Question 1

If firms in a monopolistically competitive market are incurring economic losses, which of the following statements describes the changes that occur as the market adjusts to the long-run equilibrium?

Accepted Answer

A)   Each existing firm's demand curve shifts to the left.
B)   More firms enter the market.
C)   Each firm eliminates its excess capacity.
D)   Both a and b are correct.E) None of the above
F) A) and B) D

Question 2

Product differentiation causes the seller of a good to face what type of demand curve?

Accepted Answer

A)   downward sloping
B)   vertical
C)   horizontal
D)   Any of the above could be correct since product differentiation does not affect the shape of the demand curve.E) A) and B)
F) None of the above

Question 3

Monopolistic competition is an inefficient market structure because

Accepted Answer

A)   marginal revenue equals marginal cost.
B)   it has a deadweight loss, just as monopoly does.
C)   long-run profits are zero due to free entry.
D)   All of the above are correct.E) A) and B)
F) A) and D)

Question 4

Which of the following statements is not correct?

Accepted Answer

A)   Novels are likely to be produced in a monopolistically competitive industry.
B)   Cable television is likely to be produced in a monopoly industry.
C)   Milk is likely to be produced in a monopolistically competitive industry.
D)   Cigarettes are likely to be produced in an oligopoly industry.E) C) and D)
F) None of the above

Question 5

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 6

Figure 16-13 
-Refer to Figure 16-13. Which letter represents the profit-maximizing price?

Accepted Answer

The answer of Figure 16-13 
-Refer to Figure 16-13. Which...

Question 7

Most businesses advertise their products and services. Some business use SPAM emails to advertise because the cost of a mass e-mail is close to zero. Other business spend millions of dollars to advertise in a 30-second spot during the Super Bowl. Having observed this real world data, economists argue that the amount of money that a business spends on advertising is a proxy for a good or service's

Accepted Answer

A)   size.
B)   quality.
C)   newness.
D)   cost of production.E) A) and B)
F) All of the above

Question 8

Table 16-5
This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm.
 
-Refer to Table 16-5. What is this firm's total cost at the profit­maximizing quantity?

Accepted Answer

A)   $12
B)   $18
C)   $32
D)   $36E) A) and B)
F) B) and D)

Question 9

Entry and exit drive each firm in a monopolistically competitive market to a point of tangency between its

Accepted Answer

A)   marginal revenue curve and its total cost curve.
B)   marginal revenue curve and its average total cost curve.
C)   demand curve and its total cost curve.
D)   demand curve and its average total cost curve.E) A) and B)
F) All of the above D

Question 10

In a long-run equilibrium, a firm in a monopolistically competitive market operates

Accepted Answer

A)   where marginal revenue is zero.
B)   where marginal revenue is negative.
C)   on the rising portion of its average total cost curve.
D)   on the declining portion of its average total cost curve.E) B) and C)
F) A) and D)

Question 11

The lower the concentration ratio, the

Accepted Answer

A)   more control an individual firm has to set prices.
B)   more competitive the industry.
C)   less competitive the industry.
D)   Both a and c are correct.E) All of the above
F) A) and D) B

Question 12

Figure 16-10
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-10. The firm's maximum profit is

Accepted Answer

A)   $-7,000.
B)   $-5,000.
C)   $-2,000.
D)   The firm's maximum profit cannot be determined from the figure.E) A) and D)
F) All of the above

Question 13

Scenario 16-3
Peter operates an ice cream shop in the center of Fairfield. He sells several unusual flavors of organic, homemade ice cream so he has a monopoly over his own ice cream, though he competes with many other firms selling ice cream in Fairfield for the same customers. Peter's demand and cost values for sales per day are given in the table below. (Everyone who purchases Peter's ice cream buys a double scoop cone because it's so delicious.) 
 
-Refer to Scenario 16-3. What price should Peter charge per double scoop ice cream cone to maximize his profit?

Accepted Answer

A)   $5.60
B)   $4.40
C)   $3.20
D)   $2.40E) A) and B)
F) All of the above

Question 14

Critics of advertising argue that advertising

Accepted Answer

A)   creates desires that otherwise might not exist.
B)   hinders competition.
C)   often fails to convey substantive information.
D)   All of the above are correct.E) All of the above
F) None of the above

Question 15

Firms in a monopolistically competitive market

Accepted Answer

A)   are price takers.
B)   produce an output level that minimizes average total cost in the long run.
C)   maximize profits by producing where price equals marginal cost.
D)   cannot earn economic profits in the long run.E) A) and B)
F) All of the above

Question 16

Figure 16-12 
-Refer to Figure 16-12. What is the efficient scale of production?

Accepted Answer

A)   This firm cannot produce efficiently.
B)   12 units
C)   22 units
D)   28 unitsE) A) and B)
F) A) and C)

Question 17

Which of the following statements is correct?

Accepted Answer

A)   Cigarettes are likely to be produced in a monopolistically competitive industry.
B)   Novels are likely to be produced in a monopoly industry.
C)   Movies are likely to be produced in a monopolistically competitive industry.
D)   Milk is likely to be produced in an oligopoly industry.E) A) and D)
F) None of the above

Question 18

Regulation of a firm in a monopolistically competitive market

Accepted Answer

A)   usually implies a very small administrative burden.
B)   will lower the firm's costs.
C)   is commonly used to enhance market efficiency.
D)   is unlikely to improve market efficiency.E) B) and D)
F) B) and C)

Question 19

Which of the following statements is not correct?

Accepted Answer

A)   Monopolistic competition is similar to monopoly because in each market structure the firm can charge a price above marginal costs.
B)   Monopolistic competition is similar to perfect competition because both market structures are characterized by free entry.
C)   Monopolistic competition is similar to oligopoly because both market structures are characterized by barriers to entry.
D)   Monopolistic competition is similar to perfect competition because both market structures are characterized by many sellers.E) A) and B)
F) None of the above

Question 20

The general term for market structures that fall somewhere between monopoly and perfect competition is

Accepted Answer

A)   incomplete markets.
B)   imperfectly competitive markets.
C)   oligopoly markets.
D)   monopolistically competitive markets.E) All of the above
F) B) and C)

Exam 16: Monopolistic Competition

If firms in a monopolistically competitive market are incurring economic losses, which of the following statements describes the changes that occur as the market adjusts to the long-run equilibrium?

Correct Answer
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D

Product differentiation causes the seller of a good to face what type of demand curve?

Correct Answer
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Monopolistic competition is an inefficient market structure because

Correct Answer
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Which of the following statements is not correct?

Correct Answer
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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 Answer
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Figure 16-13 -Refer to Figure 16-13. Which letter represents the profit-maximizing price?

Correct Answer
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Correct Answer
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Table 16-5 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-5. What is this firm's total cost at the profitmaximizing quantity?

Correct Answer
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Entry and exit drive each firm in a monopolistically competitive market to a point of tangency between its

Correct Answer
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D

In a long-run equilibrium, a firm in a monopolistically competitive market operates

Correct Answer
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The lower the concentration ratio, the

Correct Answer
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B

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. The firm's maximum profit is

Correct Answer
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Correct Answer
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Critics of advertising argue that advertising

Correct Answer
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Firms in a monopolistically competitive market

Correct Answer
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Figure 16-12 -Refer to Figure 16-12. What is the efficient scale of production?

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Regulation of a firm in a monopolistically competitive market

Correct Answer
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Which of the following statements is not correct?

Correct Answer
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The general term for market structures that fall somewhere between monopoly and perfect competition is

Correct Answer
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Exam 16: Monopolistic Competition

If firms in a monopolistically competitive market are incurring economic losses, which of the following statements describes the changes that occur as the market adjusts to the long-run equilibrium?

Correct AnswerverifiedD

Product differentiation causes the seller of a good to face what type of demand curve?

Correct AnswerverifiedShow Answer

Monopolistic competition is an inefficient market structure because

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

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

Figure 16-13 -Refer to Figure 16-13. Which letter represents the profit-maximizing price?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 16-5 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-5. What is this firm's total cost at the profit­maximizing quantity?

Correct AnswerverifiedShow Answer

Entry and exit drive each firm in a monopolistically competitive market to a point of tangency between its

Correct AnswerverifiedD

In a long-run equilibrium, a firm in a monopolistically competitive market operates

Correct AnswerverifiedShow Answer

The lower the concentration ratio, the

Correct AnswerverifiedB

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. The firm's maximum profit is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Critics of advertising argue that advertising

Correct AnswerverifiedShow Answer

Firms in a monopolistically competitive market

Correct AnswerverifiedShow Answer

Figure 16-12 -Refer to Figure 16-12. What is the efficient scale of production?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Regulation of a firm in a monopolistically competitive market

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

The general term for market structures that fall somewhere between monopoly and perfect competition is

Correct AnswerverifiedShow Answer

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D

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Table 16-5 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-5. What is this firm's total cost at the profitmaximizing quantity?

Correct Answer
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D

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B

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