Question 1

Which of the following is a characteristic of monopolistic competition?

Accepted Answer

A)  ownership of a key resource by a single firm
B)  free entry
C)  identical product
D)  patentsE) None of the above
F) C) and D)

Question 2

For a monopolistically competitive firm,

Accepted Answer

A)  marginal revenue and price are the same.
B)  average revenue and price are the same.
C)  at the profit-maximizing quantity of output, price equals marginal cost.
D)  at the profit-maximizing quantity of output, price equals the minimum of average total cost.E) A) and C)
F) A) and B)

Question 3

Figure 16-6 
-Refer to Figure 16-6. Which of the graphs depicts a monopolistically competitive firm in long-run equilibrium?

Accepted Answer

A)  panel a
B)  panel b
C)  panel c
D)  None of the above is correct.E) B) and D)
F) None of the above

Question 4

Figure 16-3
This figure depicts a situation in a monopolistically competitive market. 
-Refer to Figure 16-3. What price will the monopolistically competitive firm charge in this market?

Accepted Answer

A)  $60
B)  $70
C)  $75
D)  $80E) A) and B)
F) B) and D)

Question 5

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. Which industry has the highest concentration ratio?

Accepted Answer

A)  Industry A
B)  Industry B
C)  Industry C
D)  Industry DE) All of the above
F) None of the above

Question 6

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

Question 7

The product-variety externality arises in monopolistically competitive markets because

Accepted Answer

A)  firms produce with excess capacity.
B)  firms try to differentiate their products.
C)  firms would like to produce homogeneous products, but the large number of firms prohibits it.
D)  entry and exit is restricted.E) All of the above
F) A) and B)

Question 8

​Assume a monopolistically competitive firm encounters a decrease in average variable cost at all output levels.We would expect:

Accepted Answer

A)  ​The price to fall and output to rise
B)  ​The price to fall and output to fall
C)  ​The price to rise and output to rise
D)  ​The price to rise and output to fallE) B) and D)
F) All of the above

Question 9

Professional organizations (for example, the American Medical Association and the American Bar Association) have been active advocates for regulation to restrict the right of professionals to advertise. Describe what economic incentives might exist for existing professionals to restrict advertising.

Accepted Answer

If advertising increases information abo...

Question 10

As firms exit a monopolistically competitive market, profits of remaining firms

Accepted Answer

A)  decline, and product diversity in the market decreases.
B)  decline, and product diversity in the market increases.
C)  rise, and product diversity in the market decreases.
D)  rise, and product diversity in the market increases.E) A) and D)
F) All of the above

Question 11

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

Accepted Answer

oligopoly
...

Question 12

Figure 16-10
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-10. When the firm is maximizing its profit,

Accepted Answer

A)  TR = $9,000 and TC =$16,000.
B)  TR = $14,000 and TC =$16,000.
C)  TR = $16,000 and TC =$16,000.
D)  MC exceeds MR by $66.66 on the last unit of output produced.E) A) and B)
F) A) and C)

Question 13

Figure 16-4 
-Refer to Figure 16-4. What price will the monopolistically competitive firm charge in this market?

Accepted Answer

A)  $400
B)  $600
C)  $700
D)  $800E) B) and D)
F) None of the above

Question 14

Figure 16-14 
-Refer to Figure 16-14. Use the letters to identify the deadweight loss from this firm producing at its profit-maximizing level of output.

Accepted Answer

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

Question 15

Figure 16-5 
-Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will encourage the exit of some firms from a monopolistically competitive industry?

Accepted Answer

A)  panel a
B)  panel b
C)  panel c
D)  panel dE) None of the above
F) A) and B)

Question 16

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

Accepted Answer

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

Question 17

A monopolistically competitive firm has the following cost structure:  The firm faces the following demand curve:  If the government forces this firm to produce at its efficient scale, it will

Accepted Answer

A)  produce 3 units and make $9.
B)  produce 4 units and make $6.
C)  produce 5 units and lose $5.
D)  produce 7 units and lose $49.E) None of the above
F) A) and B)

Question 18

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) All of the above
F) None of the above

Question 19

Why does a typical monopolistically competitive firm face a downward-sloping demand curve?

Accepted Answer

Because its product ...

Question 20

If regulators required firms in monopolistically competitive markets to set price equal to marginal cost,

Accepted Answer

A)  firms would respond by lowering their costs.
B)  firms would require a subsidy to stay in business
C)  new firms that enter the market would operate at efficient scale.
D)  the most efficient firms would not be affected.E) A) and B)
F) B) and D)

Exam 16: Monopolistic Competition

Correct AnswerverifiedIf advertising increases information abo...View AnswerShow Answer

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

Correct Answerverifiedoligopoly...View AnswerShow Answer

A monopolistically competitive firm has the following cost structure: The firm faces the following demand curve: If the government forces this firm to produce at its efficient scale, it will

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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. Which industry has the highest concentration ratio?

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Which of the following is a characteristic of monopolistic competition?

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Figure 16-14 -Refer to Figure 16-14. Use the letters to identify the deadweight loss from this firm producing at its profit-maximizing level of output.

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As firms exit a monopolistically competitive market, profits of remaining firms

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For a monopolistically competitive firm,

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If regulators required firms in monopolistically competitive markets to set price equal to 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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Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. What price will the monopolistically competitive firm charge in this market?

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

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Why does a typical monopolistically competitive firm face a downward-sloping demand curve?

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The product-variety externality arises in monopolistically competitive markets because

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Figure 16-5 -Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will encourage the exit of some firms from a monopolistically competitive industry?

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Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. When the firm is maximizing its profit,

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Figure 16-4 -Refer to Figure 16-4. What price will the monopolistically competitive firm charge in this market?

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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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​Assume a monopolistically competitive firm encounters a decrease in average variable cost at all output levels.We would expect:

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Figure 16-6 -Refer to Figure 16-6. Which of the graphs depicts a monopolistically competitive firm in long-run equilibrium?

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If advertising increases information abo...
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oligopoly
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Because its product ...
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Assume a monopolistically competitive firm encounters a decrease in average variable cost at all output levels.We would expect:

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