Question 1

Figure 16-3 
-Refer to Figure 16-3.At the profit-maximizing,or loss-minimizing,output level,how many units of output will the firm in this figure produce?

Accepted Answer

A)   15
B)   20
C)   25
D)   This firm will choose not to produce.E) B) and C)
F) All of the above

Question 2

In his 1944 book,The Road to Serfdom,Friedrich Hayek argued that

Accepted Answer

A)   the market system should not be applauded for satisfying desires that it has itself created.
B)   consumers' tastes cannot,in any real sense,be "determined" by advertising.
C)   firms use advertising to create demand for products that people otherwise do not want or need.
D)   too much advertising would result in "private opulence and public squalor."E) B) and C)
F) None of the above

Question 3

A market is comprised of many firms as opposed to just one firm or a few firms

Accepted Answer

A)   only when it is perfectly competitive.
B)   only when it is perfectly competitive or oligopolistic.
C)   only when it is perfectly competitive or monopolistically competitive.
D)   when it is perfectly competitive,monopolistically competitive,or oligopolistic.E) B) and C)
F) A) and C)

Question 4

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.What is the concentration ratio for Industry A?

Accepted Answer

A)   approximately 52%
B)   approximately 58%
C)   approximately 66%
D)   approximately 72%E) B) and C)
F) None of the above

Question 5

What is meant by the term "excess capacity" as it relates to monopolistically competitive firms?

Accepted Answer

Monopolistically competitive f...

Question 6

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

Question 7

Excess capacity is

Accepted Answer

A)   an example of the inefficiencies of monopolistically competitive markets.
B)   a short-run problem but not a long-run problem.
C)   a characteristic of rising average total cost curves.
D)   Both a and b are correct.E) B) and C)
F) All of the above

Question 8

A study of the market for optometrists' services in the 1960s showed that

Accepted Answer

A)   all states in the United States prohibited advertising by optometrists.
B)   almost all professional optometrists opposed legal restrictions on their rights to advertise.
C)   the average price of eyeglasses would decrease if the legal restrictions on advertising by optometrists were removed.
D)   advertising on eyeglasses limited competition among optometrists.E) A) and C)
F) All of the above

Question 9

In a monopolistically competitive market,

Accepted Answer

A)   strategic interactions among the firms are very important.
B)   the threat of entry by new firms is not an important consideration.
C)   the attainment of a Nash equilibrium is an important objective.
D)   firms may enter even though they will earn zero economic profit in the long run.E) A) and C)
F) C) and D)

Question 10

Figure 16-4 
-Refer to Figure 16-4.Which of the graphs depicts a short-run equilibrium that will encourage the exit of some firms from a monopolistically competitive industry?

Accepted Answer

A)   panel a
B)   panel b
C)   panel c
D)   panel dE) B) and C)
F) None of the above

Question 11

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

Question 12

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

Accepted Answer

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

Question 13

Critics of advertising argue that advertising

Accepted Answer

A)   creates demand for products that people otherwise do not want or need.
B)   lowers barriers to entry into an industry because new firms can more easily establish themselves as competitors.
C)   increases competition by providing information about prices.
D)   encourages monopolization of markets by raising entry barriers.E) A) and C)
F) A) and B)

Question 14

Figure 16-8
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-8.Efficient scale is reached

Accepted Answer

A)   at 100 units.
B)   between 100 and 133.33 units.
C)   at 133.33 units.
D)   beyond 133.33 units.E) A) and B)
F) C) and D)

Question 15

If there are many firms participating in a market,the market is either

Accepted Answer

A)   an oligopoly or monopolistically competitive.
B)   perfectly competitive or monopolistically competitive.
C)   an oligopoly or perfectly competitive.
D)   an oligopoly or a cartel.E) A) and B)
F) A) and C)

Question 16

A monopolistically competitive firm has the following cost structure:  The firm faces the following demand curve:
 If the government forces this firm to produce at its efficient scale,it will

Accepted Answer

A)   produce 3 units and make $9.
B)   produce 4 units and make $6.
C)   produce 5 units and lose $5.
D)   produce 7 units and lose $49.E) B) and D)
F) A) and B)

Question 17

To be considered an oligopoly,the market must have a concentration ratio below 50%.

Accepted Answer

A) True 
 B)False

Question 18

When a profit-maximizing firm in a monopolistically competitive market is producing the long-run equilibrium quantity,

Accepted Answer

A)   its average revenue will equal its marginal cost.
B)   its marginal revenue will exceed its marginal cost.
C)   it will be earning positive economic profits.
D)   its demand curve will be tangent to its average total cost curve.E) None of the above
F) A) and B)

Question 19

A monopolistically competitive market

Accepted Answer

A)   usually has too many firms,reducing the economic profit of each firm to zero.
B)   usually has too few firms,reducing the product variety for consumers.
C)   may have too many or too few firms,and the government can intervene to achieve the optimal number of firms.
D)   may have too many or too few firms,but the government can do little to rectify the situation.E) B) and C)
F) B) and D)

Question 20

Monopolistic competition is characterized by many buyers and sellers,product differentiation,and free entry.

Accepted Answer

A) True 
 B)False

Exam 16: Monopolistic Competition

Figure 16-4 -Refer to Figure 16-4.Which of the graphs depicts a short-run equilibrium that will encourage the exit of some firms from a monopolistically competitive industry?

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Critics of advertising argue that advertising

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In a monopolistically competitive market,

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To be considered an oligopoly,the market must have a concentration ratio below 50%.

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

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If there are many firms participating in a market,the market is either

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A study of the market for optometrists' services in the 1960s showed that

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Figure 16-3 -Refer to Figure 16-3.At the profit-maximizing,or loss-minimizing,output level,how many units of output will the firm in this figure produce?

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In his 1944 book,The Road to Serfdom,Friedrich Hayek argued that

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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.What is the concentration ratio for Industry A?

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A market is comprised of many firms as opposed to just one firm or a few firms

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

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

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What is meant by the term "excess capacity" as it relates to monopolistically competitive firms?

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Excess capacity is

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Figure 16-8 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-8.Efficient scale is reached

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A monopolistically competitive firm has the following cost structure: The firm faces the following demand curve: If the government forces this firm to produce at its efficient scale,it will

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A monopolistically competitive market

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When a profit-maximizing firm in a monopolistically competitive market is producing the long-run equilibrium quantity,

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Monopolistic competition is characterized by many buyers and sellers,product differentiation,and free entry.

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Monopolistically competitive f...
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