Question 1

Figure 16-6 
-Refer to Figure 16-6.Which of the graphs depicts the situation for a profit-maximizing firm in a monopolistically competitive market?

Accepted Answer

A)   panel a
B)   panel b
C)   panel c
D)   panel dE) A) and D)
F) B) and C)

Question 2

Which of the following markets is not likely characterized by a monopolistically competitive market?

Accepted Answer

A)   piano lessons
B)   corn
C)   cookies
D)   clothingE) B) and C)
F) A) and B)

Question 3

The two types of imperfectly competitive markets are

Accepted Answer

A)   monopoly and monopolistic competition.
B)   monopoly and oligopoly.
C)   monopolistic competition and oligopoly.
D)   monopolistic competition and cartels.E) A) and B)
F) C) and D)

Question 4

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.E) A) and B)
F) C) and D)

Question 5

Under which of the following market structures would consumers likely pay the highest price for a product?

Accepted Answer

A)   perfect competition
B)   monopolistic competition
C)   oligopoly
D)   monopolyE) A) and D)
F) C) and D)

Question 6

A firm operating in a monopolistically competitive market can earn economic profits 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.E) None of the above
F) B) and D)

Question 7

The government of Italy will not allow any Hard Rock Cafe restaurants to open in Italy.Defenders of the efficiency of brand-name markets would argue that this has hindered restaurant market efficiency in Italy.

Accepted Answer

A) True 
 B)False

Question 8

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.E) A) and D)
F) A) and C)

Question 9

Figure 16-6 
-Refer to Figure 16-6.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 positive short-run profits.
B)   The firm is earning negative short-run profits.
C)   The firm is earning zero short-run profits.
D)   We cannot determine profits because we do not know the firm's average total costs.E) A) and C)
F) All of the above

Question 10

Figure 16-2 
-Refer to Figure 16-2.The graph depicts a monopolistically competitive firm in the short run.Which of the following explanations best decribes the long run adjustment?

Accepted Answer

A)   More firms will enter this market and each firm will have a smaller share of the total market demand,shifting this firm's demand curve to the left.
B)   More firms will enter this market and each firm will have a larger share of the total market demand,shifting this firm's demand to the right.
C)   Firms will exit this market and each firm will have a smaller share of the total market demand,shifting this firm's demand to the left.
D)   Firms will exit this market and each firm will have a larger share of the total market demand,shifting this firm's demand to the right.E) A) and B)
F) A) and C)

Question 11

In his 1958 book,The Affluent Society,John Kenneth Galbraith argued that

Accepted Answer

A)   brand names give firms an incentive to produce and sell high-quality products.
B)   consumers' tastes cannot,in any real sense,be "determined" by advertising.
C)   firms use advertising to create demand for products that people otherwise do not want or need.
D)   firms use advertising to send a signal to consumers about the quality of their products.E) C) and D)
F) None of the above

Question 12

Firms in industries that have competitors but do not face so much competition that they are price takers are operating in either a(n)

Accepted Answer

A)   oligopoly or perfectly competitive market.
B)   oligopoly or monopoly market.
C)   oligopoly or monopolistically competitive market.
D)   monopoly or monopolistically competitive market.E) None of the above
F) B) and D)

Question 13

Figure 16-8
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-8.The firm's maximum profit is

Accepted Answer

A)   $-5,000.00.
B)   $0.
C)   $5,000.00.
D)   $8,887.78.E) None of the above
F) All of the above

Question 14

Suppose that monopolistically competitive firms in a certain market are experiencing losses.In the transition from this initial situation to a long-run equilibrium,

Accepted Answer

A)   the number of firms in the market decreases.
B)   each existing firm experiences a decrease in demand for its product.
C)   each firm experiences an upward shift of its marginal cost and average total cost curves.
D)   each existing firm's average total cost falls to bring economic profit back to zero.E) C) and D)
F) All of the above

Question 15

Figure 16-2
This figure depicts a situation in a monopolistically competitive market. 
-Refer to Figure 16-2.What price will the monopolistically competitive firm charge in this market?

Accepted Answer

A)   $60
B)   $70
C)   $75
D)   $80E) A) and B)
F) A) and D)

Question 16

Which of the following is an example of a monopolistically competitive industry?

Accepted Answer

A)   breakfast cereals
B)   cigarettes
C)   restaurants in New York City
D)   milkE) All of the above
F) A) and B)

Question 17

When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium,marginal cost must lie below average total cost.

Accepted Answer

A) True 
 B)False

Question 18

A monopolistically competitive firm faces the following demand schedule for its product:  The firm has total fixed costs of $20 and a constant marginal cost of $2 per unit.The firm will maximize profit with

Accepted Answer

A)   6 units of output.
B)   9 units of output.
C)   11 units of output.
D)   13 units of output.E) B) and C)
F) None of the above

Question 19

When a firm operates with excess capacity,it must be in a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 20

A firm in a monopolistically competitive market is usually indifferent to an additional customer walking through the door,since a sale to that customer will not increase the firm's profit.

Accepted Answer

A) True 
 B)False

Exam 16: Monopolistic Competition

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

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Firms in industries that have competitors but do not face so much competition that they are price takers are operating in either a(n)

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In his 1958 book,The Affluent Society,John Kenneth Galbraith argued that

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A monopolistically competitive firm faces the following demand schedule for its product: The firm has total fixed costs of $20 and a constant marginal cost of $2 per unit.The firm will maximize profit with

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A firm operating in a monopolistically competitive market can earn economic profits in

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Which of the following is an example of a monopolistically competitive industry?

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Under which of the following market structures would consumers likely pay the highest price for a product?

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The government of Italy will not allow any Hard Rock Cafe restaurants to open in Italy.Defenders of the efficiency of brand-name markets would argue that this has hindered restaurant market efficiency in Italy.

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Figure 16-6 -Refer to Figure 16-6.Which of the graphs depicts the situation for a profit-maximizing firm in a monopolistically competitive market?

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Suppose that monopolistically competitive firms in a certain market are experiencing losses.In the transition from this initial situation to a long-run equilibrium,

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Which of the following markets is not likely characterized by a monopolistically competitive market?

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A firm in a monopolistically competitive market is usually indifferent to an additional customer walking through the door,since a sale to that customer will not increase the firm's profit.

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When a firm operates with excess capacity,it must be in a monopolistically competitive market.

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

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Figure 16-8 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-8.The firm's maximum profit is

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The two types of imperfectly competitive markets are

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When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium,marginal cost must lie below average total cost.

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Figure 16-2 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-2.What price will the monopolistically competitive firm charge in this market?

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Figure 16-6 -Refer to Figure 16-6.Suppose a firm is operating in the situation depicted in panel a.Which of the following statements is correct?

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Figure 16-2 -Refer to Figure 16-2.The graph depicts a monopolistically competitive firm in the short run.Which of the following explanations best decribes the long run adjustment?

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