Question 1

If firms in a monopolistically competitive market are incurring economic losses, which of the following statements describes the changes that occur as the market adjusts to the long-run equilibrium?

Accepted Answer

A)  Each existing firm's demand curve shifts to the right.
B)  More firms exit the market.
C)  Each firm eliminates its excess capacity.
D)  Both a and b are correct.E) B) and D)
F) A) and D)

Question 2

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?

Accepted Answer

A)  10
B)  20
C)  50
D)  100E) A) and D)
F) A) and B)

Question 3

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

Accepted Answer

A)  perfectly competitive market.
B)  monopolistically competitive market.
C)  oligopoly.
D)  monopoly.E) A) and B)
F) None of the above

Question 4

When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium, marginal cost must lie below average total cost.

Accepted Answer

A) True 
 B)False

Question 5

Firms that spend a large amount of money on advertising a particular product are likely to be providing consumers with

Accepted Answer

A)  information about the availability of the product.
B)  information about product price.
C)  a signal of product quality.
D)  a good example of wasted resources.E) B) and D)
F) A) and D)

Question 6

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

Accepted Answer

The answer of Monopolistically competitive firms could reduce the average...

Question 7

Monopolistic competition and monopoly are examples of a market structure called imperfect competition.

Accepted Answer

A) True 
 B)False

Question 8

Table 16-1
The following table shows the percentage of output supplied by the top eight firms in four different industries. 
-Refer to Table 16-1. What is the concentration ratio in Industry D?

Accepted Answer

A)  23%
B)  39%
C)  58%
D)  72%E) B) and C)
F) A) and D)

Question 9

A monopolistically competitive firm chooses its

Accepted Answer

A)  price and quantity just as a monopoly does.
B)  quantity but faces a horizontal demand curve just as a competitive firm does.
C)  price but can sell any quantity at the market price just as an oligopoly does.
D)  price and quantity based on the decisions of the other firms in the industry just as an oligopoly does.E) None of the above
F) C) and D)

Question 10

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

Accepted Answer

The answer of Which market structure(s) is(are) considered highly concentrated?...

Question 11

Defenders of advertising argue that it is not rational for profit-maximizing firms to spend money on advertising for products that have

Accepted Answer

A)  superior quality.
B)  inferior or mediocre quality.
C)  low prices.
D)  limited availability.E) All of the above
F) None of the above

Question 12

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 13

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 per double scoop ice cream cone to maximize his profit?

Accepted Answer

A)  $5.60
B)  $4.40
C)  $3.20
D)  $2.40E) A) and B)
F) A) and C)

Question 14

Which of the following statements regarding monopolistic competition is not correct?

Accepted Answer

A)  In the long-run equilibrium, price equals average total cost.
B)  In the long-run equilibrium, firms earn zero economic profit.
C)  In the long-run equilibrium, firms charge a price above marginal cost.
D)  In the long-run equilibrium, firms produce a quantity in excess of their efficient scale.E) None of the above
F) B) and C)

Question 15

The entry of new firms into a monopolistically competitive market is accompanied by

Accepted Answer

A)  both positive and negative externalities.
B)  only positive externalities.
C)  only negative externalities.
D)  only private profit opportunities (no externalities) .E) All of the above
F) B) and C)

Question 16

Figure 16-13 
-Refer to Figure 16-13. Which letter represents the profit-maximizing quantity?

Accepted Answer

The answer of Figure 16-13 
-Refer to Figure 16-13. Which...

Question 17

A monopolistically competitive firm faces the following demand curve for its product:  The firm has total fixed costs of $120 and a constant marginal cost of $12 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) B) and C)
F) A) and B)

Question 18

If we observe a great deal more advertising for Mucinex, an over-the-counter drug, than for a Grainger drill press, we can infer that

Accepted Answer

A)  more money is spent on Mucinex than on Grainger drill presses.
B)  the market for Mucinex is more highly differentiated than the market for Grainger drill presses.
C)  Grainger has lower costs of production than Mucinex.
D)  Mucinex operates in an oligopoly, while Grainger operates in a monopolistically competitive market.E) A) and B)
F) C) and D)

Question 19

Critics of markets that are characterized by firms that sell brand name products argue that brand names encourage consumers to pay more for branded products that

Accepted Answer

A)  have elastic demand curves.
B)  are very different from generic products.
C)  are indistinguishable from generic products.
D)  consumer-advocate groups have found to be inferior.E) None of the above
F) A) and B)

Question 20

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

Accepted Answer

firms will enter
pri...

Exam 16: Monopolistic Competition

Correct Answer
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Figure 16-13 -Refer to Figure 16-13. Which letter represents the profit-maximizing quantity?

Correct Answer
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The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

Correct Answer
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Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. -Refer to Table 16-1. What is the concentration ratio in Industry D?

Correct Answer
verified

A monopolistically competitive firm faces the following demand curve for its product: The firm has total fixed costs of $120 and a constant marginal cost of $12 per unit. We can conclude that

Correct Answer
verified

The entry of new firms into a monopolistically competitive market is accompanied by

Correct Answer
verified

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

Correct Answer
verified
firms will enter
pri...
View Answer

Defenders of advertising argue that it is not rational for profit-maximizing firms to spend money on advertising for products that have

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium, marginal cost must lie below average total cost.

Correct Answer
verified

If we observe a great deal more advertising for Mucinex, an over-the-counter drug, than for a Grainger drill press, we can infer that

Correct Answer
verified

Firms that spend a large amount of money on advertising a particular product are likely to be providing consumers with

Correct Answer
verified

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?

Correct Answer
verified

Critics of markets that are characterized by firms that sell brand name products argue that brand names encourage consumers to pay more for branded products that

Correct Answer
verified

Which of the following statements regarding monopolistic competition is not correct?

Correct Answer
verified

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

Correct Answer
verified

If firms in a monopolistically competitive market are incurring economic losses, which of the following statements describes the changes that occur as the market adjusts to the long-run equilibrium?

Correct Answer
verified

A monopolistically competitive firm chooses its

Correct Answer
verified

Monopolistic competition and monopoly are examples of a market structure called imperfect competition.

Correct Answer
verified

Exam 16: Monopolistic Competition

Correct AnswerverifiedShow Answer

Figure 16-13 -Refer to Figure 16-13. Which letter represents the profit-maximizing quantity?

Correct AnswerverifiedShow Answer

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

Correct AnswerverifiedShow Answer

Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. -Refer to Table 16-1. What is the concentration ratio in Industry D?

Correct AnswerverifiedShow Answer

A monopolistically competitive firm faces the following demand curve for its product: The firm has total fixed costs of $120 and a constant marginal cost of $12 per unit. We can conclude that

Correct AnswerverifiedShow Answer

The entry of new firms into a monopolistically competitive market is accompanied by

Correct AnswerverifiedShow Answer

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

Correct Answerverifiedfirms will enterpri...View AnswerShow Answer

Defenders of advertising argue that it is not rational for profit-maximizing firms to spend money on advertising for products that have

Correct AnswerverifiedShow Answer

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

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

When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium, marginal cost must lie below average total cost.

Correct AnswerverifiedShow Answer

If we observe a great deal more advertising for Mucinex, an over-the-counter drug, than for a Grainger drill press, we can infer that

Correct AnswerverifiedShow Answer

Firms that spend a large amount of money on advertising a particular product are likely to be providing consumers with

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

Critics of markets that are characterized by firms that sell brand name products argue that brand names encourage consumers to pay more for branded products that

Correct AnswerverifiedShow Answer

Which of the following statements regarding monopolistic competition is not correct?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If firms in a monopolistically competitive market are incurring economic losses, which of the following statements describes the changes that occur as the market adjusts to the long-run equilibrium?

Correct AnswerverifiedShow Answer

A monopolistically competitive firm chooses its

Correct AnswerverifiedShow Answer

Monopolistic competition and monopoly are examples of a market structure called imperfect competition.

Correct AnswerverifiedShow Answer

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firms will enter
pri...
View Answer

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