Question 1

Olivia consumes Pepsi exclusively.She claims that there is a clear taste difference and that competing brands of cola leave an unsavory taste in her mouth.However,in a blind taste test,Olivia is found to prefer generic store-brand cola to Pepsi eight out of ten times.The results of Olivia's taste test would reinforce claims by critics of brand names that

Accepted Answer

A)   consumers are always willing to pay more for brand names.
B)   brand names cause consumers to perceive differences that do not really exist.
C)   brand names cause consumers to be more sensitive to product differences.
D)   brand names are a form of socially efficient advertising.E) B) and C)
F) All of the above

Question 2

Figure 16-7
The lines in the figures below illustrate the potential effect of entry and exit in a monopolistically competitive market on either the demand curve or the marginal cost curve of existing firms. 
-Refer to Figure 16-7.Which of the diagrams illustrates the impact of some existing firms leaving the market?

Accepted Answer

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

Question 3

In a monopolistically competitive market,social welfare would be enhanced if

Accepted Answer

A)   price equaled marginal cost.
B)   government regulation eliminated the product-variety externality.
C)   the government raised taxes to subsidize firms that price below average total cost.
D)   there were fewer firms,making the industry closer to an oligopoly.E) A) and B)
F) A) and C)

Question 4

In which of the following markets is economic profit driven to zero in the long run?

Accepted Answer

A)   oligopoly
B)   monopoly
C)   monopolistic competition
D)   cartelsE) All of the above
F) A) and D)

Question 5

Table 16-5
This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm.
 
-Refer to Table 16-5.What is this firm's total cost at the profit-maximizing quantity?

Accepted Answer

A)   $12
B)   $18
C)   $32
D)   $36E) All of the above
F) A) and B)

Question 6

Monopolistic competition is characterized by which of the following attributes? (i) 
Free entry
(ii) 
Product differentiation
(iii) 
Many sellers

Accepted Answer

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

Question 7

To maximize its profit,a monopolistically competitive firm chooses its level of output by looking for the level of output at which

Accepted Answer

A)   price equals marginal cost.
B)   marginal revenue equals marginal cost.
C)   average total cost is minimized.
D)   All of the above are correct.E) A) and D)
F) B) and D)

Question 8

One theory of advertising suggests that

Accepted Answer

A)   information on price is important to make advertising effective.
B)   the content of advertising may be irrelevant to product success in the market.
C)   celebrity advertising is not effective in retail food markets.
D)   Post and Kellogg should not advertise new cereals.E) C) and D)
F) B) and D)

Question 9

Firms can freely enter a market

Accepted Answer

A)   only when the market is a monopoly.
B)   only when the market is a monopoly or monopolistically competitive.
C)   only when the market is monopolistically competitive or perfectly competitive.
D)   when the market is perfectly competitive,monopolistically competitive,or monopolistic.E) A) and C)
F) B) and C)

Question 10

A monopolistically competitive firm faces the following demand curve for its product:  The firm has total fixed costs of $40 and a constant marginal cost of $2 per unit.We can conclude that

Accepted Answer

A)   firms will exit this market.
B)   firms will enter this market.
C)   this market is in long-run equilibrium.
D)   this firm is operating at its efficient scale.E) A) and B)
F) A) and C)

Question 11

When consumers are exposed to additional choices that result from the introduction of a new product,

Accepted Answer

A)   their satisfaction is likely to be lowered as a result of their having to make additional choices.
B)   a product-variety externality is said to occur.
C)   an advertising externality is said to occur.
D)   consumers are likely to experience negative consumption externalities.E) A) and B)
F) A) and C)

Question 12

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) All of the above
F) None of the above

Question 13

Monopolistic competition is characterized by a few sellers offering similar products,whereas oligopoly is characterized by many sellers offering differentiated products.

Accepted Answer

A) True 
 B)False

Question 14

In a monopolistically competitive market,

Accepted Answer

A)   entry by new firms is impeded by barriers to entry;thus,the number of firms in the market is never ideal.
B)   entry by new firms is impeded by barriers to entry,but the number of firms in the market is nevertheless always ideal.
C)   free entry ensures that the number of firms in the market is ideal.
D)   there may be too few or too many firms in the market,despite free entry.E) B) and D)
F) None of the above

Question 15

Senator Hubris wants to pass a law that would require all monopolistically competitive firms to operate at their efficient scale.If this law were to pass and be enforced,we would expect that monopolistically competitive firms would

Accepted Answer

A)   see their profits increase.
B)   break even.
C)   lose money.
D)   not really be affected by the law.E) A) and C)
F) None of the above

Question 16

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

Question 17

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.What is the concentration ratio in Industry X?

Accepted Answer

A)   6%
B)   44%
C)   90%
D)   99%E) A) and B)
F) A) and C)

Question 18

The free entry and exit of firms in a monopolistically competitive market guarantees that

Accepted Answer

A)   both economic profits and economic losses can persist in the long run.
B)   both economic profits and economic losses disappear in the long run.
C)   economic profits,but not economic losses,can persist in the long run.
D)   economic losses,but not economic profits,can persist in the long run.E) C) and D)
F) B) and D)

Question 19

Table 16-6
Traci's Hairstyling is one salon among many in the market for hairstyling.The following table presents cost and revenue data for haircuts at Traci's Hairstyling.
 
-Refer to Table 16-6.If the government required Traci's to produce at the efficient scale of output,how many haircuts would Traci's sell?

Accepted Answer

A)   either 3 or 4
B)   either 4 or 5
C)   either 5 or 6
D)   either 6 or 7E) None of the above
F) A) and C)

Question 20

A firm can signal the high quality of its product by

Accepted Answer

A)   spending nothing on advertising to convey that the product is so good that the firm does not even need to advertise.
B)   spending a large amount of money on advertising.
C)   getting a patent for the product.
D)   not worrying about getting a patent for the product.E) All of the above
F) None of the above

Exam 16: Monopolistic Competition

A firm can signal the high quality of its product by

Correct Answer
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The free entry and exit of firms in a monopolistically competitive market guarantees that

Correct Answer
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Monopolistic competition is characterized by which of the following attributes? (i) Free entry (ii) Product differentiation (iii) Many sellers

Correct Answer
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To maximize its profit,a monopolistically competitive firm chooses its level of output by looking for the level of output at which

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

Correct Answer
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Monopolistic competition is characterized by a few sellers offering similar products,whereas oligopoly is characterized by many sellers offering differentiated products.

Correct Answer
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In which of the following markets is economic profit driven to zero in the long run?

Correct Answer
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In a monopolistically competitive market,

Correct Answer
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One theory of advertising suggests that

Correct Answer
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Firms can freely enter a market

Correct Answer
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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. -Refer to Table 16-1.What is the concentration ratio in Industry X?

Correct Answer
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In a monopolistically competitive market,social welfare would be enhanced if

Correct Answer
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Senator Hubris wants to pass a law that would require all monopolistically competitive firms to operate at their efficient scale.If this law were to pass and be enforced,we would expect that monopolistically competitive firms would

Correct Answer
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A monopolistically competitive firm faces the following demand curve for its product: The firm has total fixed costs of $40 and a constant marginal cost of $2 per unit.We can conclude that

Correct Answer
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Correct Answer
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Table 16-5 This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm. -Refer to Table 16-5.What is this firm's total cost at the profit-maximizing quantity?

Correct Answer
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When consumers are exposed to additional choices that result from the introduction of a new product,

Correct Answer
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A monopolistically competitive firm chooses the quantity to produce where

Correct Answer
verified

Exam 16: Monopolistic Competition

A firm can signal the high quality of its product by

Correct AnswerverifiedShow Answer

The free entry and exit of firms in a monopolistically competitive market guarantees that

Correct AnswerverifiedShow Answer

Monopolistic competition is characterized by which of the following attributes? (i) Free entry (ii) Product differentiation (iii) Many sellers

Correct AnswerverifiedShow Answer

To maximize its profit,a monopolistically competitive firm chooses its level of output by looking for the level of output at which

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Monopolistic competition is characterized by a few sellers offering similar products,whereas oligopoly is characterized by many sellers offering differentiated products.

Correct AnswerverifiedShow Answer

In which of the following markets is economic profit driven to zero in the long run?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a monopolistically competitive market,

Correct AnswerverifiedShow Answer

One theory of advertising suggests that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Firms can freely enter a market

Correct AnswerverifiedShow Answer

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.What is the concentration ratio in Industry X?

Correct AnswerverifiedShow Answer

In a monopolistically competitive market,social welfare would be enhanced if

Correct AnswerverifiedShow Answer

Senator Hubris wants to pass a law that would require all monopolistically competitive firms to operate at their efficient scale.If this law were to pass and be enforced,we would expect that monopolistically competitive firms would

Correct AnswerverifiedShow Answer

A monopolistically competitive firm faces the following demand curve for its product: The firm has total fixed costs of $40 and a constant marginal cost of $2 per unit.We can conclude that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 16-5 This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm. -Refer to Table 16-5.What is this firm's total cost at the profit-maximizing quantity?

Correct AnswerverifiedShow Answer

When consumers are exposed to additional choices that result from the introduction of a new product,

Correct AnswerverifiedShow Answer

A monopolistically competitive firm chooses the quantity to produce where

Correct AnswerverifiedShow Answer

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