Question 1

Product differentiation in monopolistically competitive markets ensures that, for profit-maximizing firms,

Accepted Answer

A)  marginal revenue will equal average total cost.
B)  price will exceed marginal cost.
C)  marginal cost will exceed average revenue.
D)  average variable cost will be declining.E) All of the above
F) B) and C)

Question 2

​As competitors enter a monopolistically competitive industry, the incumbent firms demand curves shift ​

Accepted Answer

A)  ​To the left and become less elastic
B)  ​To the right and becomes less elastic
C)  ​To the left and becomes more elastic
D)  ​To the right and becomes more elasticE) A) and C)
F) A) and B)

Question 3

A firm has the following cost structure:  If this firm is in a typical perfectly competitive market, in the long run it will likely produce

Accepted Answer

A)  8 or fewer units of output.
B)  10 units of output.
C)  more than 10 units of output.
D)  None of the above are necessarily correct because there is not enough information to tell.E) A) and D)
F) B) and C)

Question 4

Consider two industries in which firms hold the following market shares:
Industry A: 25%, 20%, 18%, 15%, 8%, 7%, 4%, 2%, 1%
Industry B: 30%, 10%, 9%, 8%, 8%, 8%, 8%, 6%, 6%, 5%, 2%
What are the concentration ratios for each industry? Which is more competitive?

Accepted Answer

The answer of Consider two industries in which firms hold...

Question 5

One thing that both critics of advertising and defenders of advertising agree on is that advertising fosters competition.

Accepted Answer

A) True 
 B)False

Question 6

When firms in a monopolistically competitive market engage in price-related advertising, defenders of advertising argue that

Accepted Answer

A)  the quality of products sold in the market always increases.
B)  customers are less likely to be informed about other characteristics of the product.
C)  new firms are discouraged from entering the market.
D)  each firm has less market power.E) A) and B)
F) B) and C)

Question 7

When a market is monopolistically competitive, the typical firm in the market can earn

Accepted Answer

A)  losses in the short run and profits in the long run.
B)  profits in the short run and the long run.
C)  losses in the short run and zero profit in the long run.
D)  zero profit in the short run and losses in the long run.E) B) and C)
F) A) and D)

Question 8

Figure 16-13 
-Refer to Figure 16-13. Use the letters to identify the area of profit for this firm.

Accepted Answer

The answer of Figure 16-13 
-Refer to Figure 16-13. Use...

Question 9

In a monopolistically competitive market,

Accepted Answer

A)  strategic interactions among the firms are very important.
B)  the threat of entry by new firms is not an important consideration.
C)  the attainment of a Nash equilibrium is an important objective.
D)  firms may enter even though they will earn zero economic profit in the long run.E) A) and B)
F) A) and C)

Question 10

Which market structure(s) include(s) many firms with differentiated products who can enter and exit the market freely?

Accepted Answer

monopolist...

Question 11

When advertising is used to relay information about price, each firm is able to enhance market power.

Accepted Answer

A) True 
 B)False

Question 12

​An empirical study compared the price of eyeglasses in states that restricted advertising by optometrists with those that did not.The study revealed: ​

Accepted Answer

A)  ​That the average price of eyeglasses in states where advertising was restricted was higher than the average price in states were advertising was not restricted
B)  ​That the average price of eyeglasses in states where advertising was not restricted was higher than the average price in states where advertising was restricted
C)  ​That the average price of eyeglasses did not differ between states where advertising was restricted and those in which advertising was not restricted
D)  ​That the greater the level of advertising, the higher the average price of eyeglassesE) B) and C)
F) A) and D)

Question 13

Excess capacity characterizes firms in monopolistically competitive markets, even in situations of long-run equilibrium.

Accepted Answer

A) True 
 B)False

Question 14

The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

Accepted Answer

A)  business-stealing externality that is observed in monopolistically competitive markets.
B)  product-variety externality that is observed in monopolistically competitive markets.
C)  inefficiencies of the long-term losses earned by monopolistically competitive firms.
D)  persistence of positive profits into the long run for monopolistically competitive firms.E) All of the above
F) None of the above

Question 15

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

Question 16

In what way is monopolistic competition less beneficial to the welfare of society in the long run? ​

Accepted Answer

A)  ​The firm can earn an economic profit.
B)  ​The firm does not produce where marginal revenue is equal to marginal cost.
C)  ​The firm does not produce where average total cost is minimized
D)  ​The firm does not shut down if the price is less than average variable cost. ​E) A) and C)
F) All of the above

Question 17

Figure 16-12 
-Refer to Figure 16-12. What, if any, long run adjustment will take place in this industry?

Accepted Answer

The answer of Figure 16-12 
-Refer to Figure 16-12. What,...

Question 18

Scenario 16-3
Peter operates an ice cream shop in the center of Fairfield. He sells several unusual flavors of organic, homemade ice cream so he has a monopoly over his own ice cream, though he competes with many other firms selling ice cream in Fairfield for the same customers. Peter's demand and cost values for sales per day are given in the table below. (Everyone who purchases Peter's ice cream buys a double scoop cone because it's so delicious.) 
-Refer to Scenario 16-3. How many ice cream cones should Peter sell in one day to maximize his profits?

Accepted Answer

The answer of Scenario 16-3
Peter operates an ice cream shop...

Question 19

Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profit-maximizing firm charge a price that exceeds marginal cost?

Accepted Answer

A)  monopoly only
B)  monopoly and monopolistic competition only
C)  monopoly, monopolistic competition, and perfect competition
D)  The answer cannot be determined without knowing whether the market is in the long run or short run.E) B) and C)
F) All of the above

Question 20

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

Exam 16: Monopolistic Competition

Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profit-maximizing firm charge a price that exceeds marginal cost?

Correct Answer
verified

When advertising is used to relay information about price, each firm is able to enhance market power.

Correct Answer
verified

An empirical study compared the price of eyeglasses in states that restricted advertising by optometrists with those that did not.The study revealed:

Correct Answer
verified

Figure 16-13 -Refer to Figure 16-13. Use the letters to identify the area of profit for this firm.

Correct Answer
verified

In a monopolistically competitive market,

Correct Answer
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Which market structure(s) include(s) many firms with differentiated products who can enter and exit the market freely?

Correct Answer
verified
monopolist...
View Answer

The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

Correct Answer
verified

When a market is monopolistically competitive, the typical firm in the market can earn

Correct Answer
verified

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

Correct Answer
verified

A firm has the following cost structure: If this firm is in a typical perfectly competitive market, in the long run it will likely produce

Correct Answer
verified

Consider two industries in which firms hold the following market shares: Industry A: 25%, 20%, 18%, 15%, 8%, 7%, 4%, 2%, 1% Industry B: 30%, 10%, 9%, 8%, 8%, 8%, 8%, 6%, 6%, 5%, 2% What are the concentration ratios for each industry? Which is more competitive?

Correct Answer
verified

One thing that both critics of advertising and defenders of advertising agree on is that advertising fosters competition.

Correct Answer
verified

Figure 16-12 -Refer to Figure 16-12. What, if any, long run adjustment will take place in this industry?

Correct Answer
verified

As competitors enter a monopolistically competitive industry, the incumbent firms demand curves shift

Correct Answer
verified

Product differentiation in monopolistically competitive markets ensures that, for profit-maximizing firms,

Correct Answer
verified

In what way is monopolistic competition less beneficial to the welfare of society in the long run?

Correct Answer
verified

When firms in a monopolistically competitive market engage in price-related advertising, defenders of advertising argue that

Correct Answer
verified

Excess capacity characterizes firms in monopolistically competitive markets, even in situations of long-run equilibrium.

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Exam 16: Monopolistic Competition

Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profit-maximizing firm charge a price that exceeds marginal cost?

Correct AnswerverifiedShow Answer

When advertising is used to relay information about price, each firm is able to enhance market power.

Correct AnswerverifiedShow Answer

​An empirical study compared the price of eyeglasses in states that restricted advertising by optometrists with those that did not.The study revealed: ​

Correct AnswerverifiedShow Answer

Figure 16-13 -Refer to Figure 16-13. Use the letters to identify the area of profit for this firm.

Correct AnswerverifiedShow Answer

In a monopolistically competitive market,

Correct AnswerverifiedShow Answer

Which market structure(s) include(s) many firms with differentiated products who can enter and exit the market freely?

Correct Answerverifiedmonopolist...View AnswerShow Answer

The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

Correct AnswerverifiedShow Answer

When a market is monopolistically competitive, the typical firm in the market can earn

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A firm has the following cost structure: If this firm is in a typical perfectly competitive market, in the long run it will likely produce

Correct AnswerverifiedShow Answer

Consider two industries in which firms hold the following market shares: Industry A: 25%, 20%, 18%, 15%, 8%, 7%, 4%, 2%, 1% Industry B: 30%, 10%, 9%, 8%, 8%, 8%, 8%, 6%, 6%, 5%, 2% What are the concentration ratios for each industry? Which is more competitive?

Correct AnswerverifiedShow Answer

One thing that both critics of advertising and defenders of advertising agree on is that advertising fosters competition.

Correct AnswerverifiedShow Answer

Figure 16-12 -Refer to Figure 16-12. What, if any, long run adjustment will take place in this industry?

Correct AnswerverifiedShow Answer

​As competitors enter a monopolistically competitive industry, the incumbent firms demand curves shift ​

Correct AnswerverifiedShow Answer

Product differentiation in monopolistically competitive markets ensures that, for profit-maximizing firms,

Correct AnswerverifiedShow Answer

In what way is monopolistic competition less beneficial to the welfare of society in the long run? ​

Correct AnswerverifiedShow Answer

When firms in a monopolistically competitive market engage in price-related advertising, defenders of advertising argue that

Correct AnswerverifiedShow Answer

Excess capacity characterizes firms in monopolistically competitive markets, even in situations of long-run equilibrium.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

An empirical study compared the price of eyeglasses in states that restricted advertising by optometrists with those that did not.The study revealed:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
monopolist...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

As competitors enter a monopolistically competitive industry, the incumbent firms demand curves shift

Correct Answer
verified

Correct Answer
verified

In what way is monopolistic competition less beneficial to the welfare of society in the long run?

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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