Question 1

The "monopoly" in monopolistically competitive markets is most likely a result of firms having some pricing power due to product differentiation.

Accepted Answer

A) True 
 B)False

Question 2

A monopolistically competitive market

Accepted Answer

A)   has some features of monopoly and some features of competition.
B)   has one large,dominant firm and many other smaller firms.
C)   is difficult to enter.
D)   occurs whenever firms earn zero economic profit.E) None of the above
F) B) and C)

Question 3

The government may not be able to improve the inefficiencies of a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 4

A firm has the following cost structure:

If this firm is in a typical monopolistically competitive market,in the long run it will likely produce

Accepted Answer

A)   4 or fewer units of output.
B)   5 units of output.
C)   more than 5 units of output.
D)   None of the above are necessarily correct because there is not enough information to tell.E) A) and B)
F) A) and C)

Question 5

A monopolistically competitive firm's choice of output level is virtually identical to the choice made by

Accepted Answer

A)   a perfectly competitive firm.
B)   a duopolist.
C)   a monopolist.
D)   an oligopolist.E) A) and B)
F) C) and D)

Question 6

The term excess capacity refers to the fact that a firm produces a lower quantity than it would if it operated at the efficient scale.

Accepted Answer

A) True 
 B)False

Question 7

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 lowest concentration ratio?

Accepted Answer

A)   Industry A
B)   Industry B
C)   Industry C
D)   Industry DE) A) and B)
F) B) and C)

Question 8

Excess capacity characterizes firms in monopolistically competitive markets,even in situations of long-run equilibrium.

Accepted Answer

A) True 
 B)False

Question 9

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome?

Accepted Answer

A)   (i) only
B)   (i) and (ii) only
C)   (ii) and (iii) only
D)   (i) ,(ii) ,and (iii) E) All of the above
F) None of the above

Question 10

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

Question 11

Which of the following statements is not correct?

Accepted Answer

A)   Firms in monopolistic competition and monopoly can earn economic profits in the short run.
B)   Firms in monopolistic competition and perfect competition produce the welfare-maximizing level of output.
C)   Monopolistically competitive firms price above marginal cost,whereas competitive firms price at marginal cost.
D)   Firms wishing to enter a monopolistically competitive market can do so freely,whereas firms wishing to enter a monopoly market will face barriers.E) None of the above
F) All of the above

Question 12

For the economy as a whole,spending on advertising comprises about what percent of total firm revenue?

Accepted Answer

A)   0.5
B)   2
C)   10
D)   20E) B) and C)
F) A) and B)

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

A monopolistically competitive firm

Accepted Answer

A)   charges a price that is equal to marginal cost.
B)   experiences a zero profit in the long run.
C)   produces at the efficient scale in the long run.
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 15

When a firm operates with excess capacity,it must be in a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 16

Evidence from the market for eyeglasses suggests that advertising leads to

Accepted Answer

A)   lower-quality products for consumers.
B)   lower prices for consumers.
C)   higher prices for consumers.
D)   less concern on the part of consumers about price differences among similar goods.E) A) and C)
F) A) and B)

Question 17

A monopolistically competitive firm is currently earning a positive economic profit.If other firms enter the market,we would expect that the added competition will cause this firm to adjust its output such that it

Accepted Answer

A)   will operate closer to its efficient scale.
B)   will operate further from its efficient scale.
C)   will no longer be at its efficient scale.
D)   might move either closer to or further from its efficient scale.E) B) and C)
F) A) and D)

Question 18

Which of the following statements regarding brand names in advertising is not correct?

Accepted Answer

A)   Brand names provide consumers with information about quality when quality cannot be easily judged in advance of purchase.
B)   Brand names give firms an incentive to maintain high quality to maintain the reputation of the firm.
C)   Brand names allow firms to produce and sell inferior products in the long run since people will continue to purchase the brand-name product.
D)   Brand names can cause consumers to perceive differences in products that do not actually exist.E) All of the above
F) None of the above

Question 19

Which two curves are tangent to each other in a monopolistically competitive market with zero economic profit?

Accepted Answer

A)   demand and average variable cost
B)   demand and average total cost
C)   marginal revenue and average variable cost
D)   marginal revenue and average total costE) A) and B)
F) A) and C)

Question 20

The government of Italy will not allow any Hard Rock Cafe restaurants to open in Italy.Defenders of the efficiency of brand-name markets would argue that this has hindered restaurant market efficiency in Italy.

Accepted Answer

A) True 
 B)False

Exam 16: Monopolistic Competition

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

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For the economy as a whole,spending on advertising comprises about what percent of total firm revenue?

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A monopolistically competitive market

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

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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 lowest concentration ratio?

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The government of Italy will not allow any Hard Rock Cafe restaurants to open in Italy.Defenders of the efficiency of brand-name markets would argue that this has hindered restaurant market efficiency in Italy.

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A firm has the following cost structure: If this firm is in a typical monopolistically competitive market,in the long run it will likely produce

Correct AnswerverifiedShow Answer

The term excess capacity refers to the fact that a firm produces a lower quantity than it would if it operated at the efficient scale.

Correct AnswerverifiedShow Answer

Excess capacity characterizes firms in monopolistically competitive markets,even in situations of long-run equilibrium.

Correct AnswerverifiedShow Answer

Which two curves are tangent to each other in a monopolistically competitive market with zero economic profit?

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The "monopoly" in monopolistically competitive markets is most likely a result of firms having some pricing power due to product differentiation.

Correct AnswerverifiedShow Answer

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome?

Correct AnswerverifiedShow Answer

A monopolistically competitive firm's choice of output level is virtually identical to the choice made by

Correct AnswerverifiedShow Answer

A monopolistically competitive firm

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When a firm operates with excess capacity,it must be in a monopolistically competitive market.

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The government may not be able to improve the inefficiencies of a monopolistically competitive market.

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Which of the following statements regarding brand names in advertising is not correct?

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Evidence from the market for eyeglasses suggests that advertising leads to

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

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A monopolistically competitive firm is currently earning a positive economic profit.If other firms enter the market,we would expect that the added competition will cause this firm to adjust its output such that it

Correct AnswerverifiedShow Answer

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