Question 1

Which of these types of firms can earn a positive economic profit in the long run

Accepted Answer

A) monopolies, but not competitive firms or monopolistically competitive firms 
B) monopolies and monopolistically competitive firms, but not competitive firms 
C) monopolies, monopolistically competitive firms, and monopolies 
D) monopolies and competitive firms, but not monopolistic competitive firms 
A) monopolies, but not competitive firms or monopolistically competitive firms 
B) monopolies and monopolistically competitive firms, but not competitive firms 
C) monopolies, monopolistically competitive firms, and monopolies 
D) monopolies and competitive firms, but not monopolistic competitive firms A

Question 2

What can we say about advertisements that appear to convey no information at all

Accepted Answer

A) They are usually associated with "infomercials." 
B) They are mostly useless to consumers, but valuable to firms. 
C) They are mostly useless to firms, but valuable to consumers for their entertainment quality alone. 
D) They may, in fact, signal to consumers the quality of its product given a firm's willingness to spend money on advertising. 
A) They are usually associated with "infomercials." 
B) They are mostly useless to consumers, but valuable to firms. 
C) They are mostly useless to firms, but valuable to consumers for their entertainment quality alone. 
D) They may, in fact, signal to consumers the quality of its product given a firm's willingness to spend money on advertising. D

Question 3

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

Accepted Answer

Advertising provides information to consumers and thus allows consumers to make more informed (and thus better) choices.Advertising fosters competition by making consumers more aware of prices and product characteristics in a market.

Question 4

Figure 16-4
  
-Refer to Figure 16-4.Panel (b) in the set of figures shown is consistent with a firm in a monopolistically competitive market that is in which of the following positions

Accepted Answer

A) It suffers a loss in the short-run equilibrium. 
B) It earns economic profits in the short-run equilibrium. 
C) It suffers a loss in the long-run equilibrium. 
D) It earns economic profits in the long-run equilibrium. 
A) It suffers a loss in the short-run equilibrium. 
B) It earns economic profits in the short-run equilibrium. 
C) It suffers a loss in the long-run equilibrium. 
D) It earns economic profits in the long-run equilibrium.

Question 5

When a monopolistically competitive firm is in long-run equilibrium,what is the case

Accepted Answer

A) Price is equal to minimum average total cost. 
B) Price equals marginal cost. 
C) Price equals marginal revenue. 
D) Price is equal to average total cost. 
A) Price is equal to minimum average total cost. 
B) Price equals marginal cost. 
C) Price equals marginal revenue. 
D) Price is equal to average total cost.

Question 6

If advertising reduces a consumer's price sensitivity between identical goods,it is likely to do which of the following

Accepted Answer

A) increase the elasticity of demand for differentiated products 
B) enhance competition and encourage more product diversity 
C) impede competition and reduce social well-being 
D) encourage the consumption of all homogenous goods 
A) increase the elasticity of demand for differentiated products 
B) enhance competition and encourage more product diversity 
C) impede competition and reduce social well-being 
D) encourage the consumption of all homogenous goods

Question 7

"In a long-run equilibrium,price is equal to average total cost." To which markets does this statement apply

Accepted Answer

A) competitive markets only 
B) competitive and monopolistically competitive markets 
C) competitive and monopoly markets 
D) monopolistically competitive and monopoly markets 
A) competitive markets only 
B) competitive and monopolistically competitive markets 
C) competitive and monopoly markets 
D) monopolistically competitive and monopoly markets

Question 8

Which statement best explains the relationship between demand and output capacity of a firm in a monopolistically competitive market

Accepted Answer

A) Because it faces a downward-sloping demand curve, it will generally operate with excess capacity. 
B) Because it faces a downward-sloping demand curve, it will generally operate at the efficient scale. 
C) Because it faces a perfectly elastic demand curve, it will generally operate with excess capacity. 
D) Because it faces a perfectly inelastic demand curve, it will generally operate at the efficient scale. 
A) Because it faces a downward-sloping demand curve, it will generally operate with excess capacity. 
B) Because it faces a downward-sloping demand curve, it will generally operate at the efficient scale. 
C) Because it faces a perfectly elastic demand curve, it will generally operate with excess capacity. 
D) Because it faces a perfectly inelastic demand curve, it will generally operate at the efficient scale.

Question 9

What is one way in which a profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competitive market

Accepted Answer

A) The firm in the monopolistically competitive market is characterized by market share maximization. 
B) The firm in the monopolistically competitive market has no barriers to entry. 
C) The firm in the monopolistically competitive market faces a downward-sloping demand curve for its product. 
D) The firm in the monopolistically competitive market faces a horizontal marginal revenue curve at the market clearing price. 
A) The firm in the monopolistically competitive market is characterized by market share maximization. 
B) The firm in the monopolistically competitive market has no barriers to entry. 
C) The firm in the monopolistically competitive market faces a downward-sloping demand curve for its product. 
D) The firm in the monopolistically competitive market faces a horizontal marginal revenue curve at the market clearing price.

Question 10

Which statement explains the characteristics of 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 restriction. 
D) Each firm produces a product that is essentially identical to the products of other firms in the market. 
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 restriction. 
D) Each firm produces a product that is essentially identical to the products of other firms in the market.

Question 11

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,what do we expect will happen

Accepted Answer

A) Firms are more likely to operate at efficient scale. 
B) There are likely to be too many firms in a monopolistically competitive market. 
C) Market efficiency is likely to be enhanced by the entry of new firms. 
D) The market structure is likely to be in transition. 
A) Firms are more likely to operate at efficient scale. 
B) There are likely to be too many firms in a monopolistically competitive market. 
C) Market efficiency is likely to be enhanced by the entry of new firms. 
D) The market structure is likely to be in transition.

Question 12

What statement describes both perfect competition and monopolistic competition

Accepted Answer

A) Each firm is, in many ways, like a monopoly. 
B) Each firm sells a product that is at least slightly different from those of other firms. 
C) Each firm faces a downward-sloping demand curve. 
D) Each firm has competition in the market. 
A) Each firm is, in many ways, like a monopoly. 
B) Each firm sells a product that is at least slightly different from those of other firms. 
C) Each firm faces a downward-sloping demand curve. 
D) Each firm has competition in the market.

Question 13

Which of the following is an example of a monopolistically competitive market

Accepted Answer

A) the market for hair cuts 
B) the market for soybeans 
C) the market for silver 
D) the market for cable TV 
A) the market for hair cuts 
B) the market for soybeans 
C) the market for silver 
D) the market for cable TV

Question 14

Your company has recently requested that you travel to Dhaka,Bangladesh,to work on negotiations for a new factory to be located in one of the port cities.Your travel agent provides a list of several hundred local hotels,and a hotel from a well-known North American chain.In this case,the North American brand name is likely to be used as a signal of which of the following

Accepted Answer

A) perceived differences that are not likely to exist among your various options 
B) quality when quality cannot be easily judged 
C) inefficiency in markets characterized by recognizable brand names 
D) the quality of general lodging accommodations in Dhaka 
A) perceived differences that are not likely to exist among your various options 
B) quality when quality cannot be easily judged 
C) inefficiency in markets characterized by recognizable brand names 
D) the quality of general lodging accommodations in Dhaka

Question 15

What is the profit-maximizing rule for a firm in a monopolistically competitive market

Accepted Answer

A) Select the quantity at which marginal revenue is equal to marginal cost. 
B) Select the quantity at which average total cost is equal to marginal revenue. 
C) Select the quantity at which average total cost is at its minimum value. 
D) Select the quantity at which average revenue exceeds average total cost. 
A) Select the quantity at which marginal revenue is equal to marginal cost. 
B) Select the quantity at which average total cost is equal to marginal revenue. 
C) Select the quantity at which average total cost is at its minimum value. 
D) Select the quantity at which average revenue exceeds average total cost.

Question 16

What happens when a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium

Accepted Answer

A) The demand curve will be perfectly elastic. 
B) Price exceeds marginal cost. 
C) Marginal cost is falling. 
D) Marginal revenue exceeds marginal cost. 
A) The demand curve will be perfectly elastic. 
B) Price exceeds marginal cost. 
C) Marginal cost is falling. 
D) Marginal revenue exceeds marginal cost.

Question 17

Figure 16-4
  
-Refer to Figure 16-4.Which of the panels depicts a firm in a monopolistically competitive market earning economic profits

Accepted Answer

A) panel (a) 
B) panel (b) 
C) panel (c) 
D) panel (d) 
A) panel (a) 
B) panel (b) 
C) panel (c) 
D) panel (d)

Question 18

When a firm operates at excess capacity,it must be in a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 19

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.

Accepted Answer

A) True 
 B)False

Question 20

Where does a firm in a monopolistically competitive market operate

Accepted Answer

A) where marginal revenue is zero 
B) where price is equal to marginal cost 
C) on the rising portion of its average-total-cost curve 
D) on the declining portion of its average-total-cost curve 
A) where marginal revenue is zero 
B) where price is equal to marginal cost 
C) on the rising portion of its average-total-cost curve 
D) on the declining portion of its average-total-cost curve

Exam 16: Monopolistic Competition

Which of these types of firms can earn a positive economic profit in the long run

What can we say about advertisements that appear to convey no information at all

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

Figure 16-4 -Refer to Figure 16-4.Panel (b) in the set of figures shown is consistent with a firm in a monopolistically competitive market that is in which of the following positions

When a monopolistically competitive firm is in long-run equilibrium,what is the case

If advertising reduces a consumer's price sensitivity between identical goods,it is likely to do which of the following

"In a long-run equilibrium,price is equal to average total cost." To which markets does this statement apply

Which statement best explains the relationship between demand and output capacity of a firm in a monopolistically competitive market

What is one way in which a profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competitive market

Which statement explains the characteristics of a monopolistically competitive market

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,what do we expect will happen

What statement describes both perfect competition and monopolistic competition

Which of the following is an example of a monopolistically competitive market

What is the profit-maximizing rule for a firm in a monopolistically competitive market

What happens when a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium

Figure 16-4 -Refer to Figure 16-4.Which of the panels depicts a firm in a monopolistically competitive market earning economic profits

When a firm operates at excess capacity,it must be in a monopolistically competitive market.

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.

Where does a firm in a monopolistically competitive market operate

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 Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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