Question 1

Figure 16-1    
-Refer to Figure 16-1. Which of the graphs illustrates a relatively elastic, though not perfectly elastic, demand curve consistent with a market that has many substitute products?

Accepted Answer

A)  Panel A
B)  Panel B
C)  Panel C
D)  Panel DE) A) and B)
F) None of the above

Question 2

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 C)
F) B) and D)

Question 3

The entry of new firms into a monopolistically competitive market is accompanied by

Accepted Answer

A)  both positive and negative externalities.
B)  only positive externalities.
C)  only negative externalities.
D)  only private profit opportunities (no externalities) .E) B) and C)
F) C) and D)

Question 4

Scenario 16-2
Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q.
-Refer to Scenario 16-2. If the marginal cost of producing this good is 0, what quantity would a profit-maximizing monopolist produce?

Accepted Answer

A)  Q = 0
B)  Q = 2
C)  Q = 5
D)  Q = 10E) A) and B)
F) A) and D)

Question 5

In both perfect competition and monopolistic competition, each firm

Accepted Answer

A)  has some monopoly power.
B)  sells a product that is at least slightly different from those of other firms.
C)  faces a downward-sloping demand curve.
D)  has many competitors.E) A) and C)
F) None of the above

Question 6

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, existing restauranteurs in Boston are likely to experience a

Accepted Answer

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

Question 7

If regulators required firms in monopolistically competitive markets to set price equal to marginal cost,

Accepted Answer

A)  firms would most likely experience economic losses.
B)  firms would also operate at their efficient scale.
C)  new firms would likely to enter the market.
D)  the most efficient firms would not likely to be affected.E) B) and C)
F) All of the above

Question 8

Which of these types of firms can earn a positive economic profit in the long run?

Accepted Answer

A)  monopolies, but not competitive firms or monopolistically competitive firms
B)  monopolies and monopolistically competitive firms, but not competitive firms
C)  monopolies, monopolistically competitive firms, and competitive firms
D)  No firms earn positive economic profit in the long run. Entry will reduce all firms' economic profit to zero in the long run.E) C) and D)
F) B) and C)

Question 9

Table 16-2
The following table shows the total output produced by the top six firms as well as the total industry output for each industry. 
-Refer to Table 16-2. What is the concentration ratio for Industry K?

Accepted Answer

A)  about 8%
B)  about 36%
C)  about 48%
D)  about 84%E) C) and D)
F) A) and B)

Question 10

A monopolistically competitive industry is characterized by

Accepted Answer

A)  many firms, differentiated products, and barriers to entry.
B)  many firms, differentiated products, and free entry.
C)  a few firms, identical products, and free entry.
D)  a few firms, differentiated products, and barriers to entry.E) A) and D)
F) B) and D)

Question 11

Firms that sell highly differentiated consumer goods, such as over-the-counter drugs, soft drinks, breakfast cereals, and dog food, typically spend between 10 and 20 percent of revenue for

Accepted Answer

The answer of Firms that sell highly differentiated consumer goods,...

Question 12

The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which

Accepted Answer

A)  marginal revenue is equal to marginal cost.
B)  average total cost is equal to marginal revenue.
C)  average total cost is equal to price.
D)  average revenue exceeds average total cost.E) All of the above
F) A) and B)

Question 13

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

Accepted Answer

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

Question 14

A firm that would experience higher average total cost by increasing production is operating with excess capacity.

Accepted Answer

A) True 
 B)False

Question 15

A firm in a monopolistically competitive market faces a

Accepted Answer

A)  downward-sloping demand curve because the firm's product is different from those offered by other firms.
B)  downward-sloping demand curve because there are only a few firms in the market.
C)  horizontal demand curve because there are many firms in the market.
D)  horizontal demand curve because firms can enter the market without restriction.E) A) and B)
F) A) and C)

Question 16

Which of the following statements is not correct?

Accepted Answer

A)  Novels are likely to be produced in a monopolistically competitive industry.
B)  Cable television is likely to be produced in a monopoly industry.
C)  Milk is likely to be produced in a monopolistically competitive industry.
D)  Cigarettes are likely to be produced in an oligopoly industry.E) A) and C)
F) B) and D)

Question 17

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product, the firm will

Accepted Answer

A)  be able to increase its markup over marginal cost.
B)  eventually have to reduce price to remain competitive.
C)  increase the welfare of society.
D)  reduce its average total cost.E) None of the above
F) A) and D)

Question 18

Figure 16-13 
-Refer to Figure 16-13. Use the letters to identify the deadweight loss associated with this firm's profit-maximizing production.

Accepted Answer

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

Question 19

Table 16-3
The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. 
-Refer to Table 16-3. Based on the concentration ratio, which industry is the most competitive?

Accepted Answer

A)  Industry A
B)  Industry B
C)  Industry C
D)  Industry DE) A) and B)
F) A) and C)

Question 20

When a new firm considers entering a market, it takes into account only the profit it would make. What are the two external effects that occur in the market that the firm does not consider?

Accepted Answer

product-variety exte...

Exam 16: Monopolistic Competition

The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which

Correct Answer
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Which of these types of firms can earn a positive economic profit in the long run?

Correct Answer
verified

The entry of new firms into a monopolistically competitive market is accompanied by

Correct Answer
verified

Which of the following statements is not correct?

Correct Answer
verified

Correct Answer
verified

A monopolistically competitive industry is characterized by

Correct Answer
verified

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

Correct Answer
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Table 16-3 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. -Refer to Table 16-3. Based on the concentration ratio, which industry is the most competitive?

Correct Answer
verified

When a new firm considers entering a market, it takes into account only the profit it would make. What are the two external effects that occur in the market that the firm does not consider?

Correct Answer
verified
product-variety exte...
View Answer

A firm that would experience higher average total cost by increasing production is operating with excess capacity.

Correct Answer
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A firm in a monopolistically competitive market faces a

Correct Answer
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Figure 16-1 -Refer to Figure 16-1. Which of the graphs illustrates a relatively elastic, though not perfectly elastic, demand curve consistent with a market that has many substitute products?

Correct Answer
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Figure 16-13 -Refer to Figure 16-13. Use the letters to identify the deadweight loss associated with this firm's profit-maximizing production.

Correct Answer
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Scenario 16-2 Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q. -Refer to Scenario 16-2. If the marginal cost of producing this good is 0, what quantity would a profit-maximizing monopolist produce?

Correct Answer
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Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2. What is the concentration ratio for Industry K?

Correct Answer
verified

Firms that sell highly differentiated consumer goods, such as over-the-counter drugs, soft drinks, breakfast cereals, and dog food, typically spend between 10 and 20 percent of revenue for

Correct Answer
verified

If regulators required firms in monopolistically competitive markets to set price equal to marginal cost,

Correct Answer
verified

In both perfect competition and monopolistic competition, each firm

Correct Answer
verified

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product, the firm will

Correct Answer
verified

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
verified

Exam 16: Monopolistic Competition

The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which

Correct AnswerverifiedShow Answer

Which of these types of firms can earn a positive economic profit in the long run?

Correct AnswerverifiedShow Answer

The entry of new firms into a monopolistically competitive market is accompanied by

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A monopolistically competitive industry is characterized by

Correct AnswerverifiedShow Answer

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

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Table 16-3 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. -Refer to Table 16-3. Based on the concentration ratio, which industry is the most competitive?

Correct AnswerverifiedShow Answer

When a new firm considers entering a market, it takes into account only the profit it would make. What are the two external effects that occur in the market that the firm does not consider?

Correct Answerverifiedproduct-variety exte...View AnswerShow Answer

A firm that would experience higher average total cost by increasing production is operating with excess capacity.

Correct AnswerverifiedShow Answer

A firm in a monopolistically competitive market faces a

Correct AnswerverifiedShow Answer

Figure 16-1 -Refer to Figure 16-1. Which of the graphs illustrates a relatively elastic, though not perfectly elastic, demand curve consistent with a market that has many substitute products?

Correct AnswerverifiedShow Answer

Figure 16-13 -Refer to Figure 16-13. Use the letters to identify the deadweight loss associated with this firm's profit-maximizing production.

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Scenario 16-2 Suppose market demand for a product is given by the equation P = 20 - Q. For this market demand curve, marginal revenue is MR = 20 - 2Q. -Refer to Scenario 16-2. If the marginal cost of producing this good is 0, what quantity would a profit-maximizing monopolist produce?

Correct AnswerverifiedShow Answer

Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2. What is the concentration ratio for Industry K?

Correct AnswerverifiedShow Answer

Firms that sell highly differentiated consumer goods, such as over-the-counter drugs, soft drinks, breakfast cereals, and dog food, typically spend between 10 and 20 percent of revenue for

Correct AnswerverifiedShow Answer

If regulators required firms in monopolistically competitive markets to set price equal to marginal cost,

Correct AnswerverifiedShow Answer

In both perfect competition and monopolistic competition, each firm

Correct AnswerverifiedShow Answer

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product, the firm will

Correct AnswerverifiedShow Answer

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

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product-variety exte...
View Answer

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