Question 1

Table 16-5
This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm.
 
-Refer to Table 16-5.What price should this firm charge to maximize profit?

Accepted Answer

A)   $6
B)   $12
C)   $18
D)   $24E) C) and D)
F) All of the above

Question 2

In a monopolistically competitive market,the demand curves faced by incumbent firms are unaffected by the entry of new firms into the market.

Accepted Answer

A) True 
 B)False

Question 3

In a long-run equilibrium,firms in both perfectly competitive markets and monopolistically competitive markets produce a quantity below the efficient scale of production.

Accepted Answer

A) True 
 B)False

Question 4

Monopolistically competitive firms,like monopoly firms,maximize their profits by charging a price that exceeds marginal cost.

Accepted Answer

A) True 
 B)False

Question 5

In the short run,a firm operating in a monopolistically competitive market

Accepted Answer

A)   produces an output level where marginal revenue equals average total cost.
B)   maximizes revenues as well as profits.
C)   can earn zero economic profits.
D)   sets price equal to marginal cost.E) B) and C)
F) A) and D)

Question 6

When existing firms lose customers and profits due to entry of a new competitor,a

Accepted Answer

A)   predatory-pricing externality occurs.
B)   consumption externality occurs.
C)   business-stealing externality occurs.
D)   product-variety externality occurs.E) A) and C)
F) A) and B)

Question 7

The debate over the efficiency of markets in which products with brand names are sold

Accepted Answer

A)   is framed by the role of regulation in advertising.
B)   is likely to be resolved by reference to anecdotal evidence.
C)   hinges on whether consumers are rational in their choices.
D)   hinges on the effectiveness of advertising that identifies price differences.E) A) and D)
F) C) and D)

Question 8

In monopolistically competitive markets,economic losses

Accepted Answer

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

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.Which industry is the least competitive?

Accepted Answer

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

Question 10

When monopolistically competitive firms advertise,in the long run

Accepted Answer

A)   they will still earn zero economic profit.
B)   they can earn positive economic profit by increasing market share.
C)   the market price must fall.
D)   the market price must rise.E) A) and C)
F) A) and B)

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Firms that sell highly differentiated consumer goods,such as soft drinks,breakfast cereals,and dog food,typically spend what percent of their revenues on advertising?

Accepted Answer

A)   0-1
B)   2-4
C)   10-20
D)   over 50E) A) and B)
F) A) and C)

Question 13

Due to free entry and exit in monopolistic competition,in the long run price must be equal to

Accepted Answer

The answer of Due to free entry and exit in...

Question 14

Suppose there is a market in which the firms hold the following market shares: 25%,20%,18%,15%,8%,7%,4%,2%,1%.What is the concentration ratio for this market?

Accepted Answer

The answer of Suppose there is a market in which...

Question 15

Figure 16-9
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-9.When the firm is maximizing its profit,

Accepted Answer

A)   TR = $9,000 and TC =$16,000.
B)   TR = $14,000 and TC =$16,000.
C)   TR = $16,000 and TC =$16,000.
D)   MC exceeds MR by $66.66 on the last unit of output produced.E) All of the above
F) None of the above

Question 16

When a monopolistically competitive firm is in a long-run equilibrium,the values of marginal cost,average total cost,and price are all the same.

Accepted Answer

A) True 
 B)False

Question 17

Edward Chamberlin argued that governments should

Accepted Answer

A)   ban the use of brand names.
B)   not enforce the trademarks that companies use to identify their products.
C)   vigorously enforce the trademarks that companies use to identify their products.
D)   tax companies whose products have brand names in proportion to how much consumers recognize their products.E) All of the above
F) B) and C)

Question 18

A profit-maximizing firm in a monopolistically competitive market charges a price equal to marginal cost.

Accepted Answer

A) True 
 B)False

Question 19

In monopolistic competition as well as in monopoly,

Accepted Answer

A)   price exceeds marginal revenue for each firm.
B)   profit is zero in a long-run equilibrium for each firm.
C)   entry and exit by firms are unrestricted.
D)   there are at most a few firms in each market.E) B) and C)
F) A) and C)

Question 20

Monopolistic competition is an inefficient market structure because

Accepted Answer

A)   marginal revenue equals marginal cost.
B)   it has a deadweight loss,just as monopoly does.
C)   long-run profits are zero due to free entry.
D)   All of the above are correct.E) A) and B)
F) B) and D)

Exam 16: Monopolistic Competition

Suppose there is a market in which the firms hold the following market shares: 25%,20%,18%,15%,8%,7%,4%,2%,1%.What is the concentration ratio for this market?

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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 least competitive?

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In monopolistic competition as well as in monopoly,

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In monopolistically competitive markets,economic losses

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Monopolistically competitive firms,like monopoly firms,maximize their profits by charging a price that exceeds marginal cost.

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Edward Chamberlin argued that governments should

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The debate over the efficiency of markets in which products with brand names are sold

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Figure 16-9 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-9.When the firm is maximizing its profit,

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Due to free entry and exit in monopolistic competition,in the long run price must be equal to

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In a long-run equilibrium,firms in both perfectly competitive markets and monopolistically competitive markets produce a quantity below the efficient scale of production.

Correct AnswerverifiedShow Answer

When monopolistically competitive firms advertise,in the long run

Correct AnswerverifiedShow Answer

When a monopolistically competitive firm is in a long-run equilibrium,the values of marginal cost,average total cost,and price are all the same.

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When existing firms lose customers and profits due to entry of a new competitor,a

Correct AnswerverifiedShow Answer

Table 16-5 This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm. -Refer to Table 16-5.What price should this firm charge to maximize profit?

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Monopolistic competition is an inefficient market structure because

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In the short run,a firm operating in a monopolistically competitive market

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a monopolistically competitive market charges a price equal to marginal cost.

Correct AnswerverifiedShow Answer

Firms that sell highly differentiated consumer goods,such as soft drinks,breakfast cereals,and dog food,typically spend what percent of their revenues on advertising?

Correct AnswerverifiedShow Answer

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

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In a monopolistically competitive market,the demand curves faced by incumbent firms are unaffected by the entry of new firms into the market.

Correct AnswerverifiedShow Answer

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