Question 1

Each firm in a monopolistically competitive market

Accepted Answer

A)  earns both short-run and long-run profits. 
B)  faces a downward-sloping demand curve. 
C)  cannot earn economic profit in the short run. 
D)  sets price equal to marginal cost. 
A)  earns both short-run and long-run profits. 
B)  faces a downward-sloping demand curve. 
C)  cannot earn economic profit in the short run. 
D)  sets price equal to marginal cost. B

Question 2

Suppose the point of tangency that characterizes long-run equilibrium for a monopolistically competitive firm occurs at Q₁ units of output.This level of output,Q₁,

Accepted Answer

A)  exceeds the level of output at which marginal revenue equals marginal cost. 
B)  exceeds the level of output at which marginal cost equals average total cost. 
C)  falls short of the level of output at which price equals marginal cost. 
D)  exceeds the firm's efficient scale of output. 
A)  exceeds the level of output at which marginal revenue equals marginal cost. 
B)  exceeds the level of output at which marginal cost equals average total cost. 
C)  falls short of the level of output at which price equals marginal cost. 
D)  exceeds the firm's efficient scale of output. C

Question 3

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  True

Question 4

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)  monopoly 
A)  perfect competition 
B)  monopolistic competition 
C)  oligopoly 
D)  monopoly

Question 5

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

Accepted Answer

A)  P > MR and P = MC 
B)  ATC = demand and MR = MC 
C)  P  ATC and demand > MR 
A)  P > MR and P = MC 
B)  ATC = demand and MR = MC 
C)  P  ATC and demand > MR

Question 6

Figure 16-8
The figure is drawn for a monopolistically-competitive firm.
  
-Refer to Figure 16-8.When the firm is maximizing its profit,the markup over marginal cost amounts to

Accepted Answer

A)  $16.67. 
B)  $33.33. 
C)  $50.00. 
D)  $66.66. 
A)  $16.67. 
B)  $33.33. 
C)  $50.00. 
D)  $66.66.

Question 7

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. 
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.

Question 8

Figure 16-9
The figure is drawn for a monopolistically-competitive firm.
  
-Refer to Figure 16-9.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. 
A)  $-7,000. 
B)  $-5,000. 
C)  $-2,000. 
D)  The firm's maximum profit cannot be determined from the figure.

Question 9

A firm has the following cost structure:  
If this firm is in a typical monopolistically competitive market,in the long run it will likely produce

Accepted Answer

A)  4 or fewer units of output. 
B)  5 units of output. 
C)  more than 5 units of output. 
D)  None of the above are necessarily correct because there is not enough information to tell. 
A)  4 or fewer units of output. 
B)  5 units of output. 
C)  more than 5 units of output. 
D)  None of the above are necessarily correct because there is not enough information to tell.

Question 10

Scenario 16-1
Escape Vacations has recently announced intentions to build a new hotel/resort complex in Phoenix, AZ. Assume that the hotel/resort market in Phoenix is characterized by monopolistic competition.
-Refer to Scenario 16-1.As a result of the new Escape Vacations hotel/resort,tourists who stay in Phoenix are likely to experience a

Accepted Answer

A)  product-variety externality, which harms consumers. 
B)  product-variety externality, which benefits consumers. 
C)  business-stealing externality, which harms consumers. 
D)  business-stealing externality, which benefits consumers. 
A)  product-variety externality, which harms consumers. 
B)  product-variety externality, which benefits consumers. 
C)  business-stealing externality, which harms consumers. 
D)  business-stealing externality, which benefits consumers.

Question 11

In a monopolistically competitive market,

Accepted Answer

A)  entry by new firms is impeded by barriers to entry; thus, the number of firms in the market is never ideal. 
B)  entry by new firms is impeded by barriers to entry, but the number of firms in the market is nevertheless always ideal. 
C)  free entry ensures that the number of firms in the market is ideal. 
D)  there may be too few or too many firms in the market, despite free entry. 
A)  entry by new firms is impeded by barriers to entry; thus, the number of firms in the market is never ideal. 
B)  entry by new firms is impeded by barriers to entry, but the number of firms in the market is nevertheless always ideal. 
C)  free entry ensures that the number of firms in the market is ideal. 
D)  there may be too few or too many firms in the market, despite free entry.

Question 12

Table 16-2
The following table shows the total output produced by the top six firms as well as the total industry output for each industry.
  
-Refer to Table 16-2.What is the concentration ratio for Industry A?

Accepted Answer

A)  about 71% 
B)  about 81% 
C)  about 88% 
D)  100% 
A)  about 71% 
B)  about 81% 
C)  about 88% 
D)  100%

Question 13

Two college students,Mary and Maggie,are spending spring break in Florida.Mary buys a cup of coffee each morning at the local Starbucks rather than from one of the local coffee shops.Maggie claims that Mary is irrational because she never purchases Starbucks coffee at home,and Starbucks coffee costs more than the coffee sold by local shops.An economist would most likely explain Mary's behavior by suggesting that

Accepted Answer

A)  Mary's behavior is rational, but Maggie's behavior is clearly irrational. 
B)  Mary's behavior is clearly irrational, but Maggie's behavior is rational. 
C)  the Starbucks brand name suggests consistent quality. 
D)  the advertising by Starbucks in Florida is more persuasive than the advertising by Starbucks in Mary and Maggie's home town. 
A)  Mary's behavior is rational, but Maggie's behavior is clearly irrational. 
B)  Mary's behavior is clearly irrational, but Maggie's behavior is rational. 
C)  the Starbucks brand name suggests consistent quality. 
D)  the advertising by Starbucks in Florida is more persuasive than the advertising by Starbucks in Mary and Maggie's home town.

Question 14

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.How much profit will this firm earn at the monopolistically competitive price?

Accepted Answer

A)  $0 
B)  $5 
C)  $12 
D)  $16 
A)  $0 
B)  $5 
C)  $12 
D)  $16

Question 15

A firm has the following cost structure:  
If this firm is in a typical perfectly competitive market,in the long run it will likely produce

Accepted Answer

A)  4 or fewer units of output. 
B)  5 units of output. 
C)  more than 5 units of output. 
D)  None of the above are necessarily correct because there is not enough information to tell. 
A)  4 or fewer units of output. 
B)  5 units of output. 
C)  more than 5 units of output. 
D)  None of the above are necessarily correct because there is not enough information to tell.

Question 16

Empirical evidence suggests that advertising usually leads to an increase in the price for advertised products.

Accepted Answer

A) True 
 B)False

Question 17

A monopolistically competitive firm faces the following demand schedule for its product:  
The firm has total fixed costs of $20 and a constant marginal cost of $2 per unit.The firm will maximize profit with

Accepted Answer

A)  6 units of output. 
B)  9 units of output. 
C)  11 units of output. 
D)  13 units of output. 
A)  6 units of output. 
B)  9 units of output. 
C)  11 units of output. 
D)  13 units of output.

Question 18

The market for wheat is most likely considered a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 19

The free entry and exit of firms in a monopolistically competitive market guarantees that

Accepted Answer

A)  both economic profits and economic losses can persist in the long run. 
B)  both economic profits and economic losses disappear in the long run. 
C)  economic profits, but not economic losses, can persist in the long run. 
D)  economic losses, but not economic profits, can persist in the long run. 
A)  both economic profits and economic losses can persist in the long run. 
B)  both economic profits and economic losses disappear in the long run. 
C)  economic profits, but not economic losses, can persist in the long run. 
D)  economic losses, but not economic profits, can persist in the long run.

Question 20

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

Accepted Answer

A)  perfectly competitive market. 
B)  monopolistically competitive market. 
C)  oligopoly. 
D)  monopoly. 
A)  perfectly competitive market. 
B)  monopolistically competitive market. 
C)  oligopoly. 
D)  monopoly.

Each firm in a monopolistically competitive market

Suppose the point of tangency that characterizes long-run equilibrium for a monopolistically competitive firm occurs at Q₁ units of output.This level of output,Q₁,

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

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

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

Figure 16-8 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-8.When the firm is maximizing its profit,the markup over marginal cost amounts to

In a market that is characterized by imperfect competition,

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9.The firm's maximum profit is

A firm has the following cost structure: If this firm is in a typical monopolistically competitive market,in the long run it will likely produce

In a monopolistically competitive market,

Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2.What is the concentration ratio for Industry A?

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.How much profit will this firm earn at the monopolistically competitive price?

A firm has the following cost structure: If this firm is in a typical perfectly competitive market,in the long run it will likely produce

Empirical evidence suggests that advertising usually leads to an increase in the price for advertised products.

A monopolistically competitive firm faces the following demand schedule for its product: The firm has total fixed costs of $20 and a constant marginal cost of $2 per unit.The firm will maximize profit with

The market for wheat is most likely considered a monopolistically competitive market.

The free entry and exit of firms in a monopolistically competitive market guarantees that

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

Ten Principles of Economics.

Thinking Like an Economist.

Interdependence and the Gains from Trade.

The Market Forces of Supply and Demand.

Elasticity and Its Application

Supply, Demand, And Government Policies.

Consumers, Producers, and the Efficiency of Markets.

Application: The Costs of Taxation.

Application: International Trade.

Externalities.

Public Goods and Common Resources.

The Design of the Tax System.

The Costs of Production.

Firms in Competitive Markets.

Monopoly.

Oligopoly.

The Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

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Exam 16: Monopolistic Competition.

Each firm in a monopolistically competitive market

Suppose the point of tangency that characterizes long-run equilibrium for a monopolistically competitive firm occurs at Q₁ units of output.This level of output,Q₁,

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

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

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

Figure 16-8 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-8.When the firm is maximizing its profit,the markup over marginal cost amounts to

In a market that is characterized by imperfect competition,

Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9.The firm's maximum profit is

A firm has the following cost structure: If this firm is in a typical monopolistically competitive market,in the long run it will likely produce

In a monopolistically competitive market,

Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2.What is the concentration ratio for Industry A?

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.How much profit will this firm earn at the monopolistically competitive price?

A firm has the following cost structure: If this firm is in a typical perfectly competitive market,in the long run it will likely produce

Empirical evidence suggests that advertising usually leads to an increase in the price for advertised products.

A monopolistically competitive firm faces the following demand schedule for its product: The firm has total fixed costs of $20 and a constant marginal cost of $2 per unit.The firm will maximize profit with

The market for wheat is most likely considered a monopolistically competitive market.

The free entry and exit of firms in a monopolistically competitive market guarantees that

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

Ten Principles of Economics.

Thinking Like an Economist.

Interdependence and the Gains from Trade.

The Market Forces of Supply and Demand.

Elasticity and Its Application

Supply, Demand, And Government Policies.

Consumers, Producers, and the Efficiency of Markets.

Application: The Costs of Taxation.

Application: International Trade.

Externalities.

Public Goods and Common Resources.

The Design of the Tax System.

The Costs of Production.

Firms in Competitive Markets.

Monopoly.

Oligopoly.

The Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

Filters