Question 1

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) All of the above
F) A) and D)

Question 2

Each firm in a monopolistically competitive market

Accepted Answer

A)   earns both short-run and long-run profits.
B)   faces a downward-sloping demand curve.
C)   cannot earn economic profit in the short run.
D)   sets price equal to marginal cost.E) C) and D)
F) A) and B) B

Question 3

Suppose the point of tangency that characterizes long-run equilibrium for a monopolistically competitive firm occurs at Q₁ units of output.This level of output,Q₁,

Accepted Answer

A)   exceeds the level of output at which marginal revenue equals marginal cost.
B)   exceeds the level of output at which marginal cost equals average total cost.
C)   falls short of the level of output at which price equals marginal cost.
D)   exceeds the firm's efficient scale of output.E) C) and D)
F) A) and B) C

Question 4

The free entry and exit of firms in a monopolistically competitive market guarantees that

Accepted Answer

A)   both economic profits and economic losses can persist in the long run.
B)   both economic profits and economic losses disappear in the long run.
C)   economic profits, but not economic losses, can persist in the long run.
D)   economic losses, but not economic profits, can persist in the long run.E) C) and D)
F) None of the above

Question 5

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) A) and C)

Question 6

The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.

Accepted Answer

A) True 
 B)False  True

Question 7

Empirical evidence suggests that advertising usually leads to an increase in the price for advertised products.

Accepted Answer

A) True 
 B)False

Question 8

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) A) and B)
F) All of the above

Question 9

In a monopolistically competitive market,

Accepted Answer

A)   entry by new firms is impeded by barriers to entry; thus, the number of firms in the market is never ideal.
B)   entry by new firms is impeded by barriers to entry, but the number of firms in the market is nevertheless always ideal.
C)   free entry ensures that the number of firms in the market is ideal.
D)   there may be too few or too many firms in the market, despite free entry.E) A) and B)
F) A) and C)

Question 10

Table 16-5
This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm.
 
-Refer to Table 16-5.How much profit will this firm earn at the monopolistically competitive price?

Accepted Answer

A)   $0
B)   $5
C)   $12
D)   $16E) All of the above
F) A) and B)

Question 11

Figure 16-8
The figure is drawn for a monopolistically-competitive firm.
 
-Refer to Figure 16-8.When the firm is maximizing its profit,the markup over marginal cost amounts to

Accepted Answer

A)   $16.67.
B)   $33.33.
C)   $50.00.
D)   $66.66.E) All of the above
F) A) and B)

Question 12

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.
 
-Refer to Figure 16-9.The firm's maximum profit is

Accepted Answer

A)   $-7,000.
B)   $-5,000.
C)   $-2,000.
D)   The firm's maximum profit cannot be determined from the figure.E) None of the above
F) C) and D)

Question 13

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

Accepted Answer

A)   4 or fewer units of output.
B)   5 units of output.
C)   more than 5 units of output.
D)   None of the above are necessarily correct because there is not enough information to tell.E) B) and C)
F) A) and D)

Question 14

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

Accepted Answer

A)   perfectly competitive market.
B)   monopolistically competitive market.
C)   oligopoly.
D)   monopoly.E) All of the above
F) A) and C)

Question 15

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)   4 or fewer units of output.
B)   5 units of output.
C)   more than 5 units of output.
D)   None of the above are necessarily correct because there is not enough information to tell.E) A) and B)
F) B) and D)

Question 16

The market for wheat is most likely considered a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)   P > MR and P = MC
B)   ATC = demand and MR = MC
C)   P 
D)   P > ATC and demand > MRE) B) and D)
F) A) and D)

Question 18

In a market that is characterized by imperfect competition,

Accepted Answer

A)   firms are price takers.
B)   there are always a large number of firms.
C)   there are at least a few firms that compete with one another.
D)   the actions of one firm in the market never have any impact on the other firms' profits.E) A) and B)
F) A) and C)

Question 19

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.What is the concentration ratio for Industry A?

Accepted Answer

A)   about 71%
B)   about 81%
C)   about 88%
D)   100%E) B) and D)
F) A) and D)

Question 20

Scenario 16-1
Escape Vacations has recently announced intentions to build a new hotel/resort complex in Phoenix, AZ. Assume that the hotel/resort market in Phoenix is characterized by monopolistic competition.
-Refer to Scenario 16-1.As a result of the new Escape Vacations hotel/resort,tourists who stay in Phoenix are likely to experience a

Accepted Answer

A)   product-variety externality, which harms consumers.
B)   product-variety externality, which benefits consumers.
C)   business-stealing externality, which harms consumers.
D)   business-stealing externality, which benefits consumers.E) C) and D)
F) A) and D)

Exam 16: Monopolistic Competition.

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

Correct Answer
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Each firm in a monopolistically competitive market

Correct Answer
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B

Suppose the point of tangency that characterizes long-run equilibrium for a monopolistically competitive firm occurs at Q₁ units of output.This level of output,Q₁,

Correct Answer
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C

The free entry and exit of firms in a monopolistically competitive market guarantees that

Correct Answer
verified

Correct Answer
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The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.

Correct Answer
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True

Empirical evidence suggests that advertising usually leads to an increase in the price for advertised products.

Correct Answer
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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

Correct Answer
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In a monopolistically competitive market,

Correct Answer
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Table 16-5 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-5.How much profit will this firm earn at the monopolistically competitive price?

Correct Answer
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Figure 16-8 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-8.When the firm is maximizing its profit,the markup over marginal cost amounts to

Correct Answer
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Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9.The firm's maximum profit is

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

Correct Answer
verified

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

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
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The market for wheat is most likely considered a monopolistically competitive market.

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

Correct Answer
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In a market that is characterized by imperfect competition,

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.What is the concentration ratio for Industry A?

Correct Answer
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Correct Answer
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Exam 16: Monopolistic Competition.

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

Correct AnswerverifiedShow Answer

Each firm in a monopolistically competitive market

Correct AnswerverifiedB

Suppose the point of tangency that characterizes long-run equilibrium for a monopolistically competitive firm occurs at Q₁ units of output.This level of output,Q₁,

Correct AnswerverifiedC

The free entry and exit of firms in a monopolistically competitive market guarantees that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.

Correct AnswerverifiedTrue

Empirical evidence suggests that advertising usually leads to an increase in the price for advertised products.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In a monopolistically competitive market,

Correct AnswerverifiedShow Answer

Table 16-5 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-5.How much profit will this firm earn at the monopolistically competitive price?

Correct AnswerverifiedShow Answer

Figure 16-8 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-8.When the firm is maximizing its profit,the markup over marginal cost amounts to

Correct AnswerverifiedShow Answer

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9.The firm's maximum profit is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

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

The market for wheat is most likely considered a monopolistically competitive market.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In a market that is characterized by imperfect competition,

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.What is the concentration ratio for Industry A?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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B

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C

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True

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