Question 1

A market structure with only a few sellers,each offering similar or identical products,is known as

Accepted Answer

A)   oligopoly.
B)   monopoly.
C)   monopolistic competition.
D)   perfect competition.

Question 2

When McDonald's opens a store in Dhaka,Bangladesh,it has a strong incentive to enforce product quality consistent with stores in the United States.

Accepted Answer

A) True 
 B)False

Question 3

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

Accepted Answer

A)   perfectly competitive market.
B)   monopolistically competitive market.
C)   oligopoly.
D)   monopoly.

Question 4

Two soft drinks sit side-by-side in a grocery store: A six-pack of Coca-Cola (a brand name) sells for $3.00,while a six-pack of Uncle Don's cola (not a brand name) sells for $1.50.Even defenders of brand names would have to admit that

Accepted Answer

A)   no rational consumer would spend twice as much for Coca-Cola as he would for Uncle Don's cola.
B)   the side-by-side presence of these two colas conveys no useful information to consumers.
C)   Coca-Cola has no incentive to maintain the quality of its product just because of the Coca-Cola brand name.
D)   None of the above is correct.

Question 5

There is general disagreement among economists about the role of advertising,but there is widespread agreement about the role of brand names on market efficiency.

Accepted Answer

A) True 
 B)False

Question 6

In a long-run equilibrium,a firm in a monopolistically competitive market operates

Accepted Answer

A)   where marginal revenue is zero.
B)   where marginal revenue is negative.
C)   on the rising portion of its average total cost curve.
D)   on the declining portion of its average total cost curve.

Question 7

For a profit-maximizing monopolistically competitive firm,price exceeds marginal cost in

Accepted Answer

A)   the short run but not in the long run.
B)   the long run but not in the short run.
C)   both the short run and the long run.
D)   neither the short run nor the long run.

Question 8

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 > MR

Question 9

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 has the highest concentration ratio?

Accepted Answer

A)   Industry A
B)   Industry B
C)   Industry C
D)   Industry D

Question 10

The entry of new firms into a monopolistically competitive market is accompanied by

Accepted Answer

A)   both positive and negative externalities.
B)   only positive externalities.
C)   only negative externalities.
D)   only private profit opportunities (no externalities) .

Question 11

Figure 16-1.The figure is drawn for a monopolistically competitive firm. 
-Refer to Figure 16-1.Suppose that average total cost is $18 when Q=12.What is the profit-maximizing price and resulting profit?

Accepted Answer

A)   P=$12,profit=$0
B)   P=$18,profit=$72
C)   P=$18,profit=$24
D)   P=$18,profit=$0

Question 12

In a monopolistically competitive market,

Accepted Answer

A)   the entry of new firms creates externalities.
B)   the absence of restrictions on entry by new firms ensures that there will be no deadweight loss.
C)   there are always too many firms in the market relative to the socially-optimal number of firms.
D)   firms cannot earn positive economic profits in the short run.

Question 13

Figure 16-4 
-Refer to Figure 16-4.Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into a monopolistically competitive industry?

Accepted Answer

A)   panel a
B)   panel b
C)   panel c
D)   panel d

Question 14

A monopolistically competitive market is like both a competitive market and a monopoly in that firms in all three market structures

Accepted Answer

A)   can earn economic profits in the short run.
B)   can earn economic profits in the long run.
C)   charge a price above marginal cost.
D)   All of the above are correct.

Question 15

Which of the following statements is correct?

Accepted Answer

A)   Firms in monopolistic competition and monopoly can earn economic profits in both the short run and the long run.
B)   Both perfectly competitive and monopolistically competitive firms charge a price equal to marginal cost.
C)   Firms in perfect competition,monopolistic competition,and monopoly maximize profits by producing where marginal revenue equals marginal cost.
D)   Both perfectly competitive and monopolistically competitive firms produce the welfare-maximizing level of output.

Question 16

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 firm

Question 17

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.

Question 18

A downward-sloping demand curve

Accepted Answer

A)   is a feature of all monopolistically competitive firms.
B)   means that the firm in question will never experience a zero profit.
C)   causes marginal revenue to exceed price.
D)   prohibits firms from earning positive economic profits in the long run.

Question 19

Table 16-5
Traci's Hairstyling is one salon among many in the market for hairstyling.The following table presents cost and revenue data for hair cuts at Traci's Hairstyling.
 
-Refer to Table 16-5.At the profit-maximizing quantity,what is Traci's total profit?

Accepted Answer

A)   $30
B)   $59
C)   $77
D)   $84

Question 20

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

Accepted Answer

A)   enhances the effectiveness of the advertisement.
B)   reduces people's willingness to purchase advertised products.
C)   is leaked to discredit the firms that spend so much on advertising.
D)   reduces the effective staying power of a product.

Exam 16: Monopolistic Competition

There is general disagreement among economists about the role of advertising,but there is widespread agreement about the role of brand names on market efficiency.

Correct AnswerverifiedShow Answer

When McDonald's opens a store in Dhaka,Bangladesh,it has a strong incentive to enforce product quality consistent with stores in the United States.

Correct AnswerverifiedShow Answer

Figure 16-4 -Refer to Figure 16-4.Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into a monopolistically competitive industry?

Correct AnswerverifiedShow Answer

A downward-sloping demand curve

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Table 16-5 Traci's Hairstyling is one salon among many in the market for hairstyling.The following table presents cost and revenue data for hair cuts at Traci's Hairstyling. -Refer to Table 16-5.At the profit-maximizing quantity,what is Traci's total profit?

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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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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 has the highest concentration ratio?

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The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

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Two soft drinks sit side-by-side in a grocery store: A six-pack of Coca-Cola (a brand name) sells for $3.00,while a six-pack of Uncle Don's cola (not a brand name) sells for $1.50.Even defenders of brand names would have to admit that

Correct AnswerverifiedShow Answer

A market structure with only a few sellers,each offering similar or identical products,is known as

Correct AnswerverifiedShow Answer

A monopolistically competitive market is like both a competitive market and a monopoly in that firms in all three market structures

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

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For a profit-maximizing monopolistically competitive firm,price exceeds marginal cost in

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In a long-run equilibrium,a firm in a monopolistically competitive market operates

Correct AnswerverifiedShow Answer

The entry of new firms into a monopolistically competitive market is accompanied by

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

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

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In a monopolistically competitive market,

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Figure 16-1.The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.Suppose that average total cost is $18 when Q=12.What is the profit-maximizing price and resulting profit?

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