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​A monopolistically competitive firm cannot earn an economic profit in the long run.

A) True
B) False

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Figure 16-12 Figure 16-12 -Refer to Figure 16-12. Does this monopolistically competitive market produce the welfare-maximizing level of output? -Refer to Figure 16-12. Does this monopolistically competitive market produce the welfare-maximizing level of output?

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Scenario 16-4 Delish, a moderately priced restaurant, has recently announced intentions to open a restaurant in Boston, MA. Assume that the restaurant market in Boston is characterized by monopolistic competition. -Refer to Scenario 16-4. As a result of the new restaurant, diners in Boston are likely to experience a


A) product-variety externality, which is a negative externality.
B) product-variety externality, which is a positive externality.
C) business-stealing externality, which is a negative externality.
D) business-stealing externality, which is a positive externality.

E) A) and C)
F) C) and D)

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A monopolistically competitive market is characterized by barriers to entry.

A) True
B) False

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Figure 16-11 Figure 16-11 -Refer to Figure 16-11. How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price? A) $250. B) $500 C) $562.50. D) $1250. -Refer to Figure 16-11. How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?


A) $250.
B) $500
C) $562.50.
D) $1250.

E) A) and B)
F) A) and D)

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Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. Table 16-1 The following table shows the percentage of output supplied by the top eight firms in four different industries. -Refer to Table 16-1. Which industry is the least competitive? A) Industry A B) Industry B C) Industry C D) Industry D -Refer to Table 16-1. Which industry is the least competitive?


A) Industry A
B) Industry B
C) Industry C
D) Industry D

E) B) and D)
F) B) and C)

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List five goods that are likely sold in a monopolistically competitive market.

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Books, CDs, movies, ...

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The deadweight loss that is associated with a monopolistically competitive market is a result of


A) price falling short of marginal cost in order to increase market share.
B) price exceeding marginal cost.
C) the firm operating in a regulated industry.
D) excessive advertising costs.

E) B) and C)
F) C) and D)

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Monopolistically competitive firms, like monopoly firms, maximize their profits by charging a price that exceeds marginal cost.

A) True
B) False

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The two types of imperfectly competitive markets are


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

E) B) and D)
F) B) and C)

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In a long-run equilibrium, a firm in a monopolistically competitive market operates


A) where marginal revenue is zero.
B) where marginal revenue is negative.
C) on the rising portion of its average total cost curve.
D) on the declining portion of its average total cost curve.

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

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

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Advertising provides information to cons...

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Figure 16-5 Figure 16-5 -Refer to Figure 16-5. Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm? A) panel a B) panel b C) panel c D) All of the above are correct. -Refer to Figure 16-5. Which of the panels shown could illustrate the short-run situation for a monopolistically competitive firm?


A) panel a
B) panel b
C) panel c
D) All of the above are correct.

E) A) and D)
F) A) and B)

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One theory of advertising suggests that


A) advertising is more effective for industrial products than consumer products.
B) the content of advertising may be irrelevant to product success in the market.
C) regulations limiting advertising benefit consumers, but not producers.
D) television advertising is more effective in reducing competition than ads on websites.

E) All of the above
F) A) and B)

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A firm in a monopolistically competitive market is similar to a monopoly in the sense that (i) They both face downward-sloping demand curves. (ii) They both charge a price that exceeds marginal cost. (iii) Free entry and exit determines the long-run equilibrium.


A) (i) only
B) (ii) only
C) (i) and (ii) only
D) (i) , (ii) , and (iii) only

E) All of the above
F) B) and C)

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Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. 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. Which of the following is likely to happen in the long run in this market? A) The market is currently in a long-run equilibrium. B) The market price is likely to rise. C) Firms are likely to enter the market since firms are earning a positive economic profit. D) Firms are likely to leave the market since firms are earning a negative economic profit. -Refer to Table 16-4. Which of the following is likely to happen in the long run in this market?


A) The market is currently in a long-run equilibrium.
B) The market price is likely to rise.
C) Firms are likely to enter the market since firms are earning a positive economic profit.
D) Firms are likely to leave the market since firms are earning a negative economic profit.

E) A) and D)
F) B) and C)

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Monopolistic competition is an inefficient market structure because


A) price exceeds marginal cost.
B) it has a deadweight loss, just as monopoly does.
C) at the equilibrium, some consumers will value the good at more than the marginal cost of production.
D) All of the above are correct.

E) C) and D)
F) B) and C)

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Figure 16-5 Figure 16-5 -Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into a monopolistically competitive industry? A) panel a B) panel b C) panel c D) panel d -Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will encourage the entry of other firms into a monopolistically competitive industry?


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

E) All of the above
F) None of the above

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Figure 16-2. The figure is drawn for a monopolistically competitive firm. Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. In order to maximize profit, the firm will charge a price of A) $16. B) $24. C) $32. D) $36. -Refer to Figure 16-2. In order to maximize profit, the firm will charge a price of


A) $16.
B) $24.
C) $32.
D) $36.

E) A) and B)
F) A) and C)

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Scenario 16-1 Suppose the following are the sales for all of the firms in two different industries. Scenario 16-1 Suppose the following are the sales for all of the firms in two different industries. -Refer to Scenario 16-1. What are the concentration ratios for these industries? A) Industry A: 22%, Industry B: 26% B) Industry A: 41%, Industry B: 47%. C) Industry A: 68%, Industry B: 79% D) Industry A: 100%, Industry B: 100%. -Refer to Scenario 16-1. What are the concentration ratios for these industries?


A) Industry A: 22%, Industry B: 26%
B) Industry A: 41%, Industry B: 47%.
C) Industry A: 68%, Industry B: 79%
D) Industry A: 100%, Industry B: 100%.

E) A) and B)
F) A) and C)

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