Question 1

Describe the shape of the monopolistically competitive firm's demand curve.

Accepted Answer

The answer of Describe the shape of the monopolistically competitive...

Question 2

Figure 16-12 
-Refer to Figure 16-12. Compare the price and marginal cost in this market with price and marginal cost if this were a perfectly competitive market.

Accepted Answer

Monopolistic competi...

Question 3

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 D?

Accepted Answer

A)  approximately 48%
B)  approximately 54%
C)  approximately 60%
D)  approximately 66%E) A) and D)
F) A) and C)

Question 4

According to one theory, advertising sends a signal to consumers about the quality of the product being offered. An implication of this theory is that

Accepted Answer

A)  the actual quality of the product is irrelevant.
B)  the content of the advertisement is irrelevant.
C)  advertising is not in the best interest of society.
D)  it is irrational for firms to pay famous people large amounts of money to appear in their advertisements.E) A) and D)
F) A) and C)

Question 5

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 6

Each firm in a monopolistically competitive market

Accepted Answer

A)  earns both short-run and long-run profits.
B)  faces a downward-sloping demand curve.
C)  cannot earn economic profit in the short run.
D)  sets price equal to marginal cost.E) A) and B)
F) A) and C)

Question 7

When an industry has many firms, the industry is

Accepted Answer

A)  an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products.
B)  an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products.
C)  monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products.
D)  perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products.E) A) and B)
F) A) and C)

Question 8

A profit-maximizing firm in a monopolistically competitive market charges a price equal to marginal cost.

Accepted Answer

A) True 
 B)False

Question 9

Evidence suggests that, in markets with differentiated products but little advertising,

Accepted Answer

A)  consumers are not confused by conflicting signals.
B)  firms are generally less profitable.
C)  markets are less efficient.
D)  consumers make better choices.E) None of the above
F) All of the above

Question 10

Monopolistic competition is characterized by a few sellers offering similar products, whereas oligopoly is characterized by many sellers offering differentiated products.

Accepted Answer

A) True 
 B)False

Question 11

Figure 16-14 
-Refer to Figure 16-14. Which of the following represents the excess capacity of this firm?

Accepted Answer

A)  BJ
B)  GH
C)  LM
D)  There is no excess capacity.E) B) and D)
F) A) and C)

Question 12

Economists defend brand names as useful to consumers because brand names

Accepted Answer

A)  provide consumers with information about quality when quality cannot easily be judged in advance of purchase.
B)  give firms a financial incentive to maintain the high quality associated with their brand name.
C)  convince consumers to spend more for products nearly identical to generic versions.
D)  Both a and b are correct.E) A) and B)
F) B) and D)

Question 13

Professional organizations and producer groups have an incentive to

Accepted Answer

A)  restrict advertising in order to enhance competition on the basis of price.
B)  restrict advertising in order to reduce competition on the basis of price.
C)  encourage advertising in order to reduce competition on the basis of price.
D)  encourage advertising in order to enhance competition on the basis of price.E) All of the above
F) A) and B)

Question 14

The lower the concentration ratio, the

Accepted Answer

A)  more control an individual firm has to set prices.
B)  more competitive the industry.
C)  less competitive the industry.
D)  Both a and c are correct.E) A) and B)
F) All of the above

Question 15

When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium,

Accepted Answer

A)  the demand curve will be perfectly elastic.
B)  price exceeds marginal cost.
C)  marginal cost must be falling.
D)  marginal revenue exceeds marginal cost.E) A) and D)
F) A) and C)

Question 16

Figure 16-10
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-10. If the firm were to produce 154.92 units of output,

Accepted Answer

A)  efficient scale would be realized.
B)  ATC would be at its minimum value.
C)  the firm would sustain a loss of more than $2,000.
D)  All of the above are correct.E) All of the above
F) A) and B)

Question 17

New firms will likely enter a monopolistically competitive market when price exceeds

Accepted Answer

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

Question 18

The term excess capacity refers to the fact that a firm operates on the upward-sloping portion of its average-total-cost curve.

Accepted Answer

A) True 
 B)False

Question 19

Table 16-7
A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20. 
-Refer to Table 16-7. If this firm profit maximizes and faces a constant marginal cost of $7, does it have excess capacity? How do you know?

Accepted Answer

Yes, avera...

Question 20

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

Accepted Answer

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) C) and D)

Exam 16: Monopolistic Competition

A profit-maximizing firm in a monopolistically competitive market charges a price equal to marginal cost.

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Each firm in a monopolistically competitive market

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According to one theory, advertising sends a signal to consumers about the quality of the product being offered. An implication of this theory is that

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Monopolistic competition is characterized by a few sellers offering similar products, whereas oligopoly is characterized by many sellers offering differentiated products.

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Figure 16-14 -Refer to Figure 16-14. Which of the following represents the excess capacity of this firm?

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New firms will likely enter a monopolistically competitive market when price exceeds

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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. -Refer to Table 16-3. What is the concentration ratio for Industry D?

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Describe the shape of the monopolistically competitive firm's demand curve.

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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

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The lower the concentration ratio, the

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Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. If the firm were to produce 154.92 units of output,

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Evidence suggests that, in markets with differentiated products but little advertising,

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Economists defend brand names as useful to consumers because brand names

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Table 16-7 A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20. -Refer to Table 16-7. If this firm profit maximizes and faces a constant marginal cost of $7, does it have excess capacity? How do you know?

Correct AnswerverifiedYes, avera...View AnswerShow Answer

When an industry has many firms, the industry is

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Professional organizations and producer groups have an incentive to

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Figure 16-12 -Refer to Figure 16-12. Compare the price and marginal cost in this market with price and marginal cost if this were a perfectly competitive market.

Correct AnswerverifiedMonopolistic competi...View AnswerShow Answer

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

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The term excess capacity refers to the fact that a firm operates on the upward-sloping portion of its average-total-cost curve.

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When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium,

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Yes, avera...
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Monopolistic competi...
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