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In the long run,


A) monopolistically competitive firms earn a higher profit than perfectly competitive firms because monopolistically competitive firms have some monopoly power.
B) monopolistically competitive firms produce a higher output than perfectly competitive firms because competition drives the perfectly competitive firms' output down.
C) both monopolistically competitive and perfectly competitive firms produce where P = MC.
D) both monopolistically competitive and perfectly competitive firms produce where P = ATC.

E) A) and C)
F) All of the above

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A firm in a monopolistically competitive market is usually indifferent to an additional customer walking through the door,since a sale to that customer will not increase the firm's profit.

A) True
B) False

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In a monopolistically competitive industry,firms set price


A) equal to marginal cost since each firm is a price taker.
B) below marginal cost since each firm is a price taker.
C) above marginal cost since each firm is a price setter.
D) always a fraction of marginal cost since each firm is a price setter.

E) A) and D)
F) B) and D)

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In a small college town,four microbreweries have opened in the last two years.Demonstrate the effect of new market entrants on demand for existing firms (microbreweries)that already served this market.Assume that the local community now places a moratorium on new liquor licenses for microbreweries.How will this moratorium affect the long-run profitability of incumbent firms?

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blured image The arrival of a new entrant should be ...

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Monopolistically competitive markets differ from perfectly competitive markets due to (i) the number of sellers. (ii) the barriers to entry. (iii) the product differentiation among the sellers.


A) (i) only
B) (iii) only
C) (i) and (iii) only
D) (ii) and (iii) only

E) All of the above
F) B) and C)

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For a profit-maximizing monopolistically competitive firm,price exceeds marginal cost in


A) the short run but not in the long run.
B) the long run but not in the short run.
C) both the short run and the long run.
D) neither the short run nor the long run.

E) C) and D)
F) B) and D)

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Why does a typical monopolistically competitive firm face a downward-sloping demand curve?

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Because its product ...

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Which of the following market structures is considered a differentiated products market?


A) Perfect competition
B) Monopolistic competition
C) Monopoly
D) Both a and b are differentiated products markets.

E) None of the above
F) All of the above

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Figure 16-8 The figure is drawn for a monopolistically-competitive firm. Figure 16-8 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-8.Given this firm's cost curves,if the firm were perfectly competitive rather than monopolistically competitive,then in a long-run equilibrium it would produce A) less than 100 units of output. B) between 100 and 133.33 units of output. C) 133.33 units of output. D) more than 133.33 units of output. -Refer to Figure 16-8.Given this firm's cost curves,if the firm were perfectly competitive rather than monopolistically competitive,then in a long-run equilibrium it would produce


A) less than 100 units of output.
B) between 100 and 133.33 units of output.
C) 133.33 units of output.
D) more than 133.33 units of output.

E) B) and D)
F) C) and D)

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Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. 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.If the government forces this firm to produce at its efficient output level,how much output will this firm produce? A) 0 units of output B) 1 unit of output C) 2 units of output D) 3 units of output -Refer to Table 16-4.If the government forces this firm to produce at its efficient output level,how much output will this firm produce?


A) 0 units of output
B) 1 unit of output
C) 2 units of output
D) 3 units of output

E) B) and D)
F) None of the above

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In a monopolistically competitive market,


A) strategic interactions among the firms are very important.
B) the threat of entry by new firms is not an important consideration.
C) the attainment of a Nash equilibrium is an important objective.
D) firms may enter even though they will earn zero economic profit in the long run.

E) A) and D)
F) C) and 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. 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 profit-maximizing quantity? A) $12 B) $18 C) $32 D) $36 -Refer to Table 16-5.What is this firm's total cost at the profit-maximizing quantity?


A) $12
B) $18
C) $32
D) $36

E) All of the above
F) C) and D)

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Table 16-3 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. Table 16-3 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. -Refer to Table 16-3.What is the concentration ratio for Industry C? A) approximately 44% B) approximately 48% C) approximately 53% D) approximately 56% -Refer to Table 16-3.What is the concentration ratio for Industry C?


A) approximately 44%
B) approximately 48%
C) approximately 53%
D) approximately 56%

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

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Which of the following statements regarding monopolistic competition is not correct?


A) In the long-run equilibrium, price equals average total cost.
B) In the long-run equilibrium, firms earn zero economic profit.
C) In the long-run equilibrium, firms charge a price above marginal cost.
D) In the long-run equilibrium, firms produce a quantity in excess of their efficient scale.

E) C) and D)
F) None of the above

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Figure 16-9 The figure is drawn for a monopolistically-competitive firm. Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9.If the firm were to produce 154.92 units of output, A) efficient scale would be realized. B) ATC would be at its minimum value. C) the firm would sustain a loss of more than $2,000. D) All of the above are correct. -Refer to Figure 16-9.If the firm were to produce 154.92 units of output,


A) efficient scale would be realized.
B) ATC would be at its minimum value.
C) the firm would sustain a loss of more than $2,000.
D) All of the above are correct.

E) All of the above
F) A) and D)

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Figure 16-3 Figure 16-3 -Refer to Figure 16-3.At the profit-maximizing,or loss-minimizing,output level,the firm in this figure has total costs of approximately A) $600. B) $6,000. C) $9,000. D) $12,500. -Refer to Figure 16-3.At the profit-maximizing,or loss-minimizing,output level,the firm in this figure has total costs of approximately


A) $600.
B) $6,000.
C) $9,000.
D) $12,500.

E) All of the above
F) A) and D)

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


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) None of the above

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A monopolistically competitive industry is characterized by


A) many firms, differentiated products, and barriers to entry.
B) many firms, differentiated products, and free entry.
C) a few firms, identical products, and free entry.
D) a few firms, differentiated products, and barriers to entry.

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

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Excess capacity is


A) an example of the inefficiencies of monopolistically competitive markets.
B) a short-run problem but not a long-run problem.
C) a characteristic of rising average total cost curves.
D) Both a and b are correct.

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

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Senator Hubris wants to pass a law that would require all monopolistically competitive firms to operate at their efficient scale.If this law were to pass and be enforced,we would expect that monopolistically competitive firms would


A) see their profits increase.
B) break even.
C) lose money.
D) not really be affected by the law.

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

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