Question 1

Long-run profit earned by a monopolistically competitive firm is driven to the competitive level due to a(n)

Accepted Answer

A)   change in the technology that the firm utilizes.
B)   shift of its demand curve.
C)   shift of its supply curve.
D)   increase in the firm's average cost of production.E) B) and D)
F) A) and B)

Question 2

Which of the following represents the best government policy to reduce the deadweight loss associated with a monopolistically competitive market?

Accepted Answer

A)   The government should regulate firms in a manner similar to natural monopolies.
B)   The government should encourage more firms to enter the industry because without government intervention, there are likely to be "too few" firms.
C)   The government should encourage some firms to exit the industry because without government intervention, there are likely to be "too many" firms.
D)   There is no government policy that can reduce deadweight loss without creating other problems.E) B) and C)
F) None of the above

Question 3

In a market that is characterized by imperfect competition,

Accepted Answer

A)   firms are price takers.
B)   there are always a large number of firms.
C)   there are at least a few firms that compete with one another.
D)   the actions of one firm in the market never have any impact on the other firms' profits.E) All of the above
F) A) and B)

Question 4

Examples of monopolistically competitive markets include the markets for

Accepted Answer

A)   restaurants and furniture.
B)   wheat and corn.
C)   postage stamps and wooden pencils.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 5

Which type of market structure has the fewest number of firms?

Accepted Answer

The answer of Which type of market structure has the...

Question 6

Free entry eliminates long-run profits for firms in competitive and monopolistic industries.

Accepted Answer

A) True 
 B)False

Question 7

Edward Chamberlin argued that governments should

Accepted Answer

A)   ban the use of brand names.
B)   not enforce the trademarks that companies use to identify their products.
C)   vigorously enforce the trademarks that companies use to identify their products.
D)   tax companies whose products have brand names in proportion to how much consumers recognize their products.E) B) and C)
F) A) and C)

Question 8

The "competition" in monopolistically competitive markets is most likely a result of having many sellers in the market.

Accepted Answer

A) True 
 B)False

Question 9

In many college towns, private independent bookstores typically locate on the periphery of the college campus. However, in some college towns, the university has used political power to restrict private bookstores near campus through community zoning laws. Use your knowledge of markets to predict the price and quality of service differences in the market for college textbooks under the two different market regimes.

Accepted Answer

In monopoly markets, price wil...

Question 10

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

Accepted Answer

A)   P > ATC
B)   P = ATC
C)   P 
D)   Any of the above could be correct.E) All of the above
F) None of the above

Question 11

The market structure in which each firm has a monopoly over the product it makes, but many other firms make similar products that compete for the same customers is called

Accepted Answer

monopolist...

Question 12

Which of the following best describes the idea of excess capacity in monopolistic competition?

Accepted Answer

A)   Firms produce more output than is socially desirable.
B)   The output produced by a typical firm is less than what would occur at the minimum point on its ATC curve.
C)   Due to product differentiation, firms choose output levels where price equals average total cost.
D)   Firms keep some surplus output on hand in case there is a shift in the demand for their product.E) A) and B)
F) All of the above

Question 13

Firms that sell highly differentiated consumer goods, such as over-the-counter drugs, soft drinks, breakfast cereals, and dog food, typically spend between 10 and 20 percent of revenue for

Accepted Answer

The answer of Firms that sell highly differentiated consumer goods,...

Question 14

In the short run, a firm operating in a monopolistically competitive market

Accepted Answer

A)   produces an output level where marginal revenue equals average total cost.
B)   sets price equal to demand where marginal revenue equals marginal cost.
C)   must earn zero economic profits.
D)   maximizes revenues as well as profits.E) B) and C)
F) C) and D)

Question 15

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

Question 16

Two bottles of over-the-counter pain reliever sit side-by-side in a grocery store: Advil (a brand name)  sells for $5.00, while Feel Better (not a brand name)  sells for $2.50. In a typical day the store sells some of each type of pain reliever, which suggests that

Accepted Answer

A)   no rational consumer would spend twice as much for Advil as he would for Feel Better.
B)   some consumers must perceive that Advil is a higher quality product.
C)   Advil has no incentive to maintain the quality of its product just because of the Advil brand name.
D)   Advil spends money on advertising to reduce competition in the market.E) B) and C)
F) B) and D)

Question 17

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Accepted Answer

A)   average revenue exceeds marginal revenue
B)   marginal revenue equals marginal cost
C)   price exceeds marginal cost
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 18

hich of the following industries has the highest concentration ratio?

Accepted Answer

A)   dresses
B)   apples
C)   books
D)   cigarettesE) A) and D)
F) A) and C)

Question 19

In a monopolistically competitive market,

Accepted Answer

A)   there are only a few sellers.
B)   each firm takes the price of its product as given.
C)   firms can enter or exit the market without restrictions.
D)   each firm produces a product that is essentially identical to the products of other firms in the market.E) B) and C)
F) A) and C)

Question 20

Assume the role of a defender of advertising. Describe the characteristics of advertising that enhance the effectiveness of markets and increase the social welfare of society.

Accepted Answer

Advertising provides information to cons...

Exam 16: Monopolistic Competition

Examples of monopolistically competitive markets include the markets for

Correct Answer
verified

Which of the following best describes the idea of excess capacity in monopolistic competition?

Correct Answer
verified

Two bottles of over-the-counter pain reliever sit side-by-side in a grocery store: Advil (a brand name) sells for $5.00, while Feel Better (not a brand name) sells for $2.50. In a typical day the store sells some of each type of pain reliever, which suggests that

Correct Answer
verified

Correct Answer
verified
In monopoly markets, price wil...
View Answer

Long-run profit earned by a monopolistically competitive firm is driven to the competitive level due to a(n)

Correct Answer
verified

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Correct Answer
verified

The "competition" in monopolistically competitive markets is most likely a result of having many sellers in the market.

Correct Answer
verified

Edward Chamberlin argued that governments should

Correct Answer
verified

In a market that is characterized by imperfect competition,

Correct Answer
verified

In a monopolistically competitive market,

Correct Answer
verified

hich of the following industries has the highest concentration ratio?

Correct Answer
verified

Which of the following represents the best government policy to reduce the deadweight loss associated with a monopolistically competitive market?

Correct Answer
verified

Firms that sell highly differentiated consumer goods, such as over-the-counter drugs, soft drinks, breakfast cereals, and dog food, typically spend between 10 and 20 percent of revenue for

Correct Answer
verified

Free entry eliminates long-run profits for firms in competitive and monopolistic industries.

Correct Answer
verified

The market structure in which each firm has a monopoly over the product it makes, but many other firms make similar products that compete for the same customers is called

Correct Answer
verified
monopolist...
View Answer

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

Correct Answer
verified

In the short run, a firm operating in a monopolistically competitive market

Correct Answer
verified

The product-variety externality is associated with the

Correct Answer
verified

Which type of market structure has the fewest number of firms?

Correct Answer
verified

Assume the role of a defender of advertising. Describe the characteristics of advertising that enhance the effectiveness of markets and increase the social welfare of society.

Correct Answer
verified
Advertising provides information to cons...
View Answer

Exam 16: Monopolistic Competition

Examples of monopolistically competitive markets include the markets for

Correct AnswerverifiedShow Answer

Which of the following best describes the idea of excess capacity in monopolistic competition?

Correct AnswerverifiedShow Answer

Two bottles of over-the-counter pain reliever sit side-by-side in a grocery store: Advil (a brand name) sells for $5.00, while Feel Better (not a brand name) sells for $2.50. In a typical day the store sells some of each type of pain reliever, which suggests that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIn monopoly markets, price wil...View AnswerShow Answer

Long-run profit earned by a monopolistically competitive firm is driven to the competitive level due to a(n)

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Correct AnswerverifiedShow Answer

The "competition" in monopolistically competitive markets is most likely a result of having many sellers in the market.

Correct AnswerverifiedShow Answer

Edward Chamberlin argued that governments should

Correct AnswerverifiedShow Answer

In a market that is characterized by imperfect competition,

Correct AnswerverifiedShow Answer

In a monopolistically competitive market,

Correct AnswerverifiedShow Answer

hich of the following industries has the highest concentration ratio?

Correct AnswerverifiedShow Answer

Which of the following represents the best government policy to reduce the deadweight loss associated with a monopolistically competitive market?

Correct AnswerverifiedShow Answer

Firms that sell highly differentiated consumer goods, such as over-the-counter drugs, soft drinks, breakfast cereals, and dog food, typically spend between 10 and 20 percent of revenue for

Correct AnswerverifiedShow Answer

Free entry eliminates long-run profits for firms in competitive and monopolistic industries.

Correct AnswerverifiedShow Answer

The market structure in which each firm has a monopoly over the product it makes, but many other firms make similar products that compete for the same customers is called

Correct Answerverifiedmonopolist...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

In the short run, a firm operating in a monopolistically competitive market

Correct AnswerverifiedShow Answer

The product-variety externality is associated with the

Correct AnswerverifiedShow Answer

Which type of market structure has the fewest number of firms?

Correct AnswerverifiedShow Answer

Assume the role of a defender of advertising. Describe the characteristics of advertising that enhance the effectiveness of markets and increase the social welfare of society.

Correct AnswerverifiedAdvertising provides information to cons...View AnswerShow 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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In monopoly markets, price wil...
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Correct Answer
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Correct Answer
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monopolist...
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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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Advertising provides information to cons...
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