Question 1

Two college students,Josh and John,are spending spring break in Boston to visit Harvard University's law school.Josh buys a cup of coffee each morning at the local Dunkin' Donuts rather than from one of the local coffee shops.John claims that Josh is irrational because he never purchased Dunkin' Donuts' coffee at home,and Dunkin' Donuts' coffee costs more than the coffee sold by local shops.An economist would most likely explain Josh's behavior by suggesting that

Accepted Answer

A)   Josh's behavior is rational,but John's behavior is clearly irrational.
B)   Josh's behavior is clearly irrational,but John's behavior is rational.
C)   the Dunkin' Donuts brand name suggests consistent quality.
D)   the advertising by Dunkin' Donuts in Boston is more persuasive than the advertising by Dunkin' Donuts in Josh and John's home town.

Question 2

Economists who argue that advertising enhances market efficiency suggest that celebrity advertising signals inferior product quality.

Accepted Answer

A) True 
 B)False

Question 3

Discuss how brand names may enhance the efficiency of markets in a less developed country.

Accepted Answer

Recognizable brand names signal quality ...

Question 4

When existing firms lose customers and profits due to entry of a new competitor,a

Accepted Answer

A)   predatory-pricing externality occurs.
B)   consumption externality occurs.
C)   business-stealing externality occurs.
D)   product-variety externality occurs.

Question 5

The two types of imperfectly competitive markets are

Accepted Answer

A)   markets with differentiated products and monopoly.
B)   markets with differentiated products and oligopoly.
C)   oligopoly and monopoly.
D)   monopolistic competition and oligopoly.

Question 6

Evidence suggests that,in markets with differentiated products but little advertising,

Accepted Answer

A)   consumers are not confused by conflicting signals.
B)   firms are generally less profitable.
C)   markets are less efficient.
D)   consumers make better choices.

Question 7

If firms in a particular market sell identical products,then the market is

Accepted Answer

A)   (i) or (ii) only
B)   (ii) or (iii) only
C)   (i) or (iii) only
D)   (i) only

Question 8

What do economists call a market structure in which there are many firms selling products that are similar but not identical?

Accepted Answer

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

Question 9

Monopolistic competition is characterized by

Accepted Answer

A)   i) and ii) only
B)   ii) and iv) only
C)   i) ,ii) ,and iii) only
D)   ii) ,iii) ,and iv) only

Question 10

Monopolistically competitive firms have excess capacity.To maximize profits,firms will

Accepted Answer

A)   increase their output to lower their average total cost of production and eliminate the excess capacity.
B)   produce where price equals marginal cost to eliminate the excess capacity.
C)   produce where average revenue equals marginal cost to eliminate the excess capacity.
D)   maintain the excess capacity.

Question 11

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.Which industry is the least competitive?

Accepted Answer

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

Question 12

As firms exit a monopolistically competitive market,profits of remaining firms

Accepted Answer

A)   decline,and product diversity in the market decreases.
B)   decline,and product diversity in the market increases.
C)   rise,and product diversity in the market decreases.
D)   rise,and product diversity in the market increases.

Question 13

When a firm operates with excess capacity,

Accepted Answer

A)   additional production would lower the average total cost.
B)   additional production would increase the average total cost.
C)   it must be a perfectly competitive firm.
D)   it must be a monopolistically competitive firm.

Question 14

According to the signaling theory of advertising,consumers

Accepted Answer

A)   pay little or no attention to which firms advertise and which firms do not advertise.
B)   are often more impressed by a firm's willingness to spend money on advertising than they are by the content of the advertisement.
C)   are often more impressed by low-cost advertisements than they are by high-cost advertisements.
D)   gain little or no information about product quality from advertisements.

Question 15

When consumers are exposed to additional choices that result from the introduction of a new product,

Accepted Answer

A)   their satisfaction is likely to be lowered as a result of their having to make additional choices.
B)   a product-variety externality is said to occur.
C)   an advertising externality is said to occur.
D)   consumers are likely to experience negative consumption externalities.

Question 16

Each firm in a monopolistically competitive market

Accepted Answer

A)   earns both short-run and long-run profits.
B)   faces a downward-sloping demand curve.
C)   cannot earn economic profit in the short run.
D)   sets price equal to marginal cost.

Question 17

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Accepted Answer

A)   marginal cost exceeds marginal revenue
B)   average revenue equals marginal cost
C)   price exceeds marginal cost
D)   All of the above are correct.

Question 18

If firms in a monopolistically competitive market are incurring economic losses,which of the following scenarios would best describe the change existing firms (who are able to stay in the market) would face as the market adjusts to the long-run equilibrium?

Accepted Answer

A)   a downward shift in the marginal cost curve for each firm
B)   an upward shift in the marginal cost curve for each firm
C)   a decrease in demand for each firm
D)   an increase in demand for each firm

Question 19

Figure 16-6 
-Refer to Figure 16-6.The firm depicted in panel b faces a horizontal demand curve.If panel b depicts a profit-maximizing firm,

Accepted Answer

A)   it could be operating in either a perfectly competitive market or in a monopolistically competitive market.
B)   it would not have excess capacity in its production as long as it is earning zero economic profit.
C)   it is able to choose the price at which it sells its product.
D)   the firm can always raise its profit by increasing production since consumers will buy as much as the firm can produce.

Question 20

A monopolistically competitive firm faces the following demand curve for its product:

The firm has total fixed costs of $20 and a constant marginal cost of $5 per unit.The firm will maximize profit with the production of

Accepted Answer

A)   6 units of output.
B)   8 units of output.
C)   10 units of output.
D)   12 units of output.

Exam 16: Monopolistic Competition

The two types of imperfectly competitive markets are

Correct Answer
verified

Discuss how brand names may enhance the efficiency of markets in a less developed country.

Correct Answer
verified
Recognizable brand names signal quality ...
View Answer

Evidence suggests that,in markets with differentiated products but little advertising,

Correct Answer
verified

If firms in a monopolistically competitive market are incurring economic losses,which of the following scenarios would best describe the change existing firms (who are able to stay in the market) would face as the market adjusts to the long-run equilibrium?

Correct Answer
verified

As firms exit a monopolistically competitive market,profits of remaining firms

Correct Answer
verified

Correct Answer
verified

Monopolistically competitive firms have excess capacity.To maximize profits,firms will

Correct Answer
verified

Figure 16-6 -Refer to Figure 16-6.The firm depicted in panel b faces a horizontal demand curve.If panel b depicts a profit-maximizing firm,

Correct Answer
verified

A monopolistically competitive firm faces the following demand curve for its product: The firm has total fixed costs of $20 and a constant marginal cost of $5 per unit.The firm will maximize profit with the production of

Correct Answer
verified

When consumers are exposed to additional choices that result from the introduction of a new product,

Correct Answer
verified

When existing firms lose customers and profits due to entry of a new competitor,a

Correct Answer
verified

According to the signaling theory of advertising,consumers

Correct Answer
verified

What do economists call a market structure in which there are many firms selling products that are similar but not identical?

Correct Answer
verified

Monopolistic competition is characterized by

Correct Answer
verified

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Correct Answer
verified

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.Which industry is the least competitive?

Correct Answer
verified

Each firm in a monopolistically competitive market

Correct Answer
verified

If firms in a particular market sell identical products,then the market is

Correct Answer
verified

When a firm operates with excess capacity,

Correct Answer
verified

Economists who argue that advertising enhances market efficiency suggest that celebrity advertising signals inferior product quality.

Correct Answer
verified

Exam 16: Monopolistic Competition

The two types of imperfectly competitive markets are

Correct AnswerverifiedShow Answer

Discuss how brand names may enhance the efficiency of markets in a less developed country.

Correct AnswerverifiedRecognizable brand names signal quality ...View AnswerShow Answer

Evidence suggests that,in markets with differentiated products but little advertising,

Correct AnswerverifiedShow Answer

If firms in a monopolistically competitive market are incurring economic losses,which of the following scenarios would best describe the change existing firms (who are able to stay in the market) would face as the market adjusts to the long-run equilibrium?

Correct AnswerverifiedShow Answer

As firms exit a monopolistically competitive market,profits of remaining firms

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Monopolistically competitive firms have excess capacity.To maximize profits,firms will

Correct AnswerverifiedShow Answer

Figure 16-6 -Refer to Figure 16-6.The firm depicted in panel b faces a horizontal demand curve.If panel b depicts a profit-maximizing firm,

Correct AnswerverifiedShow Answer

A monopolistically competitive firm faces the following demand curve for its product: The firm has total fixed costs of $20 and a constant marginal cost of $5 per unit.The firm will maximize profit with the production of

Correct AnswerverifiedShow Answer

When consumers are exposed to additional choices that result from the introduction of a new product,

Correct AnswerverifiedShow Answer

When existing firms lose customers and profits due to entry of a new competitor,a

Correct AnswerverifiedShow Answer

According to the signaling theory of advertising,consumers

Correct AnswerverifiedShow Answer

What do economists call a market structure in which there are many firms selling products that are similar but not identical?

Correct AnswerverifiedShow Answer

Monopolistic competition is characterized by

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

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.Which industry is the least competitive?

Correct AnswerverifiedShow Answer

Each firm in a monopolistically competitive market

Correct AnswerverifiedShow Answer

If firms in a particular market sell identical products,then the market is

Correct AnswerverifiedShow Answer

When a firm operates with excess capacity,

Correct AnswerverifiedShow Answer

Economists who argue that advertising enhances market efficiency suggest that celebrity advertising signals inferior product quality.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
verified
Recognizable brand names signal quality ...
View Answer

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