Question 1

The product-variety externality states that entry of a new firm conveys a negative externality on consumers.

Accepted Answer

A) True 
 B)False

Question 2

The breakfast cereal industry,with its concentration ratio of 78%,would best be described as a(n)

Accepted Answer

A)   perfectly competitive market.
B)   monopolistically competitive market.
C)   oligopoly.
D)   monopoly.E) All of the above
F) A) and B)

Question 3

Table 16-6
Traci's Hairstyling is one salon among many in the market for hairstyling.The following table presents cost and revenue data for haircuts at Traci's Hairstyling.
 
-Refer to Table 16-6.What is the profit-maximizing output for Traci's Hairstyling?

Accepted Answer

A)   3 haircuts
B)   4 haircuts
C)   5 haircuts
D)   6 haircutsE) B) and C)
F) A) and C)

Question 4

Product differentiation always leads to some measure of market power.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A)   perfect competition only
B)   perfect competition and monopolistic competition only
C)   perfect competition,monopolistic competition,and monopoly
D)   The answer cannot be determined without knowing whether the market is in the long run or short run.E) C) and D)
F) A) and B)

Question 6

Which of the following is not a key feature of monopolistic competition?

Accepted Answer

A)   Excess capacity
B)   A markup of price over marginal cost
C)   Positive economic profits for firms in the long run
D)   Differentiated products among firms in the marketE) A) and B)
F) B) and C)

Question 7

Assume the role of a defender of advertising.Describe the characteristics of advertising that enhance the effectiveness of markets and increase the social welfare of society.

Accepted Answer

Advertising provides information to cons...

Question 8

In the long run,a profit-maximizing firm in a monopolistically competitive market operates at

Accepted Answer

A)   efficient scale.
B)   a level of output at which average total cost is rising.
C)   a level of output at which average total cost is falling.
D)   the level of output at which total revenue is maximized.E) B) and D)
F) None of the above

Question 9

A monopolistically competitive firm chooses

Accepted Answer

A)   the quantity of output to produce,but the market determines price.
B)   the price,but competition in the market determines the quantity.
C)   price,but output is determined by a cartel production quota.
D)   the quantity of output to produce and the price at which it will sell its output.E) B) and C)
F) A) and B)

Question 10

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 D)
F) A) and C)

Question 11

If "too much choice" is a problem for consumers,it would occur in which market structure(s) ?

Accepted Answer

A)   perfect competition
B)   monopoly
C)   monopolistic competition
D)   perfect competition and monopolistic competitionE) None of the above
F) B) and C)

Question 12

In which of the following market structures is(are) there a large number of sellers? (i) 
Monopolistic competition
(ii) 
Perfect competition
(iii) 
Oligopoly

Accepted Answer

A)   (i) and (ii) only
B)   (ii) and (iii) only
C)   (ii) only
D)   (i) , (ii) ,and (iii) E) B) and C)
F) A) and B)

Question 13

Figure 16-1.The figure is drawn for a monopolistically competitive firm. 
-Refer to Figure 16-1.The firm's profit-maximizing level of output is

Accepted Answer

A)   8 units.
B)   12 units.
C)   16 units.
D)   24 units.E) C) and D)
F) All of the above

Question 14

Entry and exit drive each firm in a monopolistically competitive market to a point of tangency between its

Accepted Answer

A)   marginal revenue curve and its total cost curve.
B)   marginal revenue curve and its average total cost curve.
C)   demand curve and its total cost curve.
D)   demand curve and its average total cost curve.E) B) and D)
F) B) and C)

Question 15

Figure 16-2 
-Refer to Figure 16-2.How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

Accepted Answer

A)   $250.
B)   $500
C)   $562.50.
D)   $1250.E) C) and D)
F) All of the above

Question 16

There are four basic types of market structure.

Accepted Answer

A) True 
 B)False

Question 17

When firms in a monopolistically competitive market engage in price-related advertising,defenders of advertising argue that

Accepted Answer

A)   the quality of products sold in the market always increases.
B)   customers are less likely to be informed about other characteristics of the product.
C)   new firms are discouraged from entering the market.
D)   each firm has less market power.E) All of the above
F) C) and D)

Question 18

A market structure in which there are many firms selling products that are similar but not identical is known as

Accepted Answer

A)   oligopoly.
B)   monopoly.
C)   monopolistic competition.
D)   perfect competition.E) A) and D)
F) A) and C)

Question 19

For a monopolistically competitive firm,at the profit-maximizing quantity of output,

Accepted Answer

A)   price exceeds marginal cost.
B)   marginal revenue exceeds marginal cost.
C)   marginal cost exceeds average revenue.
D)   price equals marginal revenue.E) None of the above
F) A) and B)

Question 20

For the economy as a whole,spending on advertising comprises about what percent of total firm revenue?

Accepted Answer

A)   0.5
B)   2
C)   10
D)   20E) C) and D)
F) None of the above

Exam 16: Monopolistic Competition

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

Correct AnswerverifiedShow Answer

Product differentiation always leads to some measure of market power.

Correct AnswerverifiedShow Answer

If "too much choice" is a problem for consumers,it would occur in which market structure(s) ?

Correct AnswerverifiedShow Answer

The breakfast cereal industry,with its concentration ratio of 78%,would best be described as a(n)

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

There are four basic types of market structure.

Correct AnswerverifiedShow Answer

Entry and exit drive each firm in a monopolistically competitive market to a point of tangency between its

Correct AnswerverifiedShow Answer

Assume the role of a defender of advertising.Describe the characteristics of advertising that enhance the effectiveness of markets and increase the social welfare of society.

Correct AnswerverifiedAdvertising provides information to cons...View AnswerShow Answer

A monopolistically competitive firm chooses

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When firms in a monopolistically competitive market engage in price-related advertising,defenders of advertising argue that

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Which of the following is not a key feature of monopolistic competition?

Correct AnswerverifiedShow Answer

The product-variety externality states that entry of a new firm conveys a negative externality on consumers.

Correct AnswerverifiedShow Answer

In which of the following market structures is(are) there a large number of sellers? (i) Monopolistic competition (ii) Perfect competition (iii) Oligopoly

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For a monopolistically competitive firm,at the profit-maximizing quantity of output,

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Figure 16-2 -Refer to Figure 16-2.How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

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For the economy as a whole,spending on advertising comprises about what percent of total firm revenue?

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A market structure in which there are many firms selling products that are similar but not identical is known as

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Table 16-6 Traci's Hairstyling is one salon among many in the market for hairstyling.The following table presents cost and revenue data for haircuts at Traci's Hairstyling. -Refer to Table 16-6.What is the profit-maximizing output for Traci's Hairstyling?

Correct AnswerverifiedShow Answer

In the long run,a profit-maximizing firm in a monopolistically competitive market operates at

Correct AnswerverifiedShow Answer

Figure 16-1.The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.The firm's profit-maximizing level of output is

Correct AnswerverifiedShow Answer

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Advertising provides information to cons...
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