Question 1

Figure 16-7 
-Refer to Figure 16-7. Suppose a firm is operating in the situation depicted in panel A  Which of the following statements is correct?

Accepted Answer

A)   The firm is earning a positive short-run profit.
B)   The firm is earning a negative short-run profit.
C)   The firm is earning zero short-run profit.
D)   We cannot determine profit because we do not know the firm's average total cost.E) A) and B)
F) A) and C)

Question 2

In a monopolistically competitive market, the number of firms adjusts until economic profits are driven to zero.

Accepted Answer

A) True 
 B)False

Question 3

Figure 16-3
This figure depicts a situation in a monopolistically competitive market. 
-Refer to Figure 16-3. At the profit­maximizing level of output, what is this firm's total cost of production?

Accepted Answer

A)   $1,200
B)   $1,400
C)   $1,600
D)   $1,875E) None of the above
F) A) and C)

Question 4

Which of the following pairs illustrates the two extreme examples of market structures?

Accepted Answer

A)   competition and oligopoly
B)   competition and monopoly
C)   monopoly and monopolistic competition
D)   oligopoly and monopolistic competitionE) A) and B)
F) B) and C) B

Question 5

Regulation of a firm in a monopolistically competitive market

Accepted Answer

A)   usually implies a very small administrative burden.
B)   will lower the firm's costs.
C)   is commonly used to enhance market efficiency.
D)   is unlikely to improve market efficiency.E) A) and D)
F) B) and C) D

Question 6

The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which

Accepted Answer

A)   marginal revenue is equal to marginal cost.
B)   average total cost is equal to marginal revenue.
C)   average total cost is equal to price.
D)   average revenue exceeds average total cost.E) None of the above
F) A) and D)

Question 7

For a monopolistically competitive firm,

Accepted Answer

A)   marginal revenue and price are the same.
B)   average revenue and price are the same.
C)   at the profit-maximizing quantity of output, price equals marginal cost.
D)   at the profit-maximizing quantity of output, price equals the minimum of average total cost.E) B) and D)
F) B) and C)

Question 8

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, what price should the firm charge to maximize profit?

Accepted Answer

A)   $10
B)   $14
C)   $18
D)   $22E) None of the above
F) All of the above

Question 9

Advertisements that appear to convey no information at all

Accepted Answer

A)   are usually associated with "infomercials."
B)   are useless to consumers but valuable to firms.
C)   are useless to firms but valuable to consumers for their entertainment quality alone.
D)   may convey information to consumers by providing them with a signal that firms are willing to spend significant amounts of money to advertise.E) None of the above
F) All of the above

Question 10

Figure 16-11 
-Refer to Figure 16-11. What, if any, long run adjustment will occur in this industry?

Accepted Answer

firms will enter pri...

Question 11

Results of the study done by Lee Benham on advertising for eyeglasses would suggest that

Accepted Answer

A)   brand loyalty and market power in the eyeglass market was likely to be more pervasive in states that allowed advertising.
B)   eyeglass sales were more profitable in states that allowed advertising.
C)   optometrists would not be supportive of advertising restrictions.
D)   optometrists would enthusiastically endorse advertising restrictions.E) A) and C)
F) C) and D) D

Question 12

Consider a monopolistically competitive firm in a market in long-run equilibrium. This firm is likely earning

Accepted Answer

A)   a positive economic profit since it is charging a price above marginal cost.
B)   no economic profit since it is charging a price equal to its marginal cost.
C)   a positive economic profit since it is charging a price above its average total cost.
D)   no economic profit since it is charging a price equal to it average total cost.E) A) and B)
F) B) and C)

Question 13

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.E) A) and B)
F) None of the above

Question 14

Figure 16-9
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-9. Given this firm's cost curves, if the firm were perfectly competitive rather than monopolistically competitive, then in a long-run equilibrium it would produce

Accepted Answer

A)   less than 100 units of output.
B)   between 100 and 133.33 units of output.
C)   133.33 units of output.
D)   more than 133.33 units of output.E) None of the above
F) A) and B)

Question 15

Evaluate the following statement in the context of business-stealing and product-variety externalities: "We have too many student apartments in this town already. Statistics show that vacancy rates average 15 percent during any given semester."

Accepted Answer

Business-stealing effect: if new entrant...

Question 16

A monopolistically competitive firm chooses its

Accepted Answer

A)   price and quantity just as a monopoly does.
B)   quantity but faces a horizontal demand curve just as a competitive firm does.
C)   price but can sell any quantity at the market price just as an oligopoly does.
D)   price and quantity based on the decisions of the other firms in the industry just as an oligopoly does.E) None of the above
F) All of the above

Question 17

A monopolistically competitive industry is characterized by

Accepted Answer

A)   many firms, differentiated products, and barriers to entry.
B)   many firms, differentiated products, and free entry.
C)   a few firms, identical products, and free entry.
D)   a few firms, differentiated products, and barriers to entry.E) All of the above
F) C) and D)

Question 18

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

Question 19

Select the type of market that is described by the following attributes: many firms, differentiated products, and free entry.

Accepted Answer

A)   natural monopoly
B)   perfectly competition
C)   monopolistic competition
D)   monopolyE) C) and D)
F) B) and C)

Question 20

According to one theory, advertising sends a signal to consumers about the quality of the product being offered. An implication of this theory is that

Accepted Answer

A)   the actual quality of the product is irrelevant.
B)   the content of the advertisement is irrelevant.
C)   advertising is not in the best interest of society.
D)   it is irrational for firms to pay famous people large amounts of money to appear in their advertisements.E) B) and C)
F) A) and C)

Exam 16: Monopolistic Competition

Figure 16-7 -Refer to Figure 16-7. Suppose a firm is operating in the situation depicted in panel A Which of the following statements is correct?

Correct AnswerverifiedShow Answer

In a monopolistically competitive market, the number of firms adjusts until economic profits are driven to zero.

Correct AnswerverifiedShow Answer

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. At the profit­maximizing level of output, what is this firm's total cost of production?

Correct AnswerverifiedShow Answer

Which of the following pairs illustrates the two extreme examples of market structures?

Correct AnswerverifiedB

Regulation of a firm in a monopolistically competitive market

Correct AnswerverifiedD

The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which

Correct AnswerverifiedShow Answer

For a monopolistically competitive firm,

Correct AnswerverifiedShow Answer

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, what price should the firm charge to maximize profit?

Correct AnswerverifiedShow Answer

Advertisements that appear to convey no information at all

Correct AnswerverifiedShow Answer

Figure 16-11 -Refer to Figure 16-11. What, if any, long run adjustment will occur in this industry?

Correct Answerverifiedfirms will enter pri...View AnswerShow Answer

Results of the study done by Lee Benham on advertising for eyeglasses would suggest that

Correct AnswerverifiedD

Consider a monopolistically competitive firm in a market in long-run equilibrium. This firm is likely earning

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

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. Given this firm's cost curves, if the firm were perfectly competitive rather than monopolistically competitive, then in a long-run equilibrium it would produce

Correct AnswerverifiedShow Answer

Evaluate the following statement in the context of business-stealing and product-variety externalities: "We have too many student apartments in this town already. Statistics show that vacancy rates average 15 percent during any given semester."

Correct AnswerverifiedBusiness-stealing effect: if new entrant...View AnswerShow Answer

A monopolistically competitive firm chooses its

Correct AnswerverifiedShow Answer

A monopolistically competitive industry is characterized by

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

Select the type of market that is described by the following attributes: many firms, differentiated products, and free entry.

Correct AnswerverifiedShow Answer

According to one theory, advertising sends a signal to consumers about the quality of the product being offered. An implication of this theory is that

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. At the profitmaximizing level of output, what is this firm's total cost of production?

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
firms will enter pri...
View Answer

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Business-stealing effect: if new entrant...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified