Question 1

A profit-maximizing firm operating in a monopolistically competitive market that is in a long-run equilibrium has

Accepted Answer

A)   minimized average total cost.
B)   chosen to produce where demand is unitary elastic.
C)   produced the efficient scale of output.
D)   chosen a quantity of output where average revenue equals average total cost.E) A) and C)
F) A) and B)

Question 2

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. What price will this firm charge to maximize profit?

Accepted Answer

A)   $25
B)   $30
C)   $35
D)   $40E) A) and C)
F) B) and C)

Question 3

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

Question 4

Figure 16-5 
-Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will not encourage either the entry or exit of firms in a monopolistically competitive industry?

Accepted Answer

A)   panel a
B)   panel b
C)   panel c
D)   panel dE) B) and D)
F) B) and C)

Question 5

Figure 16-4 
-Refer to Figure 16-4. At the profit-maximizing, or loss-minimizing, output level, the firm in this figure has total revenue of approximately

Accepted Answer

A)   $12,000.
B)   $21,000.
C)   $24,000.
D)   $27,300.E) A) and C)
F) A) and B)

Question 6

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 7

In a long-run equilibrium, firms in both perfectly competitive markets and monopolistically competitive markets produce a quantity below the efficient scale of production.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Figure 16-10
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-10. In order to maximize its profit, the firm will choose to produce

Accepted Answer

A)   100 units of output, and its profit will be negative.
B)   100 units of output, and its profit will be zero.
C)   133.33 units of output, and its profit will be negative.
D)   133.33 units of output, and its profit will be zero.E) A) and D)
F) All of the above

Question 10

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

Accepted Answer

A)   P = AR
B)   MR = MC
C)   P > MC
D)   All of the above are correct.E) None of the above
F) A) and B)

Question 11

In a monopolistically competitive market,

Accepted Answer

A)   the entry of new firms creates externalities.
B)   the absence of restrictions on entry by new firms ensures that there will be no deadweight loss.
C)   there are always too many firms in the market relative to the socially-optimal number of firms.
D)   firms cannot earn positive economic profits in the short run.E) B) and D)
F) A) and B)

Question 12

Figure 16-12 
-Refer to Figure 16-12. If this firm profit-maximizes, what price will it charge?

Accepted Answer

The answer of Figure 16-12 
-Refer to Figure 16-12. If...

Question 13

Which of the following markets impose deadweight losses on society? (i)  perfect competition
(ii)  monopolistic competition
(iii)  monopoly

Accepted Answer

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

Question 14

Scenario 16-2
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 16-2. If the marginal cost of producing this good is 4, what quantity would a profit-maximizing monopolist produce?

Accepted Answer

A)   Q = 2
B)   Q = 4
C)   Q = 6
D)   Q = 8E) A) and C)
F) A) and B)

Question 15

In comparison to perfect competition, monopolistic competition is characterized by

Accepted Answer

A)   efficient scale.
B)   pricing at marginal cost.
C)   excess capacity.
D)   All of the above are correct.E) A) and D)
F) A) and C)

Question 16

Figure 16-12 
-Refer to Figure 16-12. When this firm profit­maximizes, what is the amount of the firm's profit or loss?

Accepted Answer

The answer of Figure 16-12 
-Refer to Figure 16-12. When...

Question 17

The product-variety externality is associated with the

Accepted Answer

A)   producer surplus that accrues to incumbent firms in a monopolistically competitive industry.
B)   loss of consumer surplus from exposure to additional advertising.
C)   consumer surplus that is generated from the introduction of a new product.
D)   opportunity cost of firms exiting a monopolistically competitive industry.E) None of the above
F) A) and D)

Question 18

Oligopoly and monopolistic competition are examples of a market structure called imperfect competition.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not a key feature of monopolistic competition?

Accepted Answer

A)   Excess capacity
B)   A markup of price over marginal cost
C)   Positive economic profits for firms in the long run
D)   Differentiated products among firms in the marketE) C) and D)
F) All of the above

Question 20

Imperfectly competitive firms are characterized by

Accepted Answer

A)   horizontal demand curves.
B)   standardized products.
C)   a large number of small firms.
D)   price making ability.E) All of the above
F) None of the above

Exam 16: Monopolistic Competition

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. What price will this firm charge to maximize profit?

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

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In a long-run equilibrium, firms in both perfectly competitive markets and monopolistically competitive markets produce a quantity below the efficient scale of production.

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In comparison to perfect competition, monopolistic competition is characterized by

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Figure 16-4 -Refer to Figure 16-4. At the profit-maximizing, or loss-minimizing, output level, the firm in this figure has total revenue of approximately

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Figure 16-5 -Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will not encourage either the entry or exit of firms in a monopolistically competitive industry?

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Which of the following markets impose deadweight losses on society? (i) perfect competition (ii) monopolistic competition (iii) monopoly

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Imperfectly competitive firms are characterized by

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

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A profit-maximizing firm operating in a monopolistically competitive market that is in a long-run equilibrium has

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Oligopoly and monopolistic competition are examples of a market structure called imperfect competition.

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

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Figure 16-12 -Refer to Figure 16-12. When this firm profit­maximizes, what is the amount of the firm's profit or loss?

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Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. In order to maximize its profit, the firm will choose to produce

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Scenario 16-2 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 16-2. If the marginal cost of producing this good is 4, what quantity would a profit-maximizing monopolist produce?

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The product-variety externality is associated with the

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Figure 16-12 -Refer to Figure 16-12. If this firm profit-maximizes, what price will it charge?

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

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Which of the following is not a key feature of monopolistic competition?

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In a monopolistically competitive market,

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Figure 16-12 -Refer to Figure 16-12. When this firm profitmaximizes, what is the amount of the firm's profit or loss?

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