Question 1

In a monopolistically competitive market,social welfare would be enhanced if

Accepted Answer

A)   price equaled marginal cost.
B)   government regulation eliminated the product-variety externality.
C)   the government raised taxes to subsidize firms that price below average total cost.
D)   there were fewer firms,making the industry closer to an oligopoly.E) All of the above
F) None of the above

Question 2

When monopolistically competitive firms advertise,in the long run

Accepted Answer

A)   they will still earn zero economic profit.
B)   they can earn positive economic profit by increasing market share.
C)   the market price must fall.
D)   the market price must rise.E) C) and D)
F) A) and C)

Question 3

When a firm operates at efficient scale,it is producing at the minimum point on its average total cost curve.

Accepted Answer

A) True 
 B)False

Question 4

A monopolistically competitive market is like both a competitive market and a monopoly in that

Accepted Answer

A)   all three market structures feature easy entry by new firms in the long run.
B)   firms in all three market structures maximize profit by producing an output level where marginal revenue equals marginal cost.
C)   firms in all three market structures produce the welfare-maximizing level of output.
D)   All of the above are correct.E) None of the above
F) A) and C)

Question 5

A profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competitive market because the firm in the monopolistically competitive market

Accepted Answer

A)   is characterized by market-share maximization.
B)   has no barriers to entry.
C)   faces a downward-sloping demand curve for its product.
D)   faces a horizontal demand curve at the market clearing price.E) None of the above
F) A) and D)

Question 6

Advertising during the Super Bowl is an example of information about quality contained primarily in the existence and expense of the advertising.

Accepted Answer

A) True 
 B)False

Question 7

Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e. ,on an average night,80 percent of the hotel rooms are full) .This kind of excess capacity is indicative of what kind of market?

Accepted Answer

A)   monopoly
B)   perfect competition
C)   monopolistic competition
D)   oligopolyE) All of the above
F) A) and D)

Question 8

Under which of the following market structures would consumers likely pay the highest price for a product?

Accepted Answer

A)   perfect competition
B)   monopolistic competition
C)   oligopoly
D)   monopolyE) All of the above
F) None of the above

Question 9

A firm in a monopolistically competitive market can earn short-run profits but not long-run profits.

Accepted Answer

A) True 
 B)False

Question 10

A monopolistically competitive market has characteristics that are similar to

Accepted Answer

A)   a monopoly only.
B)   a competitive firm only.
C)   both a monopoly and a competitive firm.
D)   neither a monopoly nor a competitive firm.E) B) and C)
F) A) and D)

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

A profit-maximizing firm in a monopolistically competitive market always operates on the downward-sloping portion of its marginal cost curve.

Accepted Answer

A) True 
 B)False

Question 13

Figure 16-4 
-Refer to Figure 16-4.Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm?

Accepted Answer

A)   panel a
B)   panel b
C)   panel c
D)   All of the above are correct.E) B) and D)
F) All of the above

Question 14

Table 16-1
The following table shows the percentage of output supplied by the top eight firms in four different industries.
 
-Refer to Table 16-1.What is the concentration ratio in Industry D?

Accepted Answer

A)   32%
B)   56%
C)   60%
D)   65%E) None of the above
F) B) and C)

Question 15

A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

Accepted Answer

A)   a decrease in profits for all hotels/motels.
B)   reduced efficiency of local lodging markets.
C)   a request by consumers to increase the number of billboards.
D)   increased price competition among hotels/motels in the community.E) A) and D)
F) None of the above

Question 16

Two soft drinks sit side-by-side in a grocery store: A six-pack of Coca-Cola (a brand name) sells for $3.00,while a six-pack of Uncle Don's cola (not a brand name) sells for $1.50.In a typical day the store sells some of each type of cola,which suggests that

Accepted Answer

A)   no rational consumer would spend twice as much for Coca-Cola as he would for Uncle Don's cola.
B)   some consumers must perceive that Coca-Cola is a higher quality product.
C)   Coca-Cola has no incentive to maintain the quality of its product just because of the Coca-Cola brand name.
D)   None of the above is correct.E) A) and B)
F) A) and C)

Question 17

When a firm exits a monopolistically competitive market,the individual demand curves faced by all remaining firms in that market will

Accepted Answer

A)   shift in a direction that is unpredictable without further information.
B)   shift to the right.
C)   shift to the left.
D)   remain unchanged.It is the supply curve that will shift.E) A) and B)
F) None of the above

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

In markets where the government imposes an excise tax on unit sales,it also has a tendency to dabble with restrictions on advertising (for example,cigarettes and hard liquor).Do potential (or actual)restrictions on advertising in these markets serve the interest of a government that is interested in maximizing its tax revenue from the sale of these products? Explain your answer.

Accepted Answer

In the case of the examples given,demand...

Question 20

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

Exam 16: Monopolistic Competition

Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e. ,on an average night,80 percent of the hotel rooms are full) .This kind of excess capacity is indicative of what kind of market?

Correct Answer
verified

When a firm operates at efficient scale,it is producing at the minimum point on its average total cost curve.

Correct Answer
verified

Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. -Refer to Table 16-1.What is the concentration ratio in Industry D?

Correct Answer
verified

In a monopolistically competitive market,social welfare would be enhanced if

Correct Answer
verified

A monopolistically competitive market is like both a competitive market and a monopoly in that

Correct Answer
verified

A monopolistically competitive market has characteristics that are similar to

Correct Answer
verified

A monopolistically competitive firm chooses

Correct Answer
verified

A firm in a monopolistically competitive market can earn short-run profits but not long-run profits.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Figure 16-4 -Refer to Figure 16-4.Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm?

Correct Answer
verified

Two soft drinks sit side-by-side in a grocery store: A six-pack of Coca-Cola (a brand name) sells for $3.00,while a six-pack of Uncle Don's cola (not a brand name) sells for $1.50.In a typical day the store sells some of each type of cola,which suggests that

Correct Answer
verified

When a firm exits a monopolistically competitive market,the individual demand curves faced by all remaining firms in that market will

Correct Answer
verified

When monopolistically competitive firms advertise,in the long run

Correct Answer
verified

Correct Answer
verified
In the case of the examples given,demand...
View Answer

A profit-maximizing firm in a monopolistically competitive market always operates on the downward-sloping portion of its marginal cost curve.

Correct Answer
verified

Under which of the following market structures would consumers likely pay the highest price for a product?

Correct Answer
verified

A profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competitive market because the firm in the monopolistically competitive market

Correct Answer
verified

A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

Correct Answer
verified

Advertising during the Super Bowl is an example of information about quality contained primarily in the existence and expense of the advertising.

Correct Answer
verified

Exam 16: Monopolistic Competition

Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e. ,on an average night,80 percent of the hotel rooms are full) .This kind of excess capacity is indicative of what kind of market?

Correct AnswerverifiedShow Answer

When a firm operates at efficient scale,it is producing at the minimum point on its average total cost curve.

Correct AnswerverifiedShow Answer

Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. -Refer to Table 16-1.What is the concentration ratio in Industry D?

Correct AnswerverifiedShow Answer

In a monopolistically competitive market,social welfare would be enhanced if

Correct AnswerverifiedShow Answer

A monopolistically competitive market is like both a competitive market and a monopoly in that

Correct AnswerverifiedShow Answer

A monopolistically competitive market has characteristics that are similar to

Correct AnswerverifiedShow Answer

A monopolistically competitive firm chooses

Correct AnswerverifiedShow Answer

A firm in a monopolistically competitive market can earn short-run profits but not long-run profits.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 16-4 -Refer to Figure 16-4.Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm?

Correct AnswerverifiedShow Answer

Two soft drinks sit side-by-side in a grocery store: A six-pack of Coca-Cola (a brand name) sells for $3.00,while a six-pack of Uncle Don's cola (not a brand name) sells for $1.50.In a typical day the store sells some of each type of cola,which suggests that

Correct AnswerverifiedShow Answer

When a firm exits a monopolistically competitive market,the individual demand curves faced by all remaining firms in that market will

Correct AnswerverifiedShow Answer

When monopolistically competitive firms advertise,in the long run

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIn the case of the examples given,demand...View AnswerShow Answer

A profit-maximizing firm in a monopolistically competitive market always operates on the downward-sloping portion of its marginal cost curve.

Correct AnswerverifiedShow Answer

Under which of the following market structures would consumers likely pay the highest price for a product?

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competitive market because the firm in the monopolistically competitive market

Correct AnswerverifiedShow Answer

A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

Correct AnswerverifiedShow Answer

Advertising during the Super Bowl is an example of information about quality contained primarily in the existence and expense of the advertising.

Correct AnswerverifiedShow Answer

Correct Answer
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In the case of the examples given,demand...
View Answer

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