Question 1

Scenario 16-6
Ike's Ice Cream has decided to open a new ice cream parlor in Mayville, MS. The market for ice cream parlors is monopolistically competitive.
-Refer to Scenario 16-6. As a result of the new Ike's Ice Cream parlor, existing ice cream shops located in Mayville are likely to experience a

Accepted Answer

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

Question 2

In the long run, a monopolistically competitive firm produces a quantity that is

Accepted Answer

A)   equal to the efficient scale.
B)   less than the efficient scale.
C)   greater than the efficient scale.
D)   consistent with diseconomies of scale.E) All of the above
F) None of the above

Question 3

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

Accepted Answer

A)   oligopoly
B)   monopoly
C)   monopolistic competition
D)   cartelsE) All of the above
F) B) and C)

Question 4

Which market structure(s) is(are) imperfectly competitive?

Accepted Answer

oligopoly
...

Question 5

Figure 16-12 
-Refer to Figure 16-12. If this firm profit-maximizes, how much output will it produce?

Accepted Answer

The answer of Figure 16-12 
-Refer to Figure 16-12. If...

Question 6

The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

Accepted Answer

A)   business-stealing externality that is observed in monopolistically competitive markets.
B)   product-variety externality that is observed in monopolistically competitive markets.
C)   inefficiencies of the long-term losses earned by monopolistically competitive firms.
D)   persistence of positive profits into the long run for monopolistically competitive firms.E) B) and C)
F) All of the above

Question 7

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

Accepted Answer

A)   produces an efficient output level.
B)   chooses the maximum price to maximize profits.
C)   produces where marginal cost is minimized.
D)   chooses a price that exceeds marginal revenue.E) All of the above
F) B) and C)

Question 8

Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profit-maximizing firm charge a price that exceeds marginal cost?

Accepted Answer

A)   monopoly only
B)   monopoly and monopolistic competition only
C)   monopoly, monopolistic competition, and perfect competition
D)   The answer cannot be determined without knowing whether the market is in the long run or short run.E) None of the above
F) A) and B)

Question 9

Evidence from the market for eyeglasses suggests that advertising leads to

Accepted Answer

A)   lower-quality products for consumers.
B)   lower prices for consumers.
C)   higher prices for consumers.
D)   less concern on the part of consumers about price differences among similar goods.E) C) and D)
F) All of the above

Question 10

One thing that both critics of advertising and defenders of advertising agree on is that advertising fosters competition.

Accepted Answer

A) True 
 B)False

Question 11

Because a monopolistically competitive firm has some market power, in the long-run the price of its product exceeds its

Accepted Answer

A)   average revenue.
B)   average total cost.
C)   marginal cost.
D)   None of the above is correct.E) A) and C)
F) None of the above

Question 12

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

Accepted Answer

A)   P = AR
B)   MR = MC
C)   P > MC
D)   All of the above are correct.E) All of the above
F) None of the above

Question 13

Product differentiation causes the seller of a good to face what type of demand curve?

Accepted Answer

A)   downward sloping
B)   vertical
C)   horizontal
D)   Any of the above could be correct since product differentiation does not affect the shape of the demand curve.E) A) and D)
F) A) and C)

Question 14

Figure 16-1    
-Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?

Accepted Answer

A)   Panel A
B)   Panel B
C)   Panel C
D)   Panel DE) B) and D)
F) A) and B)

Question 15

Figure 16-6 
-Refer to Figure 16-6. Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is doing its best but still losing money?

Accepted Answer

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

Question 16

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. At the profit­maximizing level of output, what is this firm's total cost?

Accepted Answer

A)   $10
B)   $40
C)   $88
D)   $100E) A) and B)
F) None of the above

Question 17

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, how much total consumer surplus would consumers receive in this market?

Accepted Answer

A)   8
B)   12
C)   32
D)   64E) C) and D)
F) B) and D)

Question 18

Compared to other firms, firms that sell highly differentiated products likely incur significant costs associated with

Accepted Answer

A)   advertising.
B)   the product-variety externality.
C)   intermediate materials.
D)   taxes and regulation.E) All of the above
F) None of the above

Question 19

Scenario 16-3
Peter operates an ice cream shop in the center of Fairfield. He sells several unusual flavors of organic, homemade ice cream so he has a monopoly over his own ice cream, though he competes with many other firms selling ice cream in Fairfield for the same customers. Peter's demand and cost values for sales per day are given in the table below. (Everyone who purchases Peter's ice cream buys a double scoop cone because it's so delicious.) 
-Refer to Scenario 16-3. What price should Peter charge to maximize his profits?

Accepted Answer

The answer of Scenario 16-3
Peter operates an ice cream shop...

Question 20

Firms can freely enter a market

Accepted Answer

A)   only when the market is a monopoly.
B)   only when the market is a monopoly or monopolistically competitive.
C)   only when the market is monopolistically competitive or perfectly competitive.
D)   when the market is perfectly competitive, monopolistically competitive, or monopolistic.E) All of the above
F) C) and D)

Exam 16: Monopolistic Competition

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, how much total consumer surplus would consumers receive in this market?

Correct Answer
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Because a monopolistically competitive firm has some market power, in the long-run the price of its product exceeds its

Correct Answer
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Which market structure(s) is(are) imperfectly competitive?

Correct Answer
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oligopoly
...
View Answer

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

Correct Answer
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Firms can freely enter a market

Correct Answer
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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. At the profitmaximizing level of output, what is this firm's total cost?

Correct Answer
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Product differentiation causes the seller of a good to face what type of demand curve?

Correct Answer
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The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

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

Correct Answer
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Figure 16-1 -Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?

Correct Answer
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In the long run, a monopolistically competitive firm produces a quantity that is

Correct Answer
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One thing that both critics of advertising and defenders of advertising agree on is that advertising fosters competition.

Correct Answer
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In the short run, a firm operating in a monopolistically competitive market

Correct Answer
verified

Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profit-maximizing firm charge a price that exceeds marginal cost?

Correct Answer
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Figure 16-12 -Refer to Figure 16-12. If this firm profit-maximizes, how much output will it produce?

Correct Answer
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Figure 16-6 -Refer to Figure 16-6. Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is doing its best but still losing money?

Correct Answer
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Scenario 16-6 Ike's Ice Cream has decided to open a new ice cream parlor in Mayville, MS. The market for ice cream parlors is monopolistically competitive. -Refer to Scenario 16-6. As a result of the new Ike's Ice Cream parlor, existing ice cream shops located in Mayville are likely to experience a

Correct Answer
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Evidence from the market for eyeglasses suggests that advertising leads to

Correct Answer
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Correct Answer
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Compared to other firms, firms that sell highly differentiated products likely incur significant costs associated with

Correct Answer
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Exam 16: Monopolistic Competition

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, how much total consumer surplus would consumers receive in this market?

Correct AnswerverifiedShow Answer

Because a monopolistically competitive firm has some market power, in the long-run the price of its product exceeds its

Correct AnswerverifiedShow Answer

Which market structure(s) is(are) imperfectly competitive?

Correct Answerverifiedoligopoly...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Firms can freely enter a market

Correct AnswerverifiedShow Answer

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. At the profit­maximizing level of output, what is this firm's total cost?

Correct AnswerverifiedShow Answer

Product differentiation causes the seller of a good to face what type of demand curve?

Correct AnswerverifiedShow Answer

The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 16-1 -Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?

Correct AnswerverifiedShow Answer

In the long run, a monopolistically competitive firm produces a quantity that is

Correct AnswerverifiedShow Answer

One thing that both critics of advertising and defenders of advertising agree on is that advertising fosters competition.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profit-maximizing firm charge a price that exceeds marginal cost?

Correct AnswerverifiedShow Answer

Figure 16-12 -Refer to Figure 16-12. If this firm profit-maximizes, how much output will it produce?

Correct AnswerverifiedShow Answer

Figure 16-6 -Refer to Figure 16-6. Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is doing its best but still losing money?

Correct AnswerverifiedShow Answer

Scenario 16-6 Ike's Ice Cream has decided to open a new ice cream parlor in Mayville, MS. The market for ice cream parlors is monopolistically competitive. -Refer to Scenario 16-6. As a result of the new Ike's Ice Cream parlor, existing ice cream shops located in Mayville are likely to experience a

Correct AnswerverifiedShow Answer

Evidence from the market for eyeglasses suggests that advertising leads to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Compared to other firms, firms that sell highly differentiated products likely incur significant costs associated with

Correct AnswerverifiedShow Answer

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oligopoly
...
View Answer

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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. At the profitmaximizing level of output, what is this firm's total cost?

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