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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. 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.When maximizing profit,what price does Traci's charge for a haircut? A) $20 B) $25 C) $30 D) $35 -Refer to Table 16-6.When maximizing profit,what price does Traci's charge for a haircut?


A) $20
B) $25
C) $30
D) $35

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

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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.

A) True
B) False

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

A) True
B) False

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Figure 16-1.The figure is drawn for a monopolistically competitive firm. Figure 16-1.The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.In order to maximize profit,the firm will charge a price of A) $8. B) $12. C) $16. D) $18. -Refer to Figure 16-1.In order to maximize profit,the firm will charge a price of


A) $8.
B) $12.
C) $16.
D) $18.

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

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Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2.What is the concentration ratio for Industry C? A) about 23% B) about 34% C) about 43% D) about 52% -Refer to Table 16-2.What is the concentration ratio for Industry C?


A) about 23%
B) about 34%
C) about 43%
D) about 52%

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

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

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Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2.Which industry has the lowest concentration ratio? A) Industry A B) Industry B C) Industry C D) Industry D -Refer to Table 16-2.Which industry has the lowest concentration ratio?


A) Industry A
B) Industry B
C) Industry C
D) Industry D

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

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Which of the following statements is not correct?


A) Firms in monopolistic competition and monopoly can earn economic profits in the short run.
B) Firms in monopolistic competition and perfect competition produce the welfare-maximizing level of output.
C) Monopolistically competitive firms price above marginal cost,whereas competitive firms price at marginal cost.
D) Firms wishing to enter a monopolistically competitive market can do so freely,whereas firms wishing to enter a monopoly market will face barriers.

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

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Figure 16-3 Figure 16-3 -Refer to Figure 16-3.Assume the firm in the figure is currently producing 10 units of output and charging $600.The firm A) will increase its profits if it raises its price and reduces its production level. B) will increase its profits if it lowers its price and expands its production level. C) is maximizing profits. D) will increase its profits if it raises its prices and expands its production level. -Refer to Figure 16-3.Assume the firm in the figure is currently producing 10 units of output and charging $600.The firm


A) will increase its profits if it raises its price and reduces its production level.
B) will increase its profits if it lowers its price and expands its production level.
C) is maximizing profits.
D) will increase its profits if it raises its prices and expands its production level.

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

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An oligopoly


A) has a concentration ratio of less than 50 percent.
B) is a price taker.
C) is a type of imperfectly competitive market.
D) has many firms rather than just one firm or a few firms.

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

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Most businesses advertise their products and services.Some business use SPAM emails to advertise because the cost of a mass e-mail is close to zero.Other business spend millions of dollars to advertise in a 30-second spot during the Super Bowl.Having observed this real world data,economists argue that the amount of money that a business spends on advertising is a proxy for a good or service's


A) size.
B) quality.
C) newness.
D) cost of production.

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

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Table 16-3 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. Table 16-3 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. -Refer to Table 16-3.What is the concentration ratio for Industry B? A) approximately 46% B) approximately 54% C) approximately 57% D) approximately 61% -Refer to Table 16-3.What is the concentration ratio for Industry B?


A) approximately 46%
B) approximately 54%
C) approximately 57%
D) approximately 61%

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

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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.As the figure is drawn,the firm is in A) a short-run equilibrium but it is not in a long-run equilibrium. B) a long-run equilibrium but it is not in a short-run equilibrium. C) a short-run equilibrium as well as a long-run equilibrium. D) neither a short-run equilibrium nor a long-run equilibrium. -Refer to Figure 16-9.As the figure is drawn,the firm is in


A) a short-run equilibrium but it is not in a long-run equilibrium.
B) a long-run equilibrium but it is not in a short-run equilibrium.
C) a short-run equilibrium as well as a long-run equilibrium.
D) neither a short-run equilibrium nor a long-run equilibrium.

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

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As developing countries make a transition to market-based economies,one of the first major capital investments is in "Western-quality" hotels.Explain why brand-name hotel accommodations are a critical step in attracting foreign investment.

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Brand-name hotels are a critic...

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


A) perfectly competitive market.
B) monopolistically competitive market.
C) oligopoly.
D) monopoly.

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

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A monopolistically competitive firm


A) charges a price that is equal to marginal cost.
B) experiences a zero profit in the long run.
C) produces at the efficient scale in the long run.
D) All of the above are correct.

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

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Defenders of advertising argue that firms use advertising as a signal of quality,even if the advertising delivers little helpful information about the product.

A) True
B) False

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A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?


A) average revenue exceeds marginal revenue
B) marginal revenue equals marginal cost
C) price exceeds marginal cost
D) All of the above are correct.

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

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Which of the following statements is not correct?


A) Monopolistic competition is similar to monopoly because in each market structure the firm can charge a price above marginal costs.
B) Monopolistic competition is similar to perfect competition because both market structures are characterized by free entry.
C) Monopolistic competition is similar to oligopoly because both market structures are characterized by barriers to entry.
D) Monopolistic competition is similar to perfect competition because both market structures are characterized by many sellers.

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

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Monopolistic competition is characterized by i) Efficient scale Ii) Markup pricing over marginal cost Iii) Deadweight loss Iv) Excess capacity


A) i) and ii) only
B) ii) and iv) only
C) i) ,ii) ,and iii) only
D) ii) ,iii) ,and iv) only

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

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