Question 1

AllClean knows that it produces and sells very effective laundry detergent. NotQuiteWhite knows that it produces and sells ineffective laundry detergent. According to the signaling theory of advertising,

Accepted Answer

A)   both AllClean and NotQuiteWhite have incentives to spend large amounts of money on advertising their products.
B)   AllClean has an incentive to spend a large amount of money on advertising its detergent, but NotQuiteWhite does not.
C)   NotQuiteWhite has an incentive to spend a large amount of money on advertising its detergent, but AllClean does not.
D)   neither AllClean nor NotQuiteWhite has an incentive to spend a large amount of money on advertising their detergents.E) A) and B)
F) A) and C)

Question 2

Figure 16-10
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-10. Efficient scale is reached

Accepted Answer

A)   at 100 units.
B)   at 133.33 units.
C)   between 133.33 units and 154.92 units.
D)   at 154.92 units.E) A) and B)
F) A) and C)

Question 3

The typical firm in the US economy

Accepted Answer

A)   has some degree of market power.
B)   sells its product for a price that is equal to the marginal cost of producing the last unit.
C)   is perfectly competitive.
D)   is a monopoly.E) B) and D)
F) C) and D)

Question 4

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. Which industry is the most competitive?

Accepted Answer

A)   Industry J
B)   Industry K
C)   Industry L
D)   Industry ME) A) and B)
F) None of the above

Question 5

Scenario 16-1
Suppose the following are the sales for all of the firms in two different industries.
 
-Refer to Scenario 16-1. Which of the following statements is correct regarding the competitiveness of these two industries?

Accepted Answer

A)   Industry A and Industry B are equally competitive.
B)   Industry A is more competitive than Industry B.
C)   Industry A is less competitive than Industry c.
D)   The competitiveness of these two industries cannot be determined from the information given.E) A) and B)
F) B) and C)

Question 6

Figure 16-8
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 16-8. Panel (d)  illustrates the change that would occur if existing firms faced

Accepted Answer

A)   long-run economic losses.
B)   a decrease in the diversity of products offered in the market.
C)   new entrants in the market.
D)   firms exiting the market.E) All of the above
F) A) and B)

Question 7

Which of the following is not an argument made by critics of advertising?

Accepted Answer

A)   Advertising manipulates people's tastes.
B)   Advertising impedes competition.
C)   Advertising promotes economies of scale.
D)   Advertising increases the perception of product differentiation.E) A) and B)
F) All of the above

Question 8

Which of the following market structures is considered a differentiated products market?

Accepted Answer

A)   Perfect competition
B)   Monopolistic competition
C)   Monopoly
D)   Both a and b are differentiated products markets.E) B) and C)
F) A) and D)

Question 9

Advertisements that appear to convey no information at all

Accepted Answer

A)   are usually associated with "infomercials."
B)   are useless to consumers but valuable to firms.
C)   are useless to firms but valuable to consumers for their entertainment quality alone.
D)   may convey information to consumers by providing them with a signal that firms are willing to spend significant amounts of money to advertise.E) A) and B)
F) C) and D)

Question 10

When a monopolistically competitive firm is in long-run equilibrium,

Accepted Answer

A)   price is equal to average total cost.
B)   price is equal to marginal cost.
C)   price is equal to marginal revenue.
D)   the firm operates at its efficient scale.E) C) and D)
F) B) and C)

Question 11

Critics of advertising argue that advertising leads to less elastic demand for products and a larger markup of price over marginal cost.

Accepted Answer

A) True 
 B)False

Question 12

Piper consumes Ragu spaghetti sauce exclusively. She claims that there is a clear taste difference and that competing brands of spaghetti sauce leave an unsavory taste in her mouth. However, in a blind taste test, Piper is found to prefer generic store-brand spaghetti sauce to Ragu spaghetti sauce eight out of ten times. The results of Piper'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 are always preferred to generics.
D)   consumers are only willing to buy generics if they are less expensive.E) None of the above
F) B) and C)

Question 13

Both monopolistic competition and oligopoly are market structures

Accepted Answer

A)   that fail to achieve the total surplus achieved by perfect competition.
B)   that feature only a few firms in each market.
C)   to which the concept of Nash equilibrium is frequently applied by economists.
D)   in which firms earn zero economic profit in the long run.E) None of the above
F) All of the above

Question 14

A monopolistically competitive firm chooses its

Accepted Answer

A)   price and quantity just as a monopoly does.
B)   quantity but faces a horizontal demand curve just as a competitive firm does.
C)   price but can sell any quantity at the market price just as an oligopoly does.
D)   price and quantity based on the decisions of the other firms in the industry just as an oligopoly does.E) B) and C)
F) A) and D)

Question 15

Figure 16-3
This figure depicts a situation in a monopolistically competitive market. 
-Refer to Figure 16-3. Which of the following will occur in the long run in this industry?

Accepted Answer

A)   Firms will exit this industry.
B)   Firms will enter this industry.
C)   This firm will continue to earn positive economic profits.
D)   This firm will incur losses.E) B) and C)
F) A) and B)

Question 16

Figure 16-2. The figure is drawn for a monopolistically competitive firm. 
-Refer to Figure 16-2. Suppose that average total cost is $36 when Q=24. What is the profit-maximizing price and resulting profit?

Accepted Answer

A)   P=$24, profit=$0
B)   P=$36, profit=$48
C)   P=$36, profit=$0
B)   P=$36, profit=$144C) A) and B)
D) None of the above

Question 17

Which of the following conditions is characteristic of a monopolistically competitive firm in long-run equilibrium?

Accepted Answer

A)   P > MR and P = MC
B)   ATC = demand and MR = MC
C)   P 
D)   P > ATC and demand > MRE) All of the above
F) B) and C)

Question 18

Firms in monopolistically competitive markets and monopolies can earn long-run profits due to barriers to entry.

Accepted Answer

A) True 
 B)False

Question 19

In Lee Benham's 1972 article examining the impact of advertising on the average price paid for a pair of eyeglasses, Benham found that

Accepted Answer

A)   the average price paid for eyeglasses was nearly 20% higher in the states that did not restrict advertising.
B)   the average price paid for eyeglasses was nearly 20% lower in the states that did not restrict advertising.
C)   there was no difference in the average price paid between states that restricted advertising and those that did not.
D)   the average price paid for eyeglasses was almost 5 times higher in the states that did not restrict advertising.E) All of the above
F) C) and D)

Question 20

The product-variety externality and the business-stealing externality are both spillover benefits of new firms entering a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Exam 16: Monopolistic Competition

Both monopolistic competition and oligopoly are market structures

Correct Answer
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Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. Suppose that average total cost is $36 when Q=24. What is the profit-maximizing price and resulting profit?

Correct Answer
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AllClean knows that it produces and sells very effective laundry detergent. NotQuiteWhite knows that it produces and sells ineffective laundry detergent. According to the signaling theory of advertising,

Correct Answer
verified

Critics of advertising argue that advertising leads to less elastic demand for products and a larger markup of price over marginal cost.

Correct Answer
verified

In Lee Benham's 1972 article examining the impact of advertising on the average price paid for a pair of eyeglasses, Benham found that

Correct Answer
verified

The product-variety externality and the business-stealing externality are both spillover benefits of new firms entering a monopolistically competitive market.

Correct Answer
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Which of the following conditions is characteristic of a monopolistically competitive firm in long-run equilibrium?

Correct Answer
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Which of the following market structures is considered a differentiated products market?

Correct Answer
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The typical firm in the US economy

Correct Answer
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Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. Efficient scale is reached

Correct Answer
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A monopolistically competitive firm chooses its

Correct Answer
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Advertisements that appear to convey no information at all

Correct Answer
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Which of the following is not an argument made by critics of advertising?

Correct Answer
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Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. Which of the following will occur in the long run in this industry?

Correct Answer
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Scenario 16-1 Suppose the following are the sales for all of the firms in two different industries. -Refer to Scenario 16-1. Which of the following statements is correct regarding the competitiveness of these two industries?

Correct Answer
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Correct Answer
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Firms in monopolistically competitive markets and monopolies can earn long-run profits due to barriers to entry.

Correct Answer
verified

When a monopolistically competitive firm is in long-run equilibrium,

Correct Answer
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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. Which industry is the most competitive?

Correct Answer
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Exam 16: Monopolistic Competition

Both monopolistic competition and oligopoly are market structures

Correct AnswerverifiedShow Answer

Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. Suppose that average total cost is $36 when Q=24. What is the profit-maximizing price and resulting profit?

Correct AnswerverifiedShow Answer

AllClean knows that it produces and sells very effective laundry detergent. NotQuiteWhite knows that it produces and sells ineffective laundry detergent. According to the signaling theory of advertising,

Correct AnswerverifiedShow Answer

Critics of advertising argue that advertising leads to less elastic demand for products and a larger markup of price over marginal cost.

Correct AnswerverifiedShow Answer

In Lee Benham's 1972 article examining the impact of advertising on the average price paid for a pair of eyeglasses, Benham found that

Correct AnswerverifiedShow Answer

The product-variety externality and the business-stealing externality are both spillover benefits of new firms entering a monopolistically competitive market.

Correct AnswerverifiedShow Answer

Which of the following conditions is characteristic of a monopolistically competitive firm in long-run equilibrium?

Correct AnswerverifiedShow Answer

Which of the following market structures is considered a differentiated products market?

Correct AnswerverifiedShow Answer

The typical firm in the US economy

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Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. Efficient scale is reached

Correct AnswerverifiedShow Answer

A monopolistically competitive firm chooses its

Correct AnswerverifiedShow Answer

Advertisements that appear to convey no information at all

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Which of the following is not an argument made by critics of advertising?

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Figure 16-3 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-3. Which of the following will occur in the long run in this industry?

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Scenario 16-1 Suppose the following are the sales for all of the firms in two different industries. -Refer to Scenario 16-1. Which of the following statements is correct regarding the competitiveness of these two industries?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Firms in monopolistically competitive markets and monopolies can earn long-run profits due to barriers to entry.

Correct AnswerverifiedShow Answer

When a monopolistically competitive firm is in long-run equilibrium,

Correct AnswerverifiedShow Answer

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. Which industry is the most competitive?

Correct AnswerverifiedShow Answer

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