Question 1

When a monopolistically competitive firm is in long-run equilibrium,

Accepted Answer

A)  marginal revenue is equal to marginal cost.
B)  average total cost is minimized.
C)  marginal revenue is tangent to average total cost.
D)  All of the above are correct.E) None of the above
F) All of the above

Question 2

Which of the following conditions distinguishes monopolistic competition from perfect competition?

Accepted Answer

A)  the number of sellers in the market
B)  the freedom of entry and exit by firms in the market
C)  the size of firms in the market
D)  product differentiationE) B) and C)
F) A) and C)

Question 3

A business-stealing externality is

Accepted Answer

A)  an externality that is likely to be punished under antitrust laws.
B)  the negative externality that occurs when one firm attempts to duplicate exactly the product of a different firm.
C)  an externality that is considered to be an explicit cost of business in monopolistically competitive markets.
D)  the negative externality associated with entry of new firms in a monopolistically competitive market.E) All of the above
F) A) and B)

Question 4

​In the long run, a monopolistically competitive firm produces at efficient scale.

Accepted Answer

A) True 
 B)False

Question 5

Monopolistic competition is an inefficient market structure because

Accepted Answer

A)  price exceeds marginal cost.
B)  it has a deadweight loss, just as monopoly does.
C)  at the equilibrium, some consumers will value the good at more than the marginal cost of production.
D)  All of the above are correct.E) All of the above
F) B) and C)

Question 6

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Accepted Answer

A) True 
 B)False

Question 7

In a long-run equilibrium,

Accepted Answer

A)  excess capacity applies to monopolistically competitive firms but not to competitive firms.
B)  zero economic profit applies to competitive firms but not to monopolistically competitive firms.
C)  markup over marginal cost applies to both monopolistically competitive and competitive firms.
D)  product variety externalities apply to both perfectly competitive firms and monopolistically competitive firms.E) None of the above
F) B) and C)

Question 8

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 9

Figure 16-3
This figure depicts a situation in a monopolistically competitive market. 
-Refer to Figure 16-3. This firm is operating

Accepted Answer

A)  in the short run and earning a positive economic profit.
B)  in the short run and breaking even.
C)  in the long run and earning a positive economic profit.
D)  in the long run and incurring and economic loss.E) A) and D)
F) C) and D)

Question 10

A monopolistically competitive firm has the following cost structure:  The firm faces the following demand curve: 
If the government forces this firm to produce at its efficient scale, it will

Accepted Answer

A)  produce 3 units and make $9.
B)  produce 4 units and make $6.
C)  produce 5 units and lose $5.
D)  produce 7 units and lose $49.E) C) and D)
F) B) and C)

Question 11

One key difference between an oligopoly market and a competitive market is that oligopolistic firms

Accepted Answer

A)  are price takers while competitive firms are not.
B)  can affect the profit of other firms in the market by the choices they make while firms in competitive markets do not affect each other by the choices they make.
C)  sell completely unrelated products while competitive firms do not.
D)  sell their product at a price equal to marginal cost while competitive firms do not.E) None of the above
F) All of the above

Question 12

Table 16-2
The following table shows the total output produced by the top six firms as well as the total industry output for each industry. 
-Refer to Table 16-2. Which industry has the lowest concentration ratio?

Accepted Answer

A)  Industry J
B)  Industry K
C)  Industry L
D)  Industry ME) All of the above
F) C) and D)

Question 13

Two college students, Mary and Maggie, are spending spring break in Florida. Mary buys a cup of coffee each morning at the local Starbucks rather than from one of the local coffee shops. Maggie claims that Mary is irrational because she never purchases Starbucks coffee at home, and Starbucks coffee costs more than the coffee sold by local shops. An economist would most likely explain Mary's behavior by suggesting that

Accepted Answer

A)  Mary's behavior is rational, but Maggie's behavior is clearly irrational.
B)  Mary's behavior is clearly irrational, but Maggie's behavior is rational.
C)  the Starbucks brand name suggests consistent quality.
D)  the advertising by Starbucks in Florida is more persuasive than the advertising by Starbucks in Mary and Maggie's home town.E) A) and B)
F) B) and C)

Question 14

Which of the following statements is correct?

Accepted Answer

A)  The more similar Firm A's product is to Firm B's product, the more likely Firm A is to advertise.
B)  Monopolistically competitive firms advertise in order to increase the elasticity of the demand curve they face.
C)  According to the signaling theory, the more product information an advertisement contains, the more effective it is.
D)  Brand names may help consumers if they provide information about the quality of a product when acquiring such information is difficult.E) A) and B)
F) None of the above

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

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, how much profit will the firm earn at the profit-maximizing level of output?

Accepted Answer

A)  $24
B)  $25
C)  $41
D)  $66E) A) and D)
F) A) and C)

Question 17

Scenario 16-7
Consider the problem facing two firms, YumYum and Bertollini, in the frozen food market. Each firm has just come up with an idea for a new "frozen meal for two" which it would sell for $9. Assume that the marginal cost for each new product is a constant $2, and the only fixed cost is for advertising. Each company knows that if it spends $12 million on advertising it will get 1.5 million consumers to try its new product. YumYum has done market research which suggests that its product does not have any "staying" power in the market. Even though it could get 1.5 million consumers to buy the product once, it is unlikely that they will continue to buy the product in the future. Bertollini's market research suggests that its product is very good, and consumers who try the product will continue to be consumers over the ensuing year. On the basis of its market research, Bertollini estimates that its initial 1.5 million customers will buy one unit of the product each month in the coming year, for a total of 18 million units.
-Refer to Scenario 16-7. Suppose YumYum has an opportunity to create a cheaper advertising campaign in newspapers rather than on television for its new product. This campaign will cost $8 million and is expected to result in the same 1.5 million one-time customers. YumYum should

Accepted Answer

A)  invest in the cheaper campaign because they will earn a profit.
B)  invest in the cheaper campaign because they will signal the high quality of their product.
C)  not invest in the cheaper campaign because they will incur a loss.
D)  not invest in the cheaper campaign because their brand name will be negatively affected.E) A) and D)
F) None of the above

Question 18

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

Question 19

In the long run, monopolistically competitive firms produce where demand equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 20

​A monopolistically competitive firm is currently charging a price of $20 and producing 3,000 units/month. It faces monthly fixed costs of $1,000 and has an average variable cost of $22/unit. We would expect:

Accepted Answer

A)  ​The firm to earn an economic profit in the long run
B)  ​The firm to shut down in the short run
C)  ​The firm to raise its price to cover its variable costs
D)  ​The firm to adjust its production to minimum efficient scaleE) A) and C)
F) None of the above

Exam 16: Monopolistic Competition

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Correct Answer
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Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2. Which industry has the lowest concentration ratio?

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

Monopolistic competition is an inefficient market structure because

Correct Answer
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A monopolistically competitive firm is currently charging a price of $20 and producing 3,000 units/month. It faces monthly fixed costs of $1,000 and has an average variable cost of $22/unit. We would expect:

Correct Answer
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Which of the following statements is correct?

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

Correct Answer
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In the long run, a monopolistically competitive firm produces at efficient scale.

Correct Answer
verified

In the long run, monopolistically competitive firms produce where demand equals marginal cost.

Correct Answer
verified

A monopolistically competitive firm has the following cost structure: The firm faces the following demand curve: If the government forces this firm to produce at its efficient scale, it will

Correct Answer
verified

Which of the following conditions distinguishes monopolistic competition from perfect competition?

Correct Answer
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Correct Answer
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Correct Answer
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One key difference between an oligopoly market and a competitive market is that oligopolistic firms

Correct Answer
verified

When a monopolistically competitive firm is in long-run equilibrium,

Correct Answer
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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,

Correct Answer
verified

Correct Answer
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Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. This firm is operating

Correct Answer
verified

A business-stealing externality is

Correct Answer
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In a long-run equilibrium,

Correct Answer
verified

Exam 16: Monopolistic Competition

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Correct AnswerverifiedShow Answer

Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2. Which industry has the lowest concentration ratio?

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

Monopolistic competition is an inefficient market structure because

Correct AnswerverifiedShow Answer

​A monopolistically competitive firm is currently charging a price of $20 and producing 3,000 units/month. It faces monthly fixed costs of $1,000 and has an average variable cost of $22/unit. We would expect:

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

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

​In the long run, a monopolistically competitive firm produces at efficient scale.

Correct AnswerverifiedShow Answer

In the long run, monopolistically competitive firms produce where demand equals marginal cost.

Correct AnswerverifiedShow Answer

A monopolistically competitive firm has the following cost structure: The firm faces the following demand curve: If the government forces this firm to produce at its efficient scale, it will

Correct AnswerverifiedShow Answer

Which of the following conditions distinguishes monopolistic competition from perfect competition?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

One key difference between an oligopoly market and a competitive market is that oligopolistic firms

Correct AnswerverifiedShow Answer

When a monopolistically competitive firm is in long-run equilibrium,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. This firm is operating

Correct AnswerverifiedShow Answer

A business-stealing externality is

Correct AnswerverifiedShow Answer

In a long-run equilibrium,

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

A monopolistically competitive firm is currently charging a price of $20 and producing 3,000 units/month. It faces monthly fixed costs of $1,000 and has an average variable cost of $22/unit. We would expect:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In the long run, a monopolistically competitive firm produces at efficient scale.

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
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Correct Answer
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Correct Answer
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