Question 1

Scenario 16-5
McDonald's restaurants has recently announced intentions to open a new restaurant in Smalltown, Indiana. Assume that the fast-food restaurant market in Smalltown is characterized by monopolistic competition.
-Refer to Scenario 16-5. As a result of the new McDonald's, existing fast food restaurants in Smalltown are likely to

Accepted Answer

A)  suffer from a product-variety externality.
B)  suffer from a business-stealing externality.
C)  increase their production to achieve the efficient scale.
D)  Both b and c are correct.E) B) and D)
F) A) and B)

Question 2

In comparison to perfect competition, monopolistic competition is characterized by

Accepted Answer

A)  efficient scale.
B)  pricing at marginal cost.
C)  excess capacity.
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 3

A new Mexican restaurant opens in the city of Manchester. The residents are happy about this new restaurant because they are experiencing what externality?

Accepted Answer

product-va...

Question 4

A monopolistically competitive firm faces the following demand curve for its product:  The firm has total fixed costs of $100 and a constant marginal cost of $25 per unit. The firm will maximize profit with the production of

Accepted Answer

A)  4 units of output.
B)  10 units of output.
C)  16 units of output.
D)  22 units of output.E) None of the above
F) A) and B)

Question 5

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Accepted Answer

A)  firms are more likely to operate at efficient scale.
B)  there are likely to be too many firms in a monopolistically competitive market.
C)  market efficiency is likely to be enhanced by the entry of new firms.
D)  all firms are earning zero economic profit.E) B) and C)
F) None of the above

Question 6

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 produces its profit-maximizing level of output and there is a constant marginal cost of $7 per unit, which of the following is correct?

Accepted Answer

A)  This firm is operating at its efficient scale.
B)  This firm should expect its demand curve to shift to the left.
C)  Firms will leave the market and profits for firms that remain in the market will rise.
D)  This firm is in a long-run equilibrium.E) All of the above
F) A) and C)

Question 7

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

Question 8

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

Accepted Answer

A)  P > MC
B)  MC = ATC
C)  P 
D)  All of the above are correct.E) A) and B)
F) A) and C)

Question 9

Which of the following statements is not correct?

Accepted Answer

A)  Monopolistic competition is similar to monopoly because in each market structure the firm can charge a price above marginal costs.
B)  Monopolistic competition is similar to perfect competition because both market structures are characterized by free entry.
C)  Monopolistic competition is similar to oligopoly because both market structures are characterized by barriers to entry.
D)  Monopolistic competition is similar to perfect competition because both market structures are characterized by many sellers.E) B) and D)
F) B) and C)

Question 10

Figure 16-12 
-Refer to Figure 16-12. How much excess capacity does this firm have?

Accepted Answer

The answer of Figure 16-12 
-Refer to Figure 16-12. How...

Question 11

Figure 16-9
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-9. In order to maximize its profit, the firm will choose to produce

Accepted Answer

A)  less than 100 units of output.
B)  100 units of output.
C)  between 100 and 133.33 units of output.
D)  more than 133.33 units of output.E) A) and D)
F) A) and C)

Question 12

Among arguments for and against advertising, both sides agree that advertising leads to

Accepted Answer

A)  higher prices and less competitive markets.
B)  higher prices and more competitive markets.
C)  lower prices and more competitive markets.
D)  None of the above is correct. The debate fails to resolve the question of advertising's effect on prices and competition.E) B) and D)
F) A) and B)

Question 13

Figure 16-4 
-Refer to Figure 16-4. The firm in this figure is monopolistically competitive. This firm

Accepted Answer

A)  is operating in the long run.
B)  is earning a short-run economic profit.
C)  is incurring a short-run loss.
D)  The answer cannot be determined from the information given.E) All of the above
F) A) and D)

Question 14

In a small college town, four microbreweries have opened in the last two years. Demonstrate the effect of new market entrants on demand for existing firms (microbreweries) that already served this market. Assume that the local community now places a moratorium on new liquor licenses for microbreweries. How will this moratorium affect the long-run profitability of incumbent firms?

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> The arrival of a new entrant should be ...

Question 15

Which of the following statements is correct?

Accepted Answer

A)  Monopolistic competition is similar to monopoly because both market structures are characterized by firms being price makers rather than price takers.
B)  Monopolistic competition is similar to perfect competition because both market structures are characterized by differentiated products.
C)  Monopolistic competition is similar to oligopoly because both market structures are characterized by strategic interaction between firms in the market.
D)  Monopolistic competition is similar to perfect competition because both market structures are characterized by perfectly elastic demand curves for firms.E) All of the above
F) C) and D)

Question 16

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. How much profit will this firm earn when it chooses its output to maximize profit?

Accepted Answer

A)  a $12 loss
B)  an $8 profit
C)  a $25 profit
D)  a $32 profitE) A) and D)
F) None of the above

Question 17

A market structure in which there are many firms selling products that are similar but not identical is known as

Accepted Answer

A)  oligopoly.
B)  monopoly.
C)  monopolistic competition.
D)  perfect competition.E) All of the above
F) B) and D)

Question 18

Critics of advertising argue that advertising

Accepted Answer

A)  creates demand for products that people otherwise do not want or need.
B)  lowers barriers to entry into an industry because new firms can more easily establish themselves as competitors.
C)  increases competition by providing information about prices.
D)  encourages monopolization of markets by raising entry barriers.E) None of the above
F) A) and C)

Question 19

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

Accepted Answer

A)  P > AR
B)  MR > MC
C)  P > MC
D)  All of the above are correct.E) A) and C)
F) A) and B)

Question 20

Figure 16-4 
-Refer to Figure 16-4. At the profit-maximizing, or loss-minimizing, output level, the firm in this figure has total costs of approximately

Accepted Answer

A)  $12,000.
B)  $18,000.
C)  $21,000.
D)  $24,000.E) None of the above
F) A) and D)

Exam 16: Monopolistic Competition

A market structure in which there are many firms selling products that are similar but not identical is known as

Correct Answer
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Figure 16-4 -Refer to Figure 16-4. The firm in this figure is monopolistically competitive. This firm

Correct Answer
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A monopolistically competitive firm faces the following demand curve for its product: The firm has total fixed costs of $100 and a constant marginal cost of $25 per unit. The firm will maximize profit with the production of

Correct Answer
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Figure 16-4 -Refer to Figure 16-4. At the profit-maximizing, or loss-minimizing, output level, the firm in this figure has total costs of approximately

Correct Answer
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In comparison to perfect competition, monopolistic competition is characterized by

Correct Answer
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Correct Answer
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The arrival of a new entrant should be ...
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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 both the short-run and the long run?

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Which of the following statements is correct?

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Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. In order to maximize its profit, the firm will choose to produce

Correct Answer
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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)

Correct Answer
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When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Correct Answer
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A new Mexican restaurant opens in the city of Manchester. The residents are happy about this new restaurant because they are experiencing what externality?

Correct Answer
verified
product-va...
View 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. How much profit will this firm earn when it chooses its output to maximize profit?

Correct Answer
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Critics of advertising argue that advertising

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Figure 16-12 -Refer to Figure 16-12. How much excess capacity does this firm have?

Correct Answer
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Among arguments for and against advertising, both sides agree that advertising leads to

Correct Answer
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Which of the following statements is not correct?

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Exam 16: Monopolistic Competition

A market structure in which there are many firms selling products that are similar but not identical is known as

Correct AnswerverifiedShow Answer

Figure 16-4 -Refer to Figure 16-4. The firm in this figure is monopolistically competitive. This firm

Correct AnswerverifiedShow Answer

A monopolistically competitive firm faces the following demand curve for its product: The firm has total fixed costs of $100 and a constant marginal cost of $25 per unit. The firm will maximize profit with the production of

Correct AnswerverifiedShow Answer

Figure 16-4 -Refer to Figure 16-4. At the profit-maximizing, or loss-minimizing, output level, the firm in this figure has total costs of approximately

Correct AnswerverifiedShow Answer

In comparison to perfect competition, monopolistic competition is characterized by

Correct AnswerverifiedShow Answer

Correct Answerverified The arrival of a new entrant should be ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

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 both the short-run and the long run?

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Which of the following statements is correct?

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Correct AnswerverifiedShow Answer

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. In order to maximize its profit, the firm will choose to produce

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Correct AnswerverifiedShow Answer

A new Mexican restaurant opens in the city of Manchester. The residents are happy about this new restaurant because they are experiencing what externality?

Correct Answerverifiedproduct-va...View AnswerShow 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. How much profit will this firm earn when it chooses its output to maximize profit?

Correct AnswerverifiedShow Answer

Critics of advertising argue that advertising

Correct AnswerverifiedShow Answer

Figure 16-12 -Refer to Figure 16-12. How much excess capacity does this firm have?

Correct AnswerverifiedShow Answer

Among arguments for and against advertising, both sides agree that advertising leads to

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

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The arrival of a new entrant should be ...
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product-va...
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