Question 1

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 A?

Accepted Answer

A)  38%
B)  71%
C)  92%
D)  98%E) B) and D)
F) C) and D)

Question 2

Figure 16-3
This figure depicts a situation in a monopolistically competitive market. 
-Refer to Figure 16-3. How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

Accepted Answer

A)  $200
B)  $312.50
C)  $400
D)  $800E) A) and D)
F) None of the above

Question 3

Figure 16-3
This figure depicts a situation in a monopolistically competitive market. 
-Refer to Figure 16-3. This firm is operating

Accepted Answer

A)  in the short run and earning a positive economic profit.
B)  in the short run and breaking even.
C)  in the long run and earning a positive economic profit.
D)  in the long run and incurring and economic loss.E) B) and C)
F) B) and D)

Question 4

When a monopolistically competitive firm raises its price,

Accepted Answer

A)  quantity demanded falls to zero.
B)  quantity demanded declines but not to zero.
C)  the market supply curve shifts outward.
D)  quantity demanded remains constant.E) All of the above
F) B) and C)

Question 5

The product-variety externality states the benefits to consumers from the introduction of a new product.

Accepted Answer

A) True 
 B)False

Question 6

In the long run, a monopolistically competitive firm produces a quantity that is

Accepted Answer

A)  equal to the efficient scale.
B)  less than the efficient scale.
C)  greater than the efficient scale.
D)  consistent with diseconomies of scale.E) B) and C)
F) All of the above

Question 7

Among arguments for and against advertising, both sides agree that advertising leads to

Accepted Answer

A)  higher prices and less competitive markets.
B)  higher prices and more competitive markets.
C)  lower prices and more competitive markets.
D)  None of the above is correct. The debate fails to resolve the question of advertising's effect on prices and competition.E) A) and B)
F) C) and D)

Question 8

The free entry and exit of firms in a monopolistically competitive market guarantees that

Accepted Answer

A)  both economic profits and economic losses can persist in the long run.
B)  both economic profits and economic losses disappear in the long run.
C)  economic profits, but not economic losses, can persist in the long run.
D)  economic losses, but not economic profits, can persist in the long run.E) A) and B)
F) All of the above

Question 9

Senator Hubris wants to pass a law that would require all monopolistically competitive firms to operate at their efficient scale. If this law were to pass and be enforced, we would expect that monopolistically competitive firms would

Accepted Answer

A)  see their profits increase.
B)  break even.
C)  lose money.
D)  not really be affected by the law.E) B) and D)
F) All of the above

Question 10

A monopolistically competitive firm faces a downward-sloping demand curve because there are few firms in the market.

Accepted Answer

A) True 
 B)False

Question 11

A markup of price over marginal cost is inconsistent with free entry and zero profit.

Accepted Answer

A) True 
 B)False

Question 12

An oligopoly is a market in which

Accepted Answer

A)  there are only a few sellers, each offering a product similar or identical to the products offered by other firms in the market.
B)  firms are price takers.
C)  the actions of one seller in the market have no impact on the other sellers' profits.
D)  there are many price-taking firms, each offering a product similar or identical to the products offered by other firms in the market.E) B) and C)
F) A) and D)

Question 13

Which of the following conditions is characteristic of a monopolistically competitive firm in short-run equilibrium?

Accepted Answer

A)  P > ATC
B)  P = ATC
C)  P 
D)  Any of the above could be correct.E) None of the above
F) B) and C)

Question 14

Figure 16-4 
-Refer to Figure 16-4. At the profit-maximizing, or loss-minimizing, output level, how many units of output will the firm in this figure produce?

Accepted Answer

A)  20
B)  30
C)  40
D)  This firm will choose not to produce.E) C) and D)
F) A) and B)

Question 15

In the debate between the critics and defenders of advertising, what conclusion have policymakers come to regarding the effect of advertising on competition - advertising makes markets more competitive or less competitive?

Accepted Answer

The answer of In the debate between the critics and...

Question 16

Which of the following market structures is considered a differentiated products market?

Accepted Answer

A)  Perfect competition
B)  Monopolistic competition
C)  Monopoly
D)  Both a and b are differentiated products markets.E) None of the above
F) C) and D)

Question 17

Adibok knows that it produces and sells high quality athletic shoes. Wurkout knows that it produces and sells low quality athletic shoes. According to the signaling theory of advertising,

Accepted Answer

A)  both Adibok and Wurkout have incentives to spend large amounts of money on advertising for their athletic shoes.
B)  Adibok has an incentive to spend a large amount of money on advertising for its athletic shoes, but Wurkout does not.
C)  Wurkout has an incentive to spend a large amount of money on advertising for its athletic shoes, but Adibok does not.
D)  neither Adibok nor Wurkout has an incentive to spend a large amount of money on advertising for their athletic shoes.E) B) and D)
F) None of the above

Question 18

An important difference between the situation faced by a profit-maximizing monopolistically competitive firm in the short run and the situation faced by that same firm in the long run is that in the short run,

Accepted Answer

A)  price may exceed marginal revenue, but in the long run, price equals marginal revenue.
B)  price may exceed marginal cost, but in the long run, price equals marginal cost.
C)  price may exceed average total cost, but in the long run, price equals average total cost.
D)  there are many firms in the market, but in the long run, there are only a few firms in the market.E) All of the above
F) None of the above

Question 19

Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e., on an average night, 80 percent of the hotel rooms are full) . This kind of excess capacity is indicative of what kind of market?

Accepted Answer

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

Question 20

Which of the following conditions is characteristic of a monopolistically competitive firm in long-run equilibrium?

Accepted Answer

A)  P > demand and P = MR
B)  ATC > demand and MR = MC
C)  P > MC and demand = ATC
D)  P  MRE) A) and B)
F) A) and C)

Exam 16: Monopolistic Competition

Which of the following conditions is characteristic of a monopolistically competitive firm in long-run equilibrium?

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Figure 16-4 -Refer to Figure 16-4. At the profit-maximizing, or loss-minimizing, output level, how many units of output will the firm in this figure produce?

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A markup of price over marginal cost is inconsistent with free entry and zero profit.

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Which of the following conditions is characteristic of a monopolistically competitive firm in short-run equilibrium?

Correct AnswerverifiedShow Answer

An oligopoly is a market in which

Correct AnswerverifiedShow Answer

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. This firm is operating

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An important difference between the situation faced by a profit-maximizing monopolistically competitive firm in the short run and the situation faced by that same firm in the long run is that in the short run,

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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 A?

Correct AnswerverifiedShow Answer

Which of the following market structures is considered a differentiated products market?

Correct AnswerverifiedShow Answer

Among arguments for and against advertising, both sides agree that advertising leads to

Correct AnswerverifiedShow Answer

In the long run, a monopolistically competitive firm produces a quantity that is

Correct AnswerverifiedShow Answer

In the debate between the critics and defenders of advertising, what conclusion have policymakers come to regarding the effect of advertising on competition - advertising makes markets more competitive or less competitive?

Correct AnswerverifiedShow Answer

Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e., on an average night, 80 percent of the hotel rooms are full) . This kind of excess capacity is indicative of what kind of market?

Correct AnswerverifiedShow Answer

Senator Hubris wants to pass a law that would require all monopolistically competitive firms to operate at their efficient scale. If this law were to pass and be enforced, we would expect that monopolistically competitive firms would

Correct AnswerverifiedShow Answer

The free entry and exit of firms in a monopolistically competitive market guarantees that

Correct AnswerverifiedShow Answer

When a monopolistically competitive firm raises its price,

Correct AnswerverifiedShow Answer

The product-variety externality states the benefits to consumers from the introduction of a new product.

Correct AnswerverifiedShow Answer

A monopolistically competitive firm faces a downward-sloping demand curve because there are few firms in the market.

Correct AnswerverifiedShow Answer

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

Correct AnswerverifiedShow Answer

Adibok knows that it produces and sells high quality athletic shoes. Wurkout knows that it produces and sells low quality athletic shoes. According to the signaling theory of advertising,

Correct AnswerverifiedShow Answer

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