Question 1

Which two curves are tangent to each other in a monopolistically competitive market with zero economic profit?

Accepted Answer

A)   demand and average variable cost
B)   demand and average total cost
C)   marginal revenue and average variable cost
D)   marginal revenue and average total costE) A) and B)
F) A) and C)

Question 2

Figure 16-5 
-Refer to Figure 16-5. 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) None of the above
F) B) and C)

Question 3

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

Accepted Answer

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

Question 4

Figure 16-10
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-10. When the firm is maximizing its profit,

Accepted Answer

A)   TR = $9,000 and TC =$16,000.
B)   TR = $14,000 and TC =$16,000.
C)   TR = $16,000 and TC =$16,000.
D)   MC exceeds MR by $66.66 on the last unit of output produced.E) All of the above
F) C) and D)

Question 5

Figure 16-12 
-Refer to Figure 16-12. How much excess capacity does this firm have?

Accepted Answer

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

Question 6

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

Question 7

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Accepted Answer

A) True 
 B)False

Question 8

The claim that advertising reduces the elasticity of demand is likely to be made by a defender of advertising.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following correctly lists the products in order from most advertised to least advertised?

Accepted Answer

A)   soft drinks, breakfast cereals, dog food
B)   corn, dog food, communication satellites
C)   dog food, communication satellites, corn
D)   wheat, corn, crude oilE) None of the above
F) A) and C)

Question 10

In the study done by Lee Benham on advertising for eyeglasses,

Accepted Answer

A)   advertising increased the average price.
B)   advertising decreased the average price.
C)   there was no difference in price, but quality was better in the states that didn't allow advertising.
D)   advertising appeared to have no effect whatsoever in the states that permitted advertising.E) All of the above
F) B) and D)

Question 11

The two types of imperfectly competitive markets are

Accepted Answer

A)   monopoly and monopolistic competition.
B)   monopoly and oligopoly.
C)   monopolistic competition and oligopoly.
D)   monopolistic competition and cartels.E) C) and D)
F) A) and B)

Question 12

Figure 16-5 
-Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will not encourage either the entry or exit of firms in a monopolistically competitive industry?

Accepted Answer

A)   panel a
B)   panel b
C)   panel c
D)   panel dE) A) and B)
F) A) and C)

Question 13

A monopolistically competitive firm chooses the quantity to produce where

Accepted Answer

A)   price equals marginal cost.
B)   demand equals marginal cost.
C)   marginal revenue equals marginal cost.
D)   Both a and c are correct.E) A) and C)
F) A) and B)

Question 14

In a long-run equilibrium, both perfectly competitive markets and monopolistically competitive markets have price equal to average total cost.

Accepted Answer

A) True 
 B)False

Question 15

Figure 16-3
This figure depicts a situation in a monopolistically competitive market. 
-Refer to Figure 16-3. What price will the monopolistically competitive firm charge in this market?

Accepted Answer

A)   $60
B)   $70
C)   $75
D)   $80E) A) and B)
F) A) and C)

Question 16

Describe the shape of the monopolistically competitive firm's demand curve.

Accepted Answer

The answer of Describe the shape of the monopolistically competitive...

Question 17

Which of the following is unique to a monopolistically competitive firm when compared to an oligopoly?

Accepted Answer

A)   The monopolistically competitive firm advertises.
B)   The monopolistically competitive firm produces a quantity of output that falls short of the socially optimal level.
C)   Monopolistic competition features many buyers.
D)   Monopolistic competition features many sellers.E) A) and D)
F) B) and C)

Question 18

The theory of monopolistic competition is somewhat disappointing in that it fails to

Accepted Answer

A)   pinpoint a profit-maximizing level of output for monopolistically competitive firms.
B)   yield simple and compelling advice for public policy.
C)   explain why product differentiation is observed in monopolistically competitive markets.
D)   explain why monopolistically competitive firms have excess capacity.E) All of the above
F) None of the above

Question 19

Which market structure would likely have the highest concentration ratio?

Accepted Answer

A)   Monopoly
B)   Oligopoly
C)   Monopolistic competition
D)   Perfect competitionE) B) and C)
F) None of the above

Question 20

Due to free entry and exit in monopolistic competition, in the long run price must be equal to

Accepted Answer

The answer of Due to free entry and exit in...

Exam 16: Monopolistic Competition

Due to free entry and exit in monopolistic competition, in the long run price must be equal to

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The two types of imperfectly competitive markets are

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Figure 16-5 -Refer to Figure 16-5. Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm?

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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,

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In the study done by Lee Benham on advertising for eyeglasses,

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Figure 16-5 -Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will not encourage either the entry or exit of firms in a monopolistically competitive industry?

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Describe the shape of the monopolistically competitive firm's demand curve.

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Which two curves are tangent to each other in a monopolistically competitive market with zero economic profit?

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Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. When the firm is maximizing its profit,

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Which of the following correctly lists the products in order from most advertised to least advertised?

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Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. What price will the monopolistically competitive firm charge in this market?

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The theory of monopolistic competition is somewhat disappointing in that it fails to

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

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A monopolistically competitive firm chooses the quantity to produce where

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Which market structure would likely have the highest concentration ratio?

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The claim that advertising reduces the elasticity of demand is likely to be made by a defender of advertising.

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Which of the following is unique to a monopolistically competitive firm when compared to an oligopoly?

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Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

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In a long-run equilibrium, both perfectly competitive markets and monopolistically competitive markets have price equal to average total cost.

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Figure 16-12 -Refer to Figure 16-12. How much excess capacity does this firm have?

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