Question 1

Since a firm in a monopolistically competitive market faces a

Accepted Answer

A)  downward-sloping demand curve, it will always operate with excess capacity.
B)  downward-sloping demand curve, it will always operate at its efficient scale.
C)  perfectly elastic demand curve, it will always operate with excess capacity.
D)  perfectly inelastic demand curve, it will always operate at its efficient scale.E) B) and D)
F) B) and C)

Question 2

A recent outbreak of hepatitis was linked to a national fast-food restaurant chain. This is an example of a case in which

Accepted Answer

A)  brand name identity increases the effectiveness of markets.
B)  brand name identity can be detrimental to the profitability of a firm.
C)  advertising is ineffective in salvaging perceptions of product quality.
D)  advertising cannot be used to establish brand loyalty.E) A) and B)
F) A) and C)

Question 3

Figure 16-13 
-Refer to Figure 16-13. Use the letters to identify the area of total cost for this firm.

Accepted Answer

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

Question 4

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

Accepted Answer

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

Question 5

Scenario 16-5
McDonald's restaurants has recently announced intentions to open a new restaurant in Smalltown, Indiana. Assume that the fast-food restaurant market in Smalltown is characterized by monopolistic competition.
-Refer to Scenario 16-5. As a result of the new McDonald's, residents of Smalltown are likely to benefit from

Accepted Answer

A)  a product-variety externality.
B)  a business-stealing externality.
C)  the fact that McDonald's will increase its production to achieve the efficient scale.
D)  Both b and c are correct.E) A) and B)
F) B) and C)

Question 6

Scenario 16-9
Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products.
-Refer to Scenario 16-9. If advertising were banned in these markets, what would likely happen to the prices of chips and soda?

Accepted Answer

They would...

Question 7

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 
D)  P > ATC and demand > MRE) All of the above
F) A) and B)

Question 8

An oligopoly

Accepted Answer

A)  has a concentration ratio of less than 50 percent.
B)  is a price taker.
C)  is a type of imperfectly competitive market.
D)  has many firms rather than just one firm or a few firms.E) B) and D)
F) None of the above

Question 9

Defenders of advertising argue that firms use advertising as a signal of quality, even if the advertising delivers little helpful information about the product.

Accepted Answer

A) True 
 B)False

Question 10

Discuss how brand names may enhance the efficiency of markets in a less developed country.

Accepted Answer

Recognizable brand names signal quality ...

Question 11

The LookGood BePopular (LGBP)  Clothing Company embarked on a new advertising campaign in which a group of young beautiful people are having fun eating out at a restaurant wearing the company's clothes. Critics of advertising argue that this advertisement

Accepted Answer

A)  causes demand for LGBP Clothing to be less elastic.
B)  is more effective than other forms of advertisement because of its content.
C)  will cause the market to be more competitive.
D)  Both a and b are correct.E) C) and D)
F) A) and D)

Question 12

Entry by new firms into a monopolistically competitive market

Accepted Answer

A)  creates additional consumer surplus.
B)  imposes a positive externality on existing firms.
C)  leads to the same externalities that are observed when new firms enter a perfectly competitive market.
D)  increases the demand for existing firms' products.E) All of the above
F) B) and C)

Question 13

Which market structure(s) include(s) many firms with differentiated products who can enter and exit the market freely?

Accepted Answer

monopolist...

Question 14

Some firms have an incentive to advertise because they sell a

Accepted Answer

A)  homogeneous product and charge a price equal to marginal cost.
B)  homogeneous product and charge a price above marginal cost.
C)  differentiated product and charge a price equal to marginal cost.
D)  differentiated product and charge a price above marginal cost.E) C) and D)
F) A) and C)

Question 15

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

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)  all firms are earning zero economic profit.E) All of the above
F) C) and D)

Question 16

Figure 16-12 
-Refer to Figure 16-12. When this firm profit-maximizes, what is the amount of the firm's profit or loss?

Accepted Answer

The answer of Figure 16-12 
-Refer to Figure 16-12. When...

Question 17

In a monopolistically competitive market, the number of firms adjusts until economic profits are driven to zero.

Accepted Answer

A) True 
 B)False

Question 18

Figure 16-3
This figure depicts a situation in a monopolistically competitive market. 
-Refer to Figure 16-3. Which of the following will occur in the long run in this industry?

Accepted Answer

A)  Firms will exit this industry.
B)  Firms will enter this industry.
C)  This firm will continue to earn positive economic profits.
D)  This firm will incur losses.E) A) and D)
F) C) and D)

Question 19

Figure 16-1    
-Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?

Accepted Answer

A)  Panel A
B)  Panel B
C)  Panel C
D)  Panel DE) B) and D)
F) B) and C)

Question 20

Figure 16-6 
-Refer to Figure 16-6. Which of the graphs shown would be consistent with a profit maximizing firm in a monopolistically competitive market that is earning a positive profit?

Accepted Answer

A)  panel a
B)  panel b
C)  panel c
D)  panel dE) B) and C)
F) None of the above

Exam 16: Monopolistic Competition

Discuss how brand names may enhance the efficiency of markets in a less developed country.

Correct Answer
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Recognizable brand names signal quality ...
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Figure 16-6 -Refer to Figure 16-6. Which of the graphs shown would be consistent with a profit maximizing firm in a monopolistically competitive market that is earning a positive profit?

Correct Answer
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Which market structure(s) include(s) many firms with differentiated products who can enter and exit the market freely?

Correct Answer
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monopolist...
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Defenders of advertising argue that firms use advertising as a signal of quality, even if the advertising delivers little helpful information about the product.

Correct Answer
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Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. Which of the following will occur in the long run in this industry?

Correct Answer
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Entry by new firms into a monopolistically competitive market

Correct Answer
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Since a firm in a monopolistically competitive market faces a

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

Correct Answer
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When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Correct Answer
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Correct Answer
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An oligopoly

Correct Answer
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Figure 16-1 -Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?

Correct Answer
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Figure 16-12 -Refer to Figure 16-12. When this firm profit-maximizes, what is the amount of the firm's profit or loss?

Correct Answer
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The LookGood BePopular (LGBP) Clothing Company embarked on a new advertising campaign in which a group of young beautiful people are having fun eating out at a restaurant wearing the company's clothes. Critics of advertising argue that this advertisement

Correct Answer
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Correct Answer
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They would...
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In a monopolistically competitive market, the number of firms adjusts until economic profits are driven to zero.

Correct Answer
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Figure 16-13 -Refer to Figure 16-13. Use the letters to identify the area of total cost for this firm.

Correct Answer
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Some firms have an incentive to advertise because they sell a

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

Correct Answer
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A recent outbreak of hepatitis was linked to a national fast-food restaurant chain. This is an example of a case in which

Correct Answer
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Exam 16: Monopolistic Competition

Discuss how brand names may enhance the efficiency of markets in a less developed country.

Correct AnswerverifiedRecognizable brand names signal quality ...View AnswerShow Answer

Figure 16-6 -Refer to Figure 16-6. Which of the graphs shown would be consistent with a profit maximizing firm in a monopolistically competitive market that is earning a positive profit?

Correct AnswerverifiedShow Answer

Which market structure(s) include(s) many firms with differentiated products who can enter and exit the market freely?

Correct Answerverifiedmonopolist...View AnswerShow Answer

Defenders of advertising argue that firms use advertising as a signal of quality, even if the advertising delivers little helpful information about the product.

Correct AnswerverifiedShow Answer

Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. Which of the following will occur in the long run in this industry?

Correct AnswerverifiedShow Answer

Entry by new firms into a monopolistically competitive market

Correct AnswerverifiedShow Answer

Since a firm in a monopolistically competitive market faces a

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An oligopoly

Correct AnswerverifiedShow Answer

Figure 16-1 -Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?

Correct AnswerverifiedShow Answer

Figure 16-12 -Refer to Figure 16-12. When this firm profit-maximizes, what is the amount of the firm's profit or loss?

Correct AnswerverifiedShow Answer

The LookGood BePopular (LGBP) Clothing Company embarked on a new advertising campaign in which a group of young beautiful people are having fun eating out at a restaurant wearing the company's clothes. Critics of advertising argue that this advertisement

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThey would...View AnswerShow Answer

In a monopolistically competitive market, the number of firms adjusts until economic profits are driven to zero.

Correct AnswerverifiedShow Answer

Figure 16-13 -Refer to Figure 16-13. Use the letters to identify the area of total cost for this firm.

Correct AnswerverifiedShow Answer

Some firms have an incentive to advertise because they sell a

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A recent outbreak of hepatitis was linked to a national fast-food restaurant chain. This is an example of a case in which

Correct AnswerverifiedShow Answer

Correct Answer
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Recognizable brand names signal quality ...
View Answer

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monopolist...
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They would...
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