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Exam 16: Monopolistic Competition

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Question 111

Multiple Choice

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Figure 16-4 -Refer to Figure 16-4. Assume the firm in the figure is currently producing 20 units of output and charging $925. The firm

A) will increase its profits if it raises its price and reduces its production level.
B) will increase its profits if it lowers its price and expands its production level.
C) is maximizing profits.
D) will increase its profits if it raises its prices and expands its production level.

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

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Question 112

Multiple Choice

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In the short run, a firm operating in a monopolistically competitive market can earn

A) positive economic profits.
B) economic losses.
C) zero economic profits.
D) All of the above are possible.

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

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Question 113

Multiple Choice

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Which of the following is a characteristic of monopolistic competition?

In which of the following product markets are we likely to observe the largest amount of advertising?

Table 16-3 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. -Refer to Table 16-3. Which industry has the highest concentration ratio?

Monopolistically competitive firms could reduce the average total cost of producing by increasing output; therefore, these firms have

Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profit-maximizing firm experience zero economic profit?

Which of the following is an example of a monopolistically competitive industry?

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

As developing countries make a transition to market-based economies, one of the first major capital investments is in "Western-quality" hotels. Explain why brand-name hotel accommodations are a critical step in attracting foreign investment.

Entry of new firms in monopolistically competitive industries can convey a positive externality on consumers because new products result in more consumer surplus. This externality is called the

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, residents of Smalltown are likely to benefit from

When quality cannot be easily judged in advance, what provides consumers with information about the quality of a product?

Scenario 16-8 Burger Bonanza, a major national burger chain, recently decided to spend $4 million on an advertising campaign featuring a world famous actor to promote its new Bomber Burger. -Refer to Scenario 16-8. What two benefits are conveyed by the brand name Burger Bonanza?

A monopolistically competitive market is characterized by barriers to entry.

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. If the government forces this firm to produce at its efficient output level, how much profit will this firm earn?

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 L?

Economists measure a market's domination by a small number of firms with a statistic called the

Because monopolistically competitive firms produce differentiated products, each firm

Your company has recently requested that you travel to Dhaka, Bangladesh, to work on negotiations for a new factory to be located in one of the port cities. Your travel agent provides a list of several hundred local hotels and a Sheraton. In this case, the Sheraton brand-name is likely to be used as a signal of