Question 1

Entry and exit drive each firm in a monopolistically competitive market to a point of tangency between its

Accepted Answer

A)   marginal revenue curve and its total cost curve.
B)   marginal revenue curve and its average total cost curve.
C)   demand curve and its total cost curve.
D)   demand curve and its average total cost curve.E) None of the above
F) A) and C)

Question 2

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

Question 3

Results of the study done by Lee Benham on advertising for eyeglasses would suggest that

Accepted Answer

A)   brand loyalty and market power in the eyeglass market was likely to be more pervasive in states that allowed advertising.
B)   eyeglass sales were more profitable in states that allowed advertising.
C)   optometrists would not be supportive of advertising restrictions.
D)   optometrists would enthusiastically endorse advertising restrictions.E) A) and B)
F) All of the above

Question 4

Which of the following is a characteristic of monopolistic competition?

Accepted Answer

A)   ownership of a key resource by a single firm
B)   free entry
C)   identical product
D)   patentsE) A) and C)
F) All of the above

Question 5

Which of the following goods are not likely to be sold in monopolistically competitive markets?

Accepted Answer

A)   compact discs
B)   books
C)   cookies
D)   wheatE) A) and B)
F) C) and D)

Question 6

Scenario 16-1
Vacation Inns of America (VIA) has recently announced intentions to build a new hotel/resort complex in Myrtle Beach,South Carolina.Assume that the hotel/resort market in Myrtle Beach is characterized by monopolistic competition.
-Refer to Scenario 16-1.As a result of the new VIA hotel/resort,tourists who stay in Myrtle Beach are likely to experience a

Accepted Answer

A)   product-variety externality,which harms consumers.
B)   product-variety externality,which benefits consumers.
C)   business-stealing externality,which harms consumers.
D)   business-stealing externality,which benefits consumers.E) None of the above
F) All of the above

Question 7

In many college towns,private independent bookstores typically locate on the periphery of the college campus.However,in some college towns,the university has used political power to restrict private bookstores near campus through community zoning laws.Use your knowledge of markets to predict the price and quality of service differences in the market for college textbooks under the two different market regimes.

Accepted Answer

In monopoly markets,price will...

Question 8

One characteristic of an oligopoly market structure is:

Accepted Answer

A)   firms in the industry are typically characterized by very diverse product lines.
B)   firms in the industry have some degree of market power.
C)   products typically sell at a price equal to their marginal cost of production.
D)   the actions of one seller have no impact on the profitability of other sellers.E) A) and B)
F) A) and C)

Question 9

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 price should this firm charge to maximize profit?

Accepted Answer

A)   $4
B)   $8
C)   $12
D)   $16E) B) and D)
F) A) and D)

Question 10

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 A?

Accepted Answer

A)   24%
B)   55%
C)   66%
D)   82%E) None of the above
F) B) and C)

Question 11

Figure 16-1.The figure is drawn for a monopolistically competitive firm. 
-Refer to Figure 16-1.If the average variable cost is $13 at the profit-maximizing quantity,and if the firm's profit is $20 at that quantity,then its fixed costs amount to

Accepted Answer

A)   $12.
B)   $22.
C)   $40.
D)   $60.E) A) and C)
F) All of the above

Question 12

In a market that is characterized by imperfect competition,

Accepted Answer

A)   firms are price takers.
B)   there are always a large number of firms.
C)   there are at least a few firms that compete with one another.
D)   the actions of one firm in the market never have any impact on the other firms' profits.E) A) and D)
F) C) and D)

Question 13

A market structure in which there are many firms selling products that are similar but not identical is known as

Accepted Answer

A)   oligopoly.
B)   monopoly.
C)   monopolistic competition.
D)   perfect competition.E) All of the above
F) C) and D)

Question 14

Which of the following pairs illustrates the two extreme examples of market structures?

Accepted Answer

A)   competition and oligopoly
B)   competition and monopoly
C)   monopoly and monopolistic competition
D)   oligopoly and monopolistic competitionE) B) and C)
F) A) and D)

Question 15

Suppose that monopolistically competitive firms in a certain market are experiencing losses.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 firm experiences an upward shift of its marginal cost and average total cost curves.
D)   each existing firm's average total cost falls to bring economic profit back to zero.E) A) and B)
F) B) and C)

Question 16

A business-stealing externality is

Accepted Answer

A)   an externality that is likely to be punished under antitrust laws.
B)   the negative externality that occurs when one firm attempts to duplicate exactly the product of a different firm.
C)   an externality that is considered to be an explicit cost of business in monopolistically competitive markets.
D)   the negative externality associated with entry of new firms in a monopolistically competitive market.E) All of the above
F) A) and B)

Question 17

Scenario 16-2
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 16-2.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) A) and C)

Question 18

A markup of price over marginal cost is inconsistent with free entry and zero profit.

Accepted Answer

A) True 
 B)False

Question 19

Critics of advertising argue that advertising

Accepted Answer

A)   creates desires that otherwise might not exist.
B)   hinders competition.
C)   often fails to convey substantive information.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 20

The product-variety externality arises in monopolistically competitive markets because

Accepted Answer

A)   firms produce with excess capacity.
B)   firms try to differentiate their products.
C)   firms would like to produce homogeneous products,but the large number of firms prohibits it.
D)   entry and exit is not restricted.E) C) and D)
F) A) and B)

Exam 16: Monopolistic Competition

The product-variety externality arises in monopolistically competitive markets because

Correct Answer
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Entry and exit drive each firm in a monopolistically competitive market to a point of tangency between its

Correct Answer
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Results of the study done by Lee Benham on advertising for eyeglasses would suggest that

Correct Answer
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Correct Answer
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In monopoly markets,price will...
View Answer

Which of the following pairs illustrates the two extreme examples of market structures?

Correct Answer
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One characteristic of an oligopoly market structure is:

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Which of the following is a characteristic of monopolistic competition?

Correct Answer
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Figure 16-1.The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.If the average variable cost is $13 at the profit-maximizing quantity,and if the firm's profit is $20 at that quantity,then its fixed costs amount to

Correct Answer
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One theory of advertising suggests that

Correct Answer
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Which of the following goods are not likely to be sold in monopolistically competitive markets?

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 A?

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In a market that is characterized by imperfect competition,

Correct Answer
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A markup of price over marginal cost is inconsistent with free entry and zero profit.

Correct Answer
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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 price should this firm charge to maximize profit?

Correct Answer
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Suppose that monopolistically competitive firms in a certain market are experiencing losses.In the transition from this initial situation to a long-run equilibrium,

Correct Answer
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A business-stealing externality is

Correct Answer
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A market structure in which there are many firms selling products that are similar but not identical is known as

Correct Answer
verified

Critics of advertising argue that advertising

Correct Answer
verified

Exam 16: Monopolistic Competition

The product-variety externality arises in monopolistically competitive markets because

Correct AnswerverifiedShow Answer

Entry and exit drive each firm in a monopolistically competitive market to a point of tangency between its

Correct AnswerverifiedShow Answer

Results of the study done by Lee Benham on advertising for eyeglasses would suggest that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIn monopoly markets,price will...View AnswerShow Answer

Which of the following pairs illustrates the two extreme examples of market structures?

Correct AnswerverifiedShow Answer

One characteristic of an oligopoly market structure is:

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Which of the following is a characteristic of monopolistic competition?

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Figure 16-1.The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-1.If the average variable cost is $13 at the profit-maximizing quantity,and if the firm's profit is $20 at that quantity,then its fixed costs amount to

Correct AnswerverifiedShow Answer

One theory of advertising suggests that

Correct AnswerverifiedShow Answer

Which of the following goods are not likely to be sold in monopolistically competitive markets?

Correct AnswerverifiedShow Answer

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 A?

Correct AnswerverifiedShow Answer

In a market that is characterized by imperfect competition,

Correct AnswerverifiedShow Answer

A markup of price over marginal cost is inconsistent with free entry and zero profit.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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 price should this firm charge to maximize profit?

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

Correct AnswerverifiedShow Answer

A business-stealing externality is

Correct AnswerverifiedShow Answer

A market structure in which there are many firms selling products that are similar but not identical is known as

Correct AnswerverifiedShow Answer

Critics of advertising argue that advertising

Correct AnswerverifiedShow Answer

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In monopoly markets,price will...
View Answer

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