Question 1

Figure 16-14 
-Refer to Figure 16-14. The difference between the price charged by the monopolistically competitive firm and the price that would be charged if this firm operated in a perfectly competitive market is represented by which line segment?

Accepted Answer

The answer of Figure 16-14 
-Refer to Figure 16-14. The...

Question 2

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

Question 3

Figure 16-4 
-Refer to Figure 16-4. The firm in this figure is monopolistically competitive. This firm

Accepted Answer

A)   is operating in the long run.
B)   is earning a short-run economic profit.
C)   is incurring a short-run loss.
D)   The answer cannot be determined from the information given.E) B) and C)
F) A) and B)

Question 4

If we observe a great deal of advertising of men's shaving products, we can infer that

Accepted Answer

A)   the market for those products is perfectly competitive.
B)   it costs firms very little to produce those products.
C)   those products are highly differentiated.
D)   firms are irrational in their decisions to advertise.E) C) and D)
F) B) and D)

Question 5

The two types of imperfectly competitive markets are

Accepted Answer

A)   markets with advertising and markets with price competition.
B)   public goods and common resources.
C)   oligopoly and monopoly.
D)   monopolistic competition and oligopoly.E) A) and D)
F) None of the above

Question 6

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures can have positive profits in the short run?

Accepted Answer

perfect competition ...

Question 7

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 4, what quantity would a profit-maximizing monopolist produce?

Accepted Answer

A)   Q = 2
B)   Q = 4
C)   Q = 6
D)   Q = 8E) A) and B)
F) B) and C)

Question 8

When a firm in a monopolistically competitive market earns zero economic profit, its product price must equal marginal cost.

Accepted Answer

A) True 
 B)False

Question 9

Figure 16-14 
-Refer to Figure 16-14. The deadweight loss from production for this firm is represented by which of the following areas?

Accepted Answer

A)   ABC
B)   IJK
C)   BHJ
D)   BCIJE) C) and D)
F) A) and B)

Question 10

The product-variety externality and the business-stealing externality are both spillover benefits of new firms entering a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 11

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

Question 12

A monopolistically competitive market is characterized by barriers to entry.

Accepted Answer

A) True 
 B)False

Question 13

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?

Accepted Answer

A)   a $12 loss
B)   a $13 profit
C)   a $25 profit
D)   a $32 profitE) A) and C)
F) All of the above

Question 14

To be considered an oligopoly, the market must have a concentration ratio below 50%.

Accepted Answer

A) True 
 B)False

Question 15

Monopolistic competition is characterized by many buyers and sellers, product differentiation, and free entry.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)   $16.67.
B)   $33.33.
C)   $50.00.
D)   $66.66.E) B) and D)
F) C) and D)

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

Question 18

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

Question 19

In markets where restrictions on advertising have been used to curtail competition, the U.S. courts have generally

Accepted Answer

A)   referred the matters of advertising restrictions to executive regulators.
B)   enforced industry-wide agreements to restrict advertising.
C)   been silent on the effect of explicit advertising restrictions.
D)   overturned laws that prohibit advertising.E) A) and C)
F) B) and C)

Question 20

In the debate between the critics and defenders of advertising, what conclusion have policymakers come to regarding the effect of advertising on competition - advertising makes markets more competitive or less competitive?

Accepted Answer

The answer of In the debate between the critics and...

Exam 16: Monopolistic Competition

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?

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A monopolistically competitive market is characterized by barriers to entry.

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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

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Figure 16-4 -Refer to Figure 16-4. The firm in this figure is monopolistically competitive. This firm

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Figure 16-14 -Refer to Figure 16-14. The difference between the price charged by the monopolistically competitive firm and the price that would be charged if this firm operated in a perfectly competitive market is represented by which line segment?

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The two types of imperfectly competitive markets are

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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,

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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 4, what quantity would a profit-maximizing monopolist produce?

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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?

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The product-variety externality and the business-stealing externality are both spillover benefits of new firms entering a monopolistically competitive market.

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To be considered an oligopoly, the market must have a concentration ratio below 50%.

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If we observe a great deal of advertising of men's shaving products, we can infer that

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Monopolistic competition is characterized by many buyers and sellers, product differentiation, and free entry.

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In the debate between the critics and defenders of advertising, what conclusion have policymakers come to regarding the effect of advertising on competition - advertising makes markets more competitive or less competitive?

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

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When a firm in a monopolistically competitive market earns zero economic profit, its product price must equal marginal cost.

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Figure 16-14 -Refer to Figure 16-14. The deadweight loss from production for this firm is represented by which of the following areas?

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In a monopolistically competitive market,

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Considering perfect competition, monopolistic competition, and monopoly, which of the market structures can have positive profits in the short run?

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In markets where restrictions on advertising have been used to curtail competition, the U.S. courts have generally

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perfect competition ...
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