Question 1

If firms in a monopolistically competitive market are earning positive profits,then

Accepted Answer

A)   firms will likely be subject to regulation.
B)   barriers to entry will be strengthened.
C)   some firms will exit the market.
D)   new firms will enter the market.E) None of the above
F) All of the above

Question 2

A monopolistically competitive firm has the following cost structure:

The firm faces the following demand curve:

To maximize profit (or minimize losses) ,the firm will produce

Accepted Answer

A)   2 units.
B)   3 units.
C)   4 units.
D)   5 units.E) B) and C)
F) All of the above

Question 3

Firm A is a perfectly competitive firm.Firm B is a monopolistically competitive firm.Both firms are currently maximizing their respective profits.Which of the following statements is correct?

Accepted Answer

A)   Both Firm A and Firm B would be eager to make an additional sale.
B)   Firm A would be eager to make an additional sale,but Firm B would not care whether it made an additional sale or not.
C)   Firm B would be eager to make an additional sale,but Firm A would not care whether it made an additional sale or not.
D)   Neither Firm A nor Firm B would care whether it made an additional sale or not.E) A) and D)
F) A) and C)

Question 4

Cecilia's Café operates in a monopolistically competitive market.Cecilia's is currently producing where its average total cost is minimized.In the long run we would expect Cecilia's output to

Accepted Answer

A)   decrease and average total cost to increase.
B)   decrease and average total cost to decrease.
C)   remain unchanged as Cecilia's is doing the best it can.
D)   increase and average total costs to decrease.E) A) and D)
F) B) and D)

Question 5

A market is comprised of many firms as opposed to just one firm or a few firms

Accepted Answer

A)   only when it is perfectly competitive.
B)   only when it is perfectly competitive or oligopolistic.
C)   only when it is perfectly competitive or monopolistically competitive.
D)   when it is perfectly competitive,monopolistically competitive,or oligopolistic.E) C) and D)
F) All of the above

Question 6

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

Question 7

Crude oil is primarily supplied to the world market by a few Middle Eastern countries.Such a market is an example of a(n)

Accepted Answer

A)   (i) and (ii) only
B)   (ii) and (iii) only
C)   (i) and (iii) only
D)   (iii) onlyE) A) and B)
F) A) and C)

Question 8

Scenario 16-3
Consider the problem facing two firms,Firm A and Firm B,in the fast-food restaurant market.Each firm has just come up with an idea for a new fast-food menu item which it would sell for $4.Assume that the marginal cost for each new menu item 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 2 million consumers to try its new product.Firm A has done market research which suggests that its product does not have any "staying" power in the market.Even though it could get 2 million consumers to buy the product once,it is unlikely that they will continue to buy the product in the future.Firm B'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,Firm B estimates that its initial 2 million customers will buy one unit of the product each month in the coming year,for a total of 24 million units.
-Refer to Scenario 16-3.If firm B decides to advertise its product it can expect to

Accepted Answer

A)   earn a profit of $48 million per year.
B)   earn a profit of $36 million per year.
C)   earn a profit of $12 million per year.
D)   incur a loss of $12 million per year.E) C) and D)
F) A) and B)

Question 9

Eunice consumes Coke exclusively.She claims that there is a clear taste difference and that competing brands of cola leave an unsavory taste in her mouth.However,in a blind taste test,Eunice is found to prefer generic store-brand cola to Coke eight out of ten times.The results of Eunice's taste test would reinforce claims by critics of brand names that

Accepted Answer

A)   consumers are always willing to pay more for brand names.
B)   brand names cause consumers to perceive differences that do not really exist.
C)   brand names cause consumers to be more sensitive to product differences.
D)   brand names are a form of socially efficient advertising.E) A) and C)
F) A) and D)

Question 10

Figure 16-3 
-Refer to Figure 16-3.The maximum total short-run economic profit for the monopolistically competitive firm in this figure is

Accepted Answer

A)   $1,000.
B)   $2,000.
C)   $3,000.
D)   $5,000.E) A) and C)
F) C) and D)

Question 11

A monopolistically competitive firm faces the following demand curve for its product:

The firm has total fixed costs of $40 and a constant marginal cost of $2 per unit.We can conclude that

Accepted Answer

A)   firms will exit this market.
B)   firms will enter this market.
C)   this market is in long-run equilibrium.
D)   this firm is operating at its efficient scale.E) A) and B)
F) A) and C)

Question 12

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) A) and D)
F) None of the above

Question 13

Figure 16-1.The figure is drawn for a monopolistically competitive firm. 
-Refer to Figure 16-1.If the average variable cost is $12 at the profit-maximizing quantity,and if the firm's fixed costs amount to $30,then the firm's maximum profit is

Accepted Answer

A)   $-30.
B)   $22.
C)   $36.
D)   $42.E) C) and D)
F) A) and B)

Question 14

Which of the following is not an argument made by critics of advertising?

Accepted Answer

A)   Advertising manipulates people's tastes.
B)   Advertising impedes competition.
C)   Advertising promotes economies of scale.
D)   Advertising increases the perception of product differentiation.E) None of the above
F) A) and B)

Question 15

Which of the following statements is not correct?

Accepted Answer

A)   Novels are likely to be produced in a monopolistically competitive industry.
B)   Cable television is likely to be produced in a monopoly industry.
C)   Milk is likely to be produced in a monopolistically competitive industry.
D)   Cigarettes are likely to be produced in an oligopoly industry.E) All of the above
F) B) and D)

Question 16

Figure 16-4 
-Refer to Figure 16-4.Which of the panels depicts a firm in a monopolistically competitive market earning positive economic profits?

Accepted Answer

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

Question 17

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 18

A firm in a monopolistically competitive market can earn both short-run and long-run profits.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not a characteristic of monopolistic competition?

Accepted Answer

A)   a large number of sellers
B)   firms are price takers
C)   free entry into the market
D)   a differentiated productE) A) and D)
F) C) and D)

Question 20

In a monopolistically competitive market,the demand curves faced by incumbent firms are unaffected by the entry of new firms into the market.

Accepted Answer

A) True 
 B)False

Exam 16: Monopolistic Competition

Crude oil is primarily supplied to the world market by a few Middle Eastern countries.Such a market is an example of a(n)

Correct Answer
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Cecilia's Café operates in a monopolistically competitive market.Cecilia's is currently producing where its average total cost is minimized.In the long run we would expect Cecilia's output to

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

Figure 16-4 -Refer to Figure 16-4.Which of the panels depicts a firm in a monopolistically competitive market earning positive economic profits?

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Figure 16-1.The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.If the average variable cost is $12 at the profit-maximizing quantity,and if the firm's fixed costs amount to $30,then the firm's maximum profit is

Correct Answer
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Figure 16-3 -Refer to Figure 16-3.The maximum total short-run economic profit for the monopolistically competitive firm in this figure is

Correct Answer
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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 $40 and a constant marginal cost of $2 per unit.We can conclude that

Correct Answer
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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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If firms in a monopolistically competitive market are earning positive profits,then

Correct Answer
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Firm A is a perfectly competitive firm.Firm B is a monopolistically competitive firm.Both firms are currently maximizing their respective profits.Which of the following statements is correct?

Correct Answer
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Which of the following statements is not correct?

Correct Answer
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A firm in a monopolistically competitive market can earn both short-run and long-run profits.

Correct Answer
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A monopolistically competitive firm has the following cost structure: The firm faces the following demand curve: To maximize profit (or minimize losses) ,the firm will produce

Correct Answer
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Correct Answer
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Which of the following is not an argument made by critics of advertising?

Correct Answer
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In a monopolistically competitive market,the demand curves faced by incumbent firms are unaffected by the entry of new firms into the market.

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

Correct Answer
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A market is comprised of many firms as opposed to just one firm or a few firms

Correct Answer
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Which of the following is not a characteristic of monopolistic competition?

Correct Answer
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Exam 16: Monopolistic Competition

Crude oil is primarily supplied to the world market by a few Middle Eastern countries.Such a market is an example of a(n)

Correct AnswerverifiedShow Answer

Cecilia's Café operates in a monopolistically competitive market.Cecilia's is currently producing where its average total cost is minimized.In the long run we would expect Cecilia's output to

Correct AnswerverifiedShow Answer

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

Figure 16-4 -Refer to Figure 16-4.Which of the panels depicts a firm in a monopolistically competitive market earning positive economic profits?

Correct AnswerverifiedShow Answer

Figure 16-1.The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.If the average variable cost is $12 at the profit-maximizing quantity,and if the firm's fixed costs amount to $30,then the firm's maximum profit is

Correct AnswerverifiedShow Answer

Figure 16-3 -Refer to Figure 16-3.The maximum total short-run economic profit for the monopolistically competitive firm in this figure is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A monopolistically competitive firm faces the following demand curve for its product: The firm has total fixed costs of $40 and a constant marginal cost of $2 per unit.We can conclude that

Correct AnswerverifiedShow Answer

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 AnswerverifiedShow Answer

If firms in a monopolistically competitive market are earning positive profits,then

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Firm A is a perfectly competitive firm.Firm B is a monopolistically competitive firm.Both firms are currently maximizing their respective profits.Which of the following statements is correct?

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Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

A firm in a monopolistically competitive market can earn both short-run and long-run profits.

Correct AnswerverifiedShow Answer

A monopolistically competitive firm has the following cost structure: The firm faces the following demand curve: To maximize profit (or minimize losses) ,the firm will produce

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not an argument made by critics of advertising?

Correct AnswerverifiedShow Answer

In a monopolistically competitive market,the demand curves faced by incumbent firms are unaffected by the entry of new firms into the market.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A market is comprised of many firms as opposed to just one firm or a few firms

Correct AnswerverifiedShow Answer

Which of the following is not a characteristic of monopolistic competition?

Correct AnswerverifiedShow Answer

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The arrival of a new entrant should be ...
View Answer

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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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