Question 1

The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.

Accepted Answer

A) True 
 B)False

Question 2

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome? (i)  perfect competition
(ii)  monopolistic competition
(iii)  monopoly

Accepted Answer

A)   (i)  only
B)   (i)  and (ii)  only
C)   (ii)  and (iii)  only
D)   (i) , (ii) , and (iii) E) A) and C)
F) B) and C)

Question 3

Firms can freely enter a market

Accepted Answer

A)   only when the market is a monopoly.
B)   only when the market is a monopoly or monopolistically competitive.
C)   only when the market is monopolistically competitive or perfectly competitive.
D)   when the market is perfectly competitive, monopolistically competitive, or monopolistid.E) A) and B)
F) B) and C)

Question 4

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

Question 5

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Accepted Answer

A) True 
 B)False

Question 6

Scenario 16-4
Delish, a moderately priced restaurant, has recently announced intentions to open a restaurant in Boston, MA. Assume that the restaurant market in Boston is characterized by monopolistic competition.
-Refer to Scenario 16-4. As a result of the new restaurant, existing restauranteurs in Boston are likely to experience a

Accepted Answer

A)   product-variety externality, which is a negative externality.
B)   product-variety externality, which is a positive externality.
C)   business-stealing externality, which is a negative externality.
D)   business-stealing externality, which is a positive externality.E) None of the above
F) B) and C)

Question 7

Evidence suggests that, in markets with differentiated products but little advertising,

Accepted Answer

A)   consumers are not confused by conflicting signals.
B)   firms are generally less profitable.
C)   markets are less efficient.
D)   consumers make better choices.E) A) and D)
F) C) and D)

Question 8

Scenario 16-7
Consider the problem facing two firms, YumYum and Bertollini, in the frozen food market. Each firm has just come up with an idea for a new "frozen meal for two" which it would sell for $9. Assume that the marginal cost for each new product is a constant $2, and the only fixed cost is for advertising. Each company knows that if it spends $12 million on advertising it will get 1.5 million consumers to try its new product. YumYum has done market research which suggests that its product does not have any "staying" power in the market. Even though it could get 1.5 million consumers to buy the product once, it is unlikely that they will continue to buy the product in the future. Bertollini's market research suggests that its product is very good, and consumers who try the product will continue to be consumers over the ensuing year. On the basis of its market research, Bertollini estimates that its initial 1.5 million customers will buy one unit of the product each month in the coming year, for a total of 18 million units.
-Refer to Scenario 16-7. By its willingness to spend money on advertising, Bertollini

Accepted Answer

A)   signals the quality of its new product to consumers.
B)   signals that it is not a profit maximizer.
C)   is detracting from the efficiency of markets.
D)   will drive YumYum out of the market.E) A) and B)
F) A) and C)

Question 9

The Mikati Philippines Hard Rock Cafe has the exact same menu as the Hard Rock Cafe in New York. This is an example of a brand name enhancing market efficiency for U.S. tourists visiting the Philippines.

Accepted Answer

A) True 
 B)False

Question 10

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Accepted Answer

A)   industrial products.
B)   homogeneous products.
C)   consumer goods for which there are no close substitutes.
D)   highly-differentiated consumer goods.E) None of the above
F) All of the above

Question 11

Oligopoly is characterized by a few sellers offering similar products, whereas monopolistic competition is characterized by many sellers offering differentiated products.

Accepted Answer

A) True 
 B)False

Question 12

A monopolistically competitive firm chooses

Accepted Answer

A)   the quantity of output to produce, but the market determines price.
B)   the price, but competition in the market determines the quantity.
C)   price, but output is determined by a cartel production quota.
D)   the quantity of output to produce and the price at which it will sell its output.E) All of the above
F) A) and D)

Question 13

Which of the following statements is correct?

Accepted Answer

A)   Firms in monopolistic competition and monopoly can earn economic profits in both the short run and the long run.
B)   Both perfectly competitive and monopolistically competitive firms charge a price equal to marginal cost.
C)   Firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost.
D)   Both perfectly competitive and monopolistically competitive firms produce the welfare-maximizing level of output.E) All of the above
F) C) and D)

Question 14

A market structure with only a few sellers, each offering similar or identical products, is known as

Accepted Answer

A)   oligopoly.
B)   monopoly.
C)   monopolistic competition.
D)   perfect competition.E) A) and B)
F) All of the above

Question 15

Figure 16-11 
-Refer to Figure 16-11. The graph depicts a monopolistically competitive firm in the short run. Which of the following explanations best describes the long run adjustment?

Accepted Answer

A)   More firms will enter this market and each firm will have a smaller share of the total market demand, shifting this firm's demand curve to the left.
B)   More firms will enter this market and each firm will have a larger share of the total market demand, shifting this firm's demand to the right.
C)   Firms will exit this market and each firm will have a smaller share of the total market demand, shifting this firm's demand to the left.
D)   Firms will exit this market and each firm will have a larger share of the total market demand, shifting this firm's demand to the right.E) A) and B)
F) A) and D)

Question 16

Of the following market structures, which are considered imperfectly competitive?

Accepted Answer

A)   III only
B)   II and III
C)   III and IV
D)   II, III, and IVE) None of the above
F) A) and B)

Question 17

When a new firm enters a monopolistically competitive market, the individual demand curves faced by all existing firms in that market will

Accepted Answer

A)   shift to the left.
B)   shift to the right.
C)   shift in a direction that is unpredictable without further information.
D)   remain unchanged. It is the supply curve that will shift.E) A) and D)
F) A) and C)

Question 18

Scenario 16-8
Burger Bonanza, a major national burger chain, recently decided to spend $4 million on an advertising campaign featuring a world famous actor to promote its new Bomber Burger.
-Refer to Scenario 16-8. What can consumers conclude from Burger Bonanza's willingness to spend $4 million on an advertising campaign?

Accepted Answer

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Question 19

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Accepted Answer

A)   highly-differentiated consumer goods.
B)   goods produced by natural monopolies.
C)   agricultural products.
D)   products with a limited shelf life such as milk and lettuce.E) All of the above
F) A) and D)

Question 20

Figure 16-9
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-9. In order to maximize its profit, the firm will choose to produce

Accepted Answer

A)   100 units of output, and its profit will be positive.
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 B)
F) None of the above

Exam 16: Monopolistic Competition

A monopolistically competitive firm

Correct Answer
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Of the following market structures, which are considered imperfectly competitive?

Correct Answer
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Firms can freely enter a market

Correct Answer
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Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. In order to maximize its profit, the firm will choose to produce

Correct Answer
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A market structure with only a few sellers, each offering similar or identical products, is known as

Correct Answer
verified

The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.

Correct Answer
verified

The Mikati Philippines Hard Rock Cafe has the exact same menu as the Hard Rock Cafe in New York. This is an example of a brand name enhancing market efficiency for U.S. tourists visiting the Philippines.

Correct Answer
verified

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Correct Answer
verified

Correct Answer
verified
high quali...
View Answer

Which of the following statements is correct?

Correct Answer
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In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome? (i) perfect competition (ii) monopolistic competition (iii) monopoly

Correct Answer
verified

Figure 16-11 -Refer to Figure 16-11. The graph depicts a monopolistically competitive firm in the short run. Which of the following explanations best describes the long run adjustment?

Correct Answer
verified

Correct Answer
verified

Evidence suggests that, in markets with differentiated products but little advertising,

Correct Answer
verified

When a new firm enters a monopolistically competitive market, the individual demand curves faced by all existing firms in that market will

Correct Answer
verified

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Correct Answer
verified

A monopolistically competitive firm chooses

Correct Answer
verified

Oligopoly is characterized by a few sellers offering similar products, whereas monopolistic competition is characterized by many sellers offering differentiated products.

Correct Answer
verified

Correct Answer
verified

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Correct Answer
verified

Exam 16: Monopolistic Competition

A monopolistically competitive firm

Correct AnswerverifiedShow Answer

Of the following market structures, which are considered imperfectly competitive?

Correct AnswerverifiedShow Answer

Firms can freely enter a market

Correct AnswerverifiedShow Answer

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9. In order to maximize its profit, the firm will choose to produce

Correct AnswerverifiedShow Answer

A market structure with only a few sellers, each offering similar or identical products, is known as

Correct AnswerverifiedShow Answer

The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.

Correct AnswerverifiedShow Answer

The Mikati Philippines Hard Rock Cafe has the exact same menu as the Hard Rock Cafe in New York. This is an example of a brand name enhancing market efficiency for U.S. tourists visiting the Philippines.

Correct AnswerverifiedShow Answer

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Correct AnswerverifiedShow Answer

Correct Answerverifiedhigh quali...View AnswerShow Answer

Which of the following statements is correct?

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? (i) perfect competition (ii) monopolistic competition (iii) monopoly

Correct AnswerverifiedShow Answer

Figure 16-11 -Refer to Figure 16-11. The graph depicts a monopolistically competitive firm in the short run. Which of the following explanations best describes the long run adjustment?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Evidence suggests that, in markets with differentiated products but little advertising,

Correct AnswerverifiedShow Answer

When a new firm enters a monopolistically competitive market, the individual demand curves faced by all existing firms in that market will

Correct AnswerverifiedShow Answer

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Correct AnswerverifiedShow Answer

A monopolistically competitive firm chooses

Correct AnswerverifiedShow Answer

Oligopoly is characterized by a few sellers offering similar products, whereas monopolistic competition is characterized by many sellers offering differentiated products.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Correct AnswerverifiedShow 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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high quali...
View Answer

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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