Question 1

Which of the following is unique to a monopolistically competitive firm when compared to an oligopoly

Accepted Answer

A)  It advertises.
B)  It produces a quantity of output that falls short of the socially optimal level.
C)  It produces identical products.
D)  Monopolistic competition features many sellers.E) B) and C)
F) B) and D)

Question 2

Ignoring oligopoly and focusing on the other three types of market structure,in which of those market structures does a profit-maximizing firm charge a price that exceeds marginal cost

Accepted Answer

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

Question 3

According to the signalling theory of advertising,how do consumers respond to advertising

Accepted Answer

A)  They pay little or no attention to which firms advertise and which firms do not advertise.
B)  They are often more impressed by a firm's willingness to spend money on advertising than they are by the content of the advertisement.
C)  They are often more impressed by low-cost advertisements than they are by high-cost advertisements.
D)  They gain little or no information about product quality from advertisements.E) B) and C)
F) A) and C)

Question 4

The phenomenon of product differentiation contrasts sharply with which of the following

Accepted Answer

A)  homogeneous products
B)  monopolistic competition
C)  product integration
D)  non-price competitionE) A) and B)
F) None of the above

Question 5

When advertising is used to relay information about price,each firm is able to enhance market power.

Accepted Answer

A) True 
 B)False

Question 6

When a leading North American fast-food chain opens a store in Dhaka,Bangladesh,it has a strong incentive to enforce product quality consistent with stores in Canada and the United States.

Accepted Answer

A) True 
 B)False

Question 7

ABC Company knows that it produces and sells a very good mousetrap.XYZ Company knows that it produces and sells a lousy mousetrap.According to the signalling theory of advertising,the quality difference likely produces which result

Accepted Answer

A)  Both ABC and XYZ have incentives to spend large amounts of money on advertising their mousetraps.
B)  ABC has an incentive to spend a large amount of money on advertising its mousetrap, but XYZ does not.
C)  XYZ has an incentive to spend a large amount of money on advertising its mousetrap, but ABC does not.
D)  Neither ABC nor XYZ has an incentive to spend a large amount of money on advertising their mousetraps.E) B) and C)
F) A) and D)

Question 8

Advertising that conveys information about the existence of new products results in which of the following

Accepted Answer

A)  It usually confuses consumers about market competition.
B)  It enhances the ability of markets to allocate resources efficiently.
C)  It reveals information that is of little value to consumers.
D)  It increases elasticity of demand.E) A) and B)
F) A) and C)

Question 9

Suppose that you are an owner of a company that produce a special weight-loss over-the-counter medicine in a monopolistically competitive industry.The demand and the total cost for your medicine per day are given by the following table.  
a.  Calculate Average Total Cost, Marginal Cost, Total Revenue, Marginal Revenue, and Profit for each bottle of the medicine produced.
b.  How many bottles of this medicine should you produce in order to maximize profit, and what are the market price and the corresponding profit?
c.  Suppose that you pay for an advertising flyer for a $100 flat fee and after that the demand for the medicine increases (see the table below for the new demand information). How do your answers in parts a. and b. change?

Accepted Answer

a.

b.If you are a profit maximizer, y...

Question 10

The two cereal makers,Post and Kellogg,have each come up with new cereal recipes.Post chooses not to advertise it,but Kellogg chooses to spend $10 million in advertising.Why do the two companies have different advertising strategies

Accepted Answer

A)  Post doesn't advertise its cereal because brand names do not require advertisement.
B)  Post doesn't advertise its cereal because a good quality product doesn't require advertising.
C)  Kellogg advertises its cereal because customers will otherwise not try this new recipe.
D)  Kellogg advertises its cereal because advertising signals the quality of its product.E) C) and D)
F) All of the above

Question 11

Which statement describes a characteristic of a monopolistic competitive market

Accepted Answer

A)  It has some features of monopoly and some features of competition.
B)  It has one large, dominant firm and many other smaller firms.
C)  It has barriers to entry.
D)  It sells homogeneous products.E) None of the above
F) A) and D)

Question 12

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.

Accepted Answer

Brand-name hotels are a critic...

Question 13

What is happening when a profit-maximizing firm in a monopolistically competitive market charges a price higher than marginal cost

Accepted Answer

A)  It is violating Canadian competition policy.
B)  It must be losing money.
C)  There is a deadweight loss, but it is exactly offset by the benefit of excess capacity.
D)  It is enjoying a markup over marginal cost.E) A) and D)
F) A) and C)

Question 14

Discuss how brand names may enhance the efficiency of markets in a less developed country.

Accepted Answer

Recognizable brand names signal quality ...

Question 15

What is one way in which monopolistic competition differs from oligopoly

Accepted Answer

A)  There are no barriers to entry in oligopolies.
B)  In oligopoly markets there are only a few sellers.
C)  All oligopoly firms eventually earn zero economic profits.
D)  Strategic interactions between firms are rarely evident in oligopolies.E) A) and B)
F) All of the above

Question 16

Which statement defines business-stealing externality

Accepted Answer

A)  It is the positive externality associated with the gains of consumer surplus in a monopolistically competitive market.
B)  It occurs when one firm attempts to exactly duplicate exactly the product of another firm.
C)  It is considered to be an explicit cost of business in monopolistically competitive markets.
D)  It is the negative externality associated with entry of new firms in a monopolistically competitive market.E) All of the above
F) C) and D)

Question 17

Evaluate the following statement in the context of business-stealing and product-variety externalities: "We have too many student apartments in this town already; statistics show that vacancy rates average 15 percent during any given semester."

Accepted Answer

Business-stealing effect: if new entrant...

Question 18

Figure 16-3
 
-Refer to Figure 16-3.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

Accepted Answer

A)  panel (a) 
B)  panel (b) 
C)  panel (c) 
D)  panel (d) E) B) and C)
F) A) and C)

Question 19

Brand names are rarely used to convey information about product quality.

Accepted Answer

A) True 
 B)False

Question 20

Advertising during the Super Bowl is an example of information about quality contained primarily in the existence and expense of the advertising.

Accepted Answer

A) True 
 B)False

Exam 16: Monopolistic Competition

The two cereal makers,Post and Kellogg,have each come up with new cereal recipes.Post chooses not to advertise it,but Kellogg chooses to spend $10 million in advertising.Why do the two companies have different advertising strategies

Correct Answer
verified

Evaluate the following statement in the context of business-stealing and product-variety externalities: "We have too many student apartments in this town already; statistics show that vacancy rates average 15 percent during any given semester."

Correct Answer
verified
Business-stealing effect: if new entrant...
View Answer

The phenomenon of product differentiation contrasts sharply with which of the following

Correct Answer
verified

Advertising that conveys information about the existence of new products results in which of the following

Correct Answer
verified

Figure 16-3 -Refer to Figure 16-3.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

Correct Answer
verified

Advertising during the Super Bowl is an example of information about quality contained primarily in the existence and expense of the advertising.

Correct Answer
verified

Discuss how brand names may enhance the efficiency of markets in a less developed country.

Correct Answer
verified
Recognizable brand names signal quality ...
View Answer

Correct Answer
verified
a.

b.If you are a profit maximizer, y...
View Answer

Which statement describes a characteristic of a monopolistic competitive market

Correct Answer
verified

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.

Correct Answer
verified
Brand-name hotels are a critic...
View Answer

Which of the following is unique to a monopolistically competitive firm when compared to an oligopoly

Correct Answer
verified

When a leading North American fast-food chain opens a store in Dhaka,Bangladesh,it has a strong incentive to enforce product quality consistent with stores in Canada and the United States.

Correct Answer
verified

What is one way in which monopolistic competition differs from oligopoly

Correct Answer
verified

According to the signalling theory of advertising,how do consumers respond to advertising

Correct Answer
verified

What is happening when a profit-maximizing firm in a monopolistically competitive market charges a price higher than marginal cost

Correct Answer
verified

Which statement defines business-stealing externality

Correct Answer
verified

Ignoring oligopoly and focusing on the other three types of market structure,in which of those market structures does a profit-maximizing firm charge a price that exceeds marginal cost

Correct Answer
verified

ABC Company knows that it produces and sells a very good mousetrap.XYZ Company knows that it produces and sells a lousy mousetrap.According to the signalling theory of advertising,the quality difference likely produces which result

Correct Answer
verified

Brand names are rarely used to convey information about product quality.

Correct Answer
verified

When advertising is used to relay information about price,each firm is able to enhance market power.

Correct Answer
verified

Exam 16: Monopolistic Competition

The two cereal makers,Post and Kellogg,have each come up with new cereal recipes.Post chooses not to advertise it,but Kellogg chooses to spend $10 million in advertising.Why do the two companies have different advertising strategies

Correct AnswerverifiedShow Answer

Evaluate the following statement in the context of business-stealing and product-variety externalities: "We have too many student apartments in this town already; statistics show that vacancy rates average 15 percent during any given semester."

Correct AnswerverifiedBusiness-stealing effect: if new entrant...View AnswerShow Answer

The phenomenon of product differentiation contrasts sharply with which of the following

Correct AnswerverifiedShow Answer

Advertising that conveys information about the existence of new products results in which of the following

Correct AnswerverifiedShow Answer

Figure 16-3 -Refer to Figure 16-3.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

Correct AnswerverifiedShow Answer

Advertising during the Super Bowl is an example of information about quality contained primarily in the existence and expense of the advertising.

Correct AnswerverifiedShow Answer

Discuss how brand names may enhance the efficiency of markets in a less developed country.

Correct AnswerverifiedRecognizable brand names signal quality ...View AnswerShow Answer

Correct Answerverifieda. b.If you are a profit maximizer, y...View AnswerShow Answer

Which statement describes a characteristic of a monopolistic competitive market

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedBrand-name hotels are a critic...View AnswerShow Answer

Which of the following is unique to a monopolistically competitive firm when compared to an oligopoly

Correct AnswerverifiedShow Answer

When a leading North American fast-food chain opens a store in Dhaka,Bangladesh,it has a strong incentive to enforce product quality consistent with stores in Canada and the United States.

Correct AnswerverifiedShow Answer

What is one way in which monopolistic competition differs from oligopoly

Correct AnswerverifiedShow Answer

According to the signalling theory of advertising,how do consumers respond to advertising

Correct AnswerverifiedShow Answer

What is happening when a profit-maximizing firm in a monopolistically competitive market charges a price higher than marginal cost

Correct AnswerverifiedShow Answer

Which statement defines business-stealing externality

Correct AnswerverifiedShow Answer

Ignoring oligopoly and focusing on the other three types of market structure,in which of those market structures does a profit-maximizing firm charge a price that exceeds marginal cost

Correct AnswerverifiedShow Answer

ABC Company knows that it produces and sells a very good mousetrap.XYZ Company knows that it produces and sells a lousy mousetrap.According to the signalling theory of advertising,the quality difference likely produces which result

Correct AnswerverifiedShow Answer

Brand names are rarely used to convey information about product quality.

Correct AnswerverifiedShow Answer

When advertising is used to relay information about price,each firm is able to enhance market power.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Business-stealing effect: if new entrant...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified
Recognizable brand names signal quality ...
View Answer

Correct Answer
verified
a.

b.If you are a profit maximizer, y...
View Answer

Correct Answer
verified

Correct Answer
verified
Brand-name hotels are a critic...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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