Question 1

When a profit-maximizing firm in a monopolistically competitive market charges a price higher than marginal cost,

Accepted Answer

A)   the firm must be earning a positive economic profit.
B)   the firm may be incurring economic losses
C)   there is a deadweight loss to society, but it is exactly offset by the benefit of excess capacity.
D)   new firms will enter the market in the long run.E) A) and D)
F) A) and B)

Question 2

A monopolistically competitive firm

Accepted Answer

A)   has the usual deadweight loss of monopoly pricing.
B)   experiences a zero profit in a long-run equilibrium.
C)   is said to have excess capacity.
D)   All of the above are correct.E) A) and B)
F) All of the above

Question 3

Edward Chamberlin argued that brand names

Accepted Answer

A)   hampered market efficiency.
B)   were instrumental in enhancing market efficiency.
C)   were useful in enhancing market efficiency when the government enforced the use of exclusive trademarks.
D)   were likely to be more socially efficient when used in conjunction with advertising.E) A) and D)
F) B) and C)

Question 4

A new Mexican restaurant opens in the city of Manchester. The residents are happy about this new restaurant because they are experiencing what externality?

Accepted Answer

product-va...

Question 5

Defenders of advertising argue that firms use advertising as a signal of quality, even if the advertising delivers little helpful information about the product.

Accepted Answer

A) True 
 B)False

Question 6

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Accepted Answer

A)   marginal cost exceeds marginal revenue
B)   average revenue equals marginal cost
C)   price exceeds marginal cost
D)   All of the above are correct.E) B) and C)
F) None of the above

Question 7

A firm maximizes its profit by producing output up to the point where marginal revenue equals marginal cost

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

Question 8

In monopolistically competitive markets, positive economic profits

Accepted Answer

A)   suggest that some existing firms will exit the market.
B)   suggest that new firms will enter the market.
C)   are sustained through government-imposed barriers to entry.
D)   are never possible.E) C) and D)
F) A) and C)

Question 9

When a firm operates with excess capacity, it must be in a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following industries has the lowest concentration ratio?

Accepted Answer

A)   breakfast cereal
B)   electric lamp bulbs
C)   household laundry equipment
D)   cigarettesE) C) and D)
F) None of the above

Question 11

Figure 16-13 
-Refer to Figure 16-13. What is the first step in this industry's adjustment to long run equilibrium?

Accepted Answer

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

Question 12

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. Which industry has the lowest concentration ratio?

Accepted Answer

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

Question 13

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) All of the above

Question 14

Excess capacity characterizes firms in monopolistically competitive markets, even in situations of long-run equilibrium.

Accepted Answer

A) True 
 B)False

Question 15

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

Question 16

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

Accepted Answer

Monopolistically competitive f...

Question 17

Figure 16-14 
-Refer to Figure 16-14. If this firm were operating in a perfectly competitive market, it would charge a price equal to point

Accepted Answer

A)   I but in a monopolistically competitive market, the profit-maximizing price is C.
B)   G but in a monopolistically competitive market, the profit-maximizing price is C.
C)   C but in a monopolistically competitive market, the profit-maximizing price is G.
D)   G but in a monopolistically competitive market, the profit-maximizing price is J.E) C) and D)
F) None of the above

Question 18

Table 16-6
Beatrice's Birthday Cakes is one bakery among many in the market for birthday cakes. The following table presents cost and revenue data for birthday cakes at Beatrice's. 
-Refer to Table 16-6. At the profit­maximizing quantity, what is Beatrice's total profit?

Accepted Answer

A)   $43
B)   $89
C)   $101
D)   $144E) A) and B)
F) A) and C)

Question 19

Figure 16-2. The figure is drawn for a monopolistically competitive firm. 
-Refer to Figure 16-2. If the average total cost is $30 at the profit­maximizing quantity, then the firm's maximum profit is

Accepted Answer

A)   $64.
B)   $96.
C)   $144.
D)   $480.E) A) and B)
F) A) and C)

Question 20

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

Exam 16: Monopolistic Competition

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

Correct Answer
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Figure 16-13 -Refer to Figure 16-13. What is the first step in this industry's adjustment to long run equilibrium?

Correct Answer
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A new Mexican restaurant opens in the city of Manchester. The residents are happy about this new restaurant because they are experiencing what externality?

Correct Answer
verified
product-va...
View Answer

A monopolistically competitive firm

Correct Answer
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When a profit-maximizing firm in a monopolistically competitive market charges a price higher than marginal cost,

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

Correct Answer
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Which of the following industries has the lowest concentration ratio?

Correct Answer
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A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Correct Answer
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Edward Chamberlin argued that brand names

Correct Answer
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Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. If the average total cost is $30 at the profitmaximizing quantity, then the firm's maximum profit is

Correct Answer
verified

Table 16-6 Beatrice's Birthday Cakes is one bakery among many in the market for birthday cakes. The following table presents cost and revenue data for birthday cakes at Beatrice's. -Refer to Table 16-6. At the profitmaximizing quantity, what is Beatrice's total profit?

Correct Answer
verified

Defenders of advertising argue that firms use advertising as a signal of quality, even if the advertising delivers little helpful information about the product.

Correct Answer
verified

Correct Answer
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When a firm operates with excess capacity, it must be in a monopolistically competitive 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. Which industry has the lowest concentration ratio?

Correct Answer
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Figure 16-14 -Refer to Figure 16-14. If this firm were operating in a perfectly competitive market, it would charge a price equal to point

Correct Answer
verified

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

Correct Answer
verified
Monopolistically competitive f...
View Answer

In monopolistically competitive markets, positive economic profits

Correct Answer
verified

A firm maximizes its profit by producing output up to the point where marginal revenue equals marginal cost

Correct Answer
verified

Excess capacity characterizes firms in monopolistically competitive markets, even in situations of long-run equilibrium.

Correct Answer
verified

Exam 16: Monopolistic Competition

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

Correct AnswerverifiedShow Answer

Figure 16-13 -Refer to Figure 16-13. What is the first step in this industry's adjustment to long run equilibrium?

Correct AnswerverifiedShow Answer

A new Mexican restaurant opens in the city of Manchester. The residents are happy about this new restaurant because they are experiencing what externality?

Correct Answerverifiedproduct-va...View AnswerShow Answer

A monopolistically competitive firm

Correct AnswerverifiedShow Answer

When a profit-maximizing firm in a monopolistically competitive market charges a price higher than marginal cost,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following industries has the lowest concentration ratio?

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Correct AnswerverifiedShow Answer

Edward Chamberlin argued that brand names

Correct AnswerverifiedShow Answer

Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. If the average total cost is $30 at the profit­maximizing quantity, then the firm's maximum profit is

Correct AnswerverifiedShow Answer

Table 16-6 Beatrice's Birthday Cakes is one bakery among many in the market for birthday cakes. The following table presents cost and revenue data for birthday cakes at Beatrice's. -Refer to Table 16-6. At the profit­maximizing quantity, what is Beatrice's total profit?

Correct AnswerverifiedShow Answer

Defenders of advertising argue that firms use advertising as a signal of quality, even if the advertising delivers little helpful information about the product.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a firm operates with excess capacity, it must be in a monopolistically competitive 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. Which industry has the lowest concentration ratio?

Correct AnswerverifiedShow Answer

Figure 16-14 -Refer to Figure 16-14. If this firm were operating in a perfectly competitive market, it would charge a price equal to point

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedMonopolistically competitive f...View AnswerShow Answer

In monopolistically competitive markets, positive economic profits

Correct AnswerverifiedShow Answer

A firm maximizes its profit by producing output up to the point where marginal revenue equals marginal cost

Correct AnswerverifiedShow Answer

Excess capacity characterizes firms in monopolistically competitive markets, even in situations of long-run equilibrium.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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product-va...
View Answer

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Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. If the average total cost is $30 at the profitmaximizing quantity, then the firm's maximum profit is

Correct Answer
verified

Table 16-6 Beatrice's Birthday Cakes is one bakery among many in the market for birthday cakes. The following table presents cost and revenue data for birthday cakes at Beatrice's. -Refer to Table 16-6. At the profitmaximizing quantity, what is Beatrice's total profit?

Correct Answer
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Correct Answer
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Monopolistically competitive f...
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