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Scenario 16-3 Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q. -Refer to Scenario 16-3.If the marginal cost of producing this good is 4,what price would a profit-maximizing monopolist charge for the product?


A) P = 4
B) P = 10
C) P = 12
D) P = 20

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

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Figure 16-8 The figure is drawn for a monopolistically-competitive firm. Figure 16-8 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-8.Efficient scale is reached A) at 100 units. B) between 100 and 133.33 units. C) at 133.33 units. D) beyond 133.33 units. -Refer to Figure 16-8.Efficient scale is reached


A) at 100 units.
B) between 100 and 133.33 units.
C) at 133.33 units.
D) beyond 133.33 units.

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

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A monopolistically competitive market is like both a competitive market and a monopoly in that firms in all three market structures


A) can earn economic profits in the short run.
B) can earn economic profits in the long run.
C) charge a price above marginal cost.
D) All of the above are correct.

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

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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.If the government required Traci's to produce at the efficient scale of output,how many haircuts would Traci's sell? A) either 3 or 4 B) either 4 or 5 C) either 5 or 6 D) either 6 or 7 -Refer to Table 16-6.If the government required Traci's to produce at the efficient scale of output,how many haircuts would Traci's sell?


A) either 3 or 4
B) either 4 or 5
C) either 5 or 6
D) either 6 or 7

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

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When existing firms lose customers and profits due to entry of a new competitor,a


A) predatory-pricing externality occurs.
B) consumption externality occurs.
C) business-stealing externality occurs.
D) product-variety externality occurs.

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

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What is meant by the term "excess capacity" as it relates to monopolistically competitive firms?

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Monopolistically competitive f...

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"In a long-run equilibrium,price is equal to average total cost." This statement applies to


A) competitive markets, but not to monopolistically competitive markets or monopolies.
B) competitive and monopolistically competitive markets, but not to monopolies.
C) competitive markets, monopolistically competitive markets, and monopolies.
D) None of the above is correct.

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

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The deadweight loss that is associated with a monopolistically competitive market is a result of


A) price falling short of marginal cost in order to increase market share.
B) price exceeding marginal cost.
C) the firm operating in a regulated industry.
D) excessive advertising costs.

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

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In a monopolistically competitive market,the number of firms adjusts until economic profits are driven to zero.

A) True
B) False

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Figure 16-5 Figure 16-5 -Refer to Figure 16-5.Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is doing its best but still losing money? A) panel a B) panel b C) panel c D) panel d -Refer to Figure 16-5.Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is doing its best but still losing money?


A) panel a
B) panel b
C) panel c
D) panel d

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

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A firm is a price taker


A) only when the market is perfectly competitive.
B) only when the market is perfectly competitive or monopolistic.
C) only when the market is perfectly competitive or monopolistically competitive.
D) when the market is perfectly competitive, monopolistically competitive, or monopolistic.

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

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Critics of advertising argue that in some markets advertising may


A) attract products of lower quality into the market.
B) attract less informed buyers into the market.
C) decrease elasticity of demand allowing firms to charge a larger markup over marginal cost.
D) enhance competition in markets to an unnecessary degree.

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

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Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-4.Which of the following is likely to happen in the long run in this market? A) The market is currently in a long-run equilibrium. B) The market price is likely to fall. C) Firms are likely to enter the market since firms are earning a positive economic profit. D) Firms are likely to leave the market since firms are earning a negative economic profit. -Refer to Table 16-4.Which of the following is likely to happen in the long run in this market?


A) The market is currently in a long-run equilibrium.
B) The market price is likely to fall.
C) Firms are likely to enter the market since firms are earning a positive economic profit.
D) Firms are likely to leave the market since firms are earning a negative economic profit.

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

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Olivia consumes Pepsi exclusively.She claims that there is a clear taste difference and that competing brands of cola leave an unsavory taste in her mouth.However,in a blind taste test,Olivia is found to prefer generic store-brand cola to Pepsi eight out of ten times.The results of Olivia's taste test would reinforce claims by critics of brand names that


A) consumers are always willing to pay more for brand names.
B) brand names cause consumers to perceive differences that do not really exist.
C) brand names cause consumers to be more sensitive to product differences.
D) brand names are a form of socially efficient advertising.

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

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Firms in monopolistically competitive markets and monopolies can earn long-run profits due to barriers to entry.

A) True
B) False

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In which of the following markets is economic profit driven to zero in the long run?


A) oligopoly
B) monopoly
C) monopolistic competition
D) cartels

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

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The primary claim of defenders of advertising is that it


A) conveys information about firm profitability.
B) is psychological rather than informational.
C) enhances the information available to consumers.
D) reduces the elasticity of demand for a firm's product.

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

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Figure 16-3 Figure 16-3 -Refer to Figure 16-3.Which of the following will occur in the long run in this industry? A) Firms will exit this industry. B) Firms will enter this industry. C) This firm will continue to earn positive economic profits. D) This firm will incur losses. -Refer to Figure 16-3.Which of the following will occur in the long run in this industry?


A) Firms will exit this industry.
B) Firms will enter this industry.
C) This firm will continue to earn positive economic profits.
D) This firm will incur losses.

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

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Economists defend brand names as useful to consumers because brand names


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 D)
F) All of the above

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Figure 16-7 The lines in the figures below illustrate the potential effect of entry and exit in a monopolistically competitive market on either the demand curve or the marginal cost curve of existing firms. Figure 16-7 The lines in the figures below illustrate the potential effect of entry and exit in a monopolistically competitive market on either the demand curve or the marginal cost curve of existing firms. -Refer to Figure 16-7.Which of the diagrams illustrates the impact of some existing firms leaving the market? A) panel a B) panel b C) panel c D) panel d -Refer to Figure 16-7.Which of the diagrams illustrates the impact of some existing firms leaving the market?


A) panel a
B) panel b
C) panel c
D) panel d

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

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