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How does advertising signal to consumers that the product is a good one?


A) By seeing famous people using the product, consumers infer that they too can be famous.
B) By being willing to spend money on advertising, firms let consumers know the product is likely a good one since firms would not likely advertise a poor product.
C) By making consumers laugh during commercials, firms are associating positive experiences with the product.
D) Without allowing consumers to actually use the product, it is not possible for firms to signal to consumers the product's quality.

E) A) and D)
F) A) and C)

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Figure 16-14 Figure 16-14 -Refer to Figure 16-14. Which letter identifies the profit-maximizing level of output for this firm? -Refer to Figure 16-14. Which letter identifies the profit-maximizing level of output for this firm?

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In which of the following markets is economic profit driven to zero in the long run?


A) oligopoly
B) monopoly
C) monopolistic competition
D) cartels

E) None of the above
F) B) and C)

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Which market structure(s) is(are) considered highly concentrated?

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Excess capacity characterizes firms in monopolistically competitive markets, even in situations of long-run equilibrium.

A) True
B) False

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A concentration ratio


A) measures the percentage of total output supplied by the four largest firms in the industry.
B) reflects the level of competition in an industry.
C) is related to the control that each firm has over price.
D) All of the above are correct.

E) C) and D)
F) All of the above

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Figure 16-11 Figure 16-11 -Refer to Figure 16-11. What, if any, long run adjustment will occur in this industry? -Refer to Figure 16-11. What, if any, long run adjustment will occur in this industry?

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firms will enter pri...

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Roberto consumes Coke exclusively. He claims that there is a clear taste difference and that competing brands of cola leave an unsavory taste in his mouth. In a blind taste test, Roberto is found to prefer Coke to store-brand cola eight out of ten times. The results of Roberto's taste test would refute claims by critics of brand names that


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) consumers with the lowest levels of income are the most likely to be influenced by brand name advertising.
D) brand names are a form of socially efficient advertising.

E) None of the above
F) A) and B)

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Which market structure would likely have the highest concentration ratio?


A) Monopoly
B) Oligopoly
C) Monopolistic competition
D) Perfect competition

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

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Results of the study done by Lee Benham on advertising for eyeglasses would suggest that


A) brand loyalty and market power in the eyeglass market was likely to be more pervasive in states that allowed advertising.
B) eyeglass sales were more profitable in states that allowed advertising.
C) optometrists would not be supportive of advertising restrictions.
D) optometrists would enthusiastically endorse advertising restrictions.

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

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Figure 16-14 Figure 16-14 -Refer to Figure 16-14. Which of the following best describes the profit-maximizing outcome for the firm depicted here? A) This firm is earning a short run profit, but will earn zero profit in the long run. B) This firm is incurring a short run loss, but will earn zero profit in the long run. C) This firm is earning zero profit in the short run, but will earn a positive profit in the long run. D) This firm is in long run equilibrium and will continue to earn zero profit. -Refer to Figure 16-14. Which of the following best describes the profit-maximizing outcome for the firm depicted here?


A) This firm is earning a short run profit, but will earn zero profit in the long run.
B) This firm is incurring a short run loss, but will earn zero profit in the long run.
C) This firm is earning zero profit in the short run, but will earn a positive profit in the long run.
D) This firm is in long run equilibrium and will continue to earn zero profit.

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

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Scenario 16-2 Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q. -Refer to Scenario 16-2. If the marginal cost of producing this good is 0, how much total consumer surplus would consumers receive in this market?


A) 10
B) 20
C) 50
D) 100

E) A) and B)
F) None of the above

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Figure 16-9 The figure is drawn for a monopolistically-competitive firm. Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. When the firm is maximizing its profit, the markup over marginal cost amounts to A) $16.67. B) $33.33. C) $50.00. D) $66.66. -Refer to Figure 16-9. When the firm is maximizing its profit, the markup over marginal cost amounts to


A) $16.67.
B) $33.33.
C) $50.00.
D) $66.66.

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

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


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

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The primary claim of defenders of advertising is that it


A) conveys information about firm profitability.
B) is psychological rather than informational.
C) enhances the information available to consumers.
D) reduces the elasticity of demand for a firm's product.

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

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Each firm in a monopolistically competitive market


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

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The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which


A) marginal revenue is equal to marginal cost.
B) average total cost is equal to marginal revenue.
C) average total cost is equal to price.
D) average revenue exceeds average total cost.

E) All of the above
F) None of the above

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Scenario 16-1 Suppose the following are the sales for all of the firms in two different industries. Scenario 16-1 Suppose the following are the sales for all of the firms in two different industries. -Refer to Scenario 16-1. What are the concentration ratios for these industries? A) Industry A: 22%, Industry B: 26% B) Industry A: 41%, Industry B: 47%. C) Industry A: 68%, Industry B: 79% D) Industry A: 100%, Industry B: 100%. -Refer to Scenario 16-1. What are the concentration ratios for these industries?


A) Industry A: 22%, Industry B: 26%
B) Industry A: 41%, Industry B: 47%.
C) Industry A: 68%, Industry B: 79%
D) Industry A: 100%, Industry B: 100%.

E) A) and D)
F) C) and D)

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


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) B) and C)
F) None of the above

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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. 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? A) $24 B) $25 C) $41 D) $66 -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?


A) $24
B) $25
C) $41
D) $66

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

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