persuasive than the advertising by Burger King in your home town.E) None of the above
F) All of the above

Question 7

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. If the government forces this firm to produce at its efficient output level, how much output will this firm produce?

Accepted Answer

A)   0 units of output
B)   3 units of output
C)   4 units of output
D)   5 units of outputE) All of the above
F) A) and C)

Question 8

Figure 16-10
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-10. In order to maximize its profit, the firm will choose to produce

Accepted Answer

A)   100 units of output.
B)   between 100 and 133.33 units of output.
C)   133.33 units of output.
D)   154.92 units of output.E) B) and C)
F) B) and D)

Question 9

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) A) and B)
F) A) and C)

Question 10

Figure 16-4 
-Refer to Figure 16-4. The maximum total short-run economic profit for the monopolistically competitive firm in this figure is

Accepted Answer

A)   -$3,000.
B)   $3,000.
C)   $9,000.
D)   $24,000.E) A) and B)
F) A) and C)

Question 11

Two bottles of body wash sit side-by-side in a grocery store: Olay (a brand name)  sells for $6.00, while Up and Up (not a brand name)  sells for $3.00. Even defenders of brand names would have to admit that

Accepted Answer

A)   no rational consumer would spend twice as much for Olay as she would for Up and Up.
B)   the side-by-side presence of these two body washes conveys no useful information to consumers.
C)   Olay has no incentive to maintain the quality of its product just because of the Olay brand name.
D)   None of the above is correct.E) A) and C)
F) A) and B)

Question 12

Firms that sell highly differentiated consumer goods, such as soft drinks, breakfast cereals, and dog food, typically spend what percent of their revenues on advertising?

Accepted Answer

A)   0-1
B)   2-4
C)  10-20
D)   over 50E) All of the above
F) None of the above

Question 13

The traditional view of monopolistic competition holds that this type of industrial structure is inefficient because

Accepted Answer

A)   there are too few firms to reach an efficient level of production.
B)   firms do not operate at the output that minimizes average costs.
C)   more advertising is needed to inform customers about product differences.
D)   consumers do not have enough choice among the product varieties available.E) A) and B)
F) B) and C)

Question 14

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. Given the cost and revenue data, Beatrice's is

Accepted Answer

A)   not in a long-run equilibrium. More businesses will enter the bakery market in the long-run.
B)   not in a short-run equilibrium.
C)   not in a long-run equilibrium. Some businesses currently in the bakery market will exit the market in the long- run.
D)   in a long-run equilibrium.E) A) and D)
F) A) and C)

Question 15

Examples of monopolistically competitive markets include the markets for

Accepted Answer

A)   restaurants and furniture.
B)   wheat and corn.
C)   postage stamps and wooden pencils.
D)   All of the above are correct.E) C) and D)
F) B) and C)

Question 16

Scenario 16-6
Ike's Ice Cream has decided to open a new ice cream parlor in Mayville, MS. The market for ice cream parlors is monopolistically competitive.
-Refer to Scenario 16-6. As a result of the new Ike's Ice Cream parlor, consumers living in and visiting Mayville are likely to experience a

Accepted Answer

A)   business-stealing externality, which harms producers.
B)   business-stealing externality, which benefits producers.
C)   product-variety externality, which harms consumers.
D)   product-variety externality, which benefits consumers.E) All of the above
F) A) and D)

Question 17

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

Question 18

Which of the following is a commonly-cited benefit of advertising?

Accepted Answer

A)   Advertising can be a signal of the quality of a product.
B)   Advertising impedes competition.
C)   Advertising reduces the deadweight loss associated with monopolistic competition.
D)   Advertising encourages free entry, which increases profits.E) B) and D)
F) None of the above

Question 19

Figure 16-6 
-Refer to Figure 16-6. Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is doing its best but still losing money?

Accepted Answer

A)   panel a
B)   panel b
C)   panel c
D)   panel dE) None of the above
F) All of the above

Question 20

A market is comprised of many firms as opposed to just one firm or a few firms

Accepted Answer

A)   only when it is perfectly competitive.
B)   only when it is perfectly competitive or oligopolistic.
C)   only when it is perfectly competitive or monopolistically competitive.
D)   when it is perfectly competitive, monopolistically competitive, or oligopolistid.E) A) and B)
F) A) and C)

Exam 16: Monopolistic Competition

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
verified

The traditional view of monopolistic competition holds that this type of industrial structure is inefficient because

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

Figure 16-4 -Refer to Figure 16-4. The maximum total short-run economic profit for the monopolistically competitive firm in this figure is

Correct Answer
verified

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. In order to maximize its profit, the firm will choose to produce

Correct Answer
verified

Firms that sell highly differentiated consumer goods, such as soft drinks, breakfast cereals, and dog food, typically spend what percent of their revenues on advertising?

Correct Answer
verified

In a monopolistically competitive market,

Correct Answer
verified

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. If the government forces this firm to produce at its efficient output level, how much output will this firm produce?

Correct Answer
verified

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. Given the cost and revenue data, Beatrice's is

Correct Answer
verified

In the short run, a firm operating in a monopolistically competitive market

Correct Answer
verified

Scenario 16-6 Ike's Ice Cream has decided to open a new ice cream parlor in Mayville, MS. The market for ice cream parlors is monopolistically competitive. -Refer to Scenario 16-6. As a result of the new Ike's Ice Cream parlor, consumers living in and visiting Mayville are likely to experience a

Correct Answer
verified

Which of the following is a commonly-cited benefit of advertising?

Correct Answer
verified

Figure 16-6 -Refer to Figure 16-6. Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is doing its best but still losing money?

Correct Answer
verified

Examples of monopolistically competitive markets include the markets for

Correct Answer
verified

A monopolistically competitive market could be considered inefficient because

Correct Answer
verified

Two bottles of body wash sit side-by-side in a grocery store: Olay (a brand name) sells for $6.00, while Up and Up (not a brand name) sells for $3.00. Even defenders of brand names would have to admit that

Correct Answer
verified

A market is comprised of many firms as opposed to just one firm or a few firms

Correct Answer
verified

When a firm's demand curve is tangent to its average total cost curve, the

Correct Answer
verified

Exam 16: Monopolistic Competition

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

The traditional view of monopolistic competition holds that this type of industrial structure is inefficient because

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Figure 16-4 -Refer to Figure 16-4. The maximum total short-run economic profit for the monopolistically competitive firm in this figure is

Correct AnswerverifiedShow Answer

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. In order to maximize its profit, the firm will choose to produce

Correct AnswerverifiedShow Answer

Firms that sell highly differentiated consumer goods, such as soft drinks, breakfast cereals, and dog food, typically spend what percent of their revenues on advertising?

Correct AnswerverifiedShow Answer

In a monopolistically competitive market,

Correct AnswerverifiedShow Answer

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. If the government forces this firm to produce at its efficient output level, how much output will this firm produce?

Correct AnswerverifiedShow Answer

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. Given the cost and revenue data, Beatrice's is

Correct AnswerverifiedShow Answer

In the short run, a firm operating in a monopolistically competitive market

Correct AnswerverifiedShow Answer

Scenario 16-6 Ike's Ice Cream has decided to open a new ice cream parlor in Mayville, MS. The market for ice cream parlors is monopolistically competitive. -Refer to Scenario 16-6. As a result of the new Ike's Ice Cream parlor, consumers living in and visiting Mayville are likely to experience a

Correct AnswerverifiedShow Answer

Which of the following is a commonly-cited benefit of advertising?

Correct AnswerverifiedShow Answer

Figure 16-6 -Refer to Figure 16-6. Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is doing its best but still losing money?

Correct AnswerverifiedShow Answer

Examples of monopolistically competitive markets include the markets for

Correct AnswerverifiedShow Answer

A monopolistically competitive market could be considered inefficient because

Correct AnswerverifiedShow Answer

Two bottles of body wash sit side-by-side in a grocery store: Olay (a brand name) sells for $6.00, while Up and Up (not a brand name) sells for $3.00. Even defenders of brand names would have to admit that

Correct AnswerverifiedShow Answer

A market is comprised of many firms as opposed to just one firm or a few firms

Correct AnswerverifiedShow Answer

When a firm's demand curve is tangent to its average total cost curve, the

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified