Question 1

Product differentiation in monopolistically competitive markets ensures that,for profit-maximizing firms,

Accepted Answer

A)   marginal revenue will equal average total cost.
B)   price will exceed marginal cost.
C)   marginal cost will exceed average revenue.
D)   average variable cost will be declining.E) A) and C)
F) All of the above

Question 2

Professional organizations and producer groups have an incentive to

Accepted Answer

A)   restrict advertising in order to enhance competition on the basis of price.
B)   restrict advertising in order to reduce competition on the basis of price.
C)   encourage advertising in order to reduce competition on the basis of price.
D)   encourage advertising in order to enhance competition on the basis of price.E) None of the above
F) C) and D)

Question 3

Table 16-4
This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm.
 
-Refer to Table 16-4.If the government forces this firm to produce at its efficient output level,how much profit will this firm earn?

Accepted Answer

A)   a $4 loss
B)   a $6 loss
C)   a $6 profit
D)   a $12 profitE) C) and D)
F) A) and B)

Question 4

When a firm operates with excess capacity,

Accepted Answer

A)   additional production would lower the average total cost.
B)   additional production would increase the average total cost.
C)   it must be a perfectly competitive firm.
D)   it must be a monopolistically competitive firm.E) All of the above
F) A) and C)

Question 5

If we observe a great deal of advertising of dog food,we can infer that

Accepted Answer

A)   consumers spend very little of their disposable income on dog food.
B)   dog food is cheap to produce.
C)   dog food is a highly-differentiated product.
D)   firms who do not advertise earn higher profits than those who do.E) A) and B)
F) A) and C)

Question 6

Of the following market structures,which are considered imperfectly competitive? I.
Perfect competition
II) 
Monopoly
III) 
Monopolistic competition
IV) 
Oligopoly

Accepted Answer

A)   III only
B)   II and III
C)   III and IV
D)   II,III,and IVE) A) and C)
F) B) and C)

Question 7

Figure 16-3 
-Refer to Figure 16-3.What is the efficient scale of production?

Accepted Answer

A)   This firm cannot produce efficiently.
B)   12 units
C)   22 units
D)   28 unitsE) B) and D)
F) None of the above

Question 8

Table 16-4
This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm.
 
-Refer to Table 16-4.What is this firm's profit maximizing level of output?

Accepted Answer

A)   0 units of output
B)   1 unit of output
C)   2 units of output
D)   3 units of outputE) A) and C)
F) C) and D)

Question 9

Figure 16-3 
-Refer to Figure 16-3.If this firm minimized cost,how much output will it produce?

Accepted Answer

The answer of Figure 16-3 
-Refer to Figure 16-3.If this...

Question 10

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Accepted Answer

A)   average revenue exceeds marginal revenue
B)   marginal revenue exceeds average revenue
C)   average revenue is equal to marginal revenue
D)   revenue is always maximized along with profitE) A) and B)
F) A) and C)

Question 11

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) A) and D)
F) None of the above

Question 12

Suppose that monopolistically competitive firms in a certain market are earning positive profits.In the transition from this initial situation to a long-run equilibrium,

Accepted Answer

A)   the number of firms in the market decreases.
B)   each existing firm experiences a decrease in demand for its product.
C)   each existing firm experiences a rightward shift of its marginal revenue curve.
D)   each existing firm experiences an upward shift in its average total cost curve.E) C) and D)
F) B) and D)

Question 13

Among the following situations,which one is least likely to apply to a monopolistically competitive firm?

Accepted Answer

A)   profit is positive in the short run
B)   total cost exceeds total revenue in the short run
C)   profit is positive in the long run
D)   total revenue equals total cost in the long runE) A) and C)
F) None of the above

Question 14

When a new firm enters a monopolistically competitive market,the individual demand curves faced by all existing firms in that market will

Accepted Answer

A)   shift to the left.
B)   shift to the right.
C)   shift in a direction that is unpredictable without further information.
D)   remain unchanged.It is the supply curve that will shift.E) A) and C)
F) B) and C)

Question 15

The primary claim of defenders of advertising is that it

Accepted Answer

A)   conveys information about firm profitability.
B)   is psychological rather than informational.
C)   enhances the information available to consumers.
D)   reduces the elasticity of demand for a firm's product.E) B) and C)
F) A) and B)

Question 16

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

Accepted Answer

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

Question 17

Which of the following statements regarding brand names in advertising is not correct?

Accepted Answer

A)   Brand names provide consumers with information about quality when quality cannot be easily judged in advance of purchase.
B)   Brand names give firms an incentive to maintain high quality to maintain the reputation of the firm.
C)   Brand names allow firms to produce and sell inferior products in the long run since people will continue to purchase the brand-name product.
D)   Brand names can cause consumers to perceive differences in products that do not actually exist.E) A) and B)
F) A) and C)

Question 18

Figure 16-3 
-Refer to Figure 16-3.The firm in this figure is monopolistically competitive.It illustrates

Accepted Answer

A)   the shut-down case.
B)   a long-run economic profit.
C)   a short-run economic profit.
D)   a short-run loss.E) None of the above
F) A) and B)

Question 19

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome? (i) 
Perfect competition
(ii) 
Monopolistic competition
(iii) 
Monopoly

Accepted Answer

A)   (i) only
B)   (i) and (ii) only
C)   (ii) and (iii) only
D)   (i) , (ii) ,and (iii) E) All of the above
F) C) and D)

Question 20

The "competition" in monopolistically competitive markets is most likely a result of having many sellers in the market.

Accepted Answer

A) True 
 B)False

Exam 16: Monopolistic Competition

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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The "competition" in monopolistically competitive markets is most likely a result of having many sellers in the market.

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Figure 16-3 -Refer to Figure 16-3.If this firm minimized cost,how much output will it produce?

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A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

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Which of the following statements regarding brand names in advertising is not correct?

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Product differentiation in monopolistically competitive markets ensures that,for profit-maximizing firms,

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Among the following situations,which one is least likely to apply to a monopolistically competitive firm?

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Figure 16-3 -Refer to Figure 16-3.What is the efficient scale of production?

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Table 16-4 This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm. -Refer to Table 16-4.What is this firm's profit maximizing level of output?

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The primary claim of defenders of advertising is that it

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Of the following market structures,which are considered imperfectly competitive? I. Perfect competition II) Monopoly III) Monopolistic competition IV) Oligopoly

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When a firm operates with excess capacity,

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Professional organizations and producer groups have an incentive to

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

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Figure 16-3 -Refer to Figure 16-3.The firm in this figure is monopolistically competitive.It illustrates

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If we observe a great deal of advertising of dog food,we can infer that

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Table 16-4 This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm. -Refer to Table 16-4.If the government forces this firm to produce at its efficient output level,how much profit will this firm earn?

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Suppose that monopolistically competitive firms in a certain market are earning positive profits.In the transition from this initial situation to a long-run equilibrium,

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In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome? (i) Perfect competition (ii) Monopolistic competition (iii) Monopoly

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When a new firm enters a monopolistically competitive market,the individual demand curves faced by all existing firms in that market will

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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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