Question 1

Most businesses advertise their products and services.Some business use SPAM emails to advertise because the cost of a mass e-mail is close to zero.Other business spend millions of dollars to advertise in a 30-second spot during the Super Bowl.Having observed this real world data,economists argue that the amount of money that a business spends on advertising is a proxy for a good or service's

Accepted Answer

A)   size.
B)   quality.
C)   newness.
D)   cost of production.E) A) and D)
F) A) and C)

Question 2

Which of the following statements is correct?

Accepted Answer

A)   Monopolistic competition is similar to monopoly because both market structures are characterized by patents.
B)   Monopolistic competition is similar to perfect competition because both market structures are characterized by each seller being small compared to the market.
C)   Monopolistic competition is similar to oligopoly because both market structures are characterized by free entry.
D)   Monopolistic competition is similar to perfect competition because both market structures are characterized by excess capacity.E) A) and D)
F) A) and C)

Question 3

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

Question 4

In a monopolistically competitive industry,firms set price

Accepted Answer

A)   equal to marginal cost since each firm is a price taker.
B)   below marginal cost since each firm is a price taker.
C)   above marginal cost since each firm is a price setter.
D)   always a fraction of marginal cost since each firm is a price setter.E) C) and D)
F) A) and B)

Question 5

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

Question 6

If we observe a great deal of advertising of dog food,we can infer that

Accepted Answer

A)   consumers spend very little of their disposable income on dog food.
B)   dog food is cheap to produce.
C)   dog food is a highly-differentiated product.
D)   firms who do not advertise earn higher profits than those who do.E) All of the above
F) None of the above

Question 7

Which of the following industries has the highest concentration ratio?

Accepted Answer

A)   wheat
B)   novels
C)   cigarettes
D)   dog foodE) A) and B)
F) All of the above

Question 8

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

Accepted Answer

A)   P = AR
B)   MR = MC
C)   P > MC
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 9

Figure 16-6 
-Refer to Figure 16-6.Which of the graphs depicts the situation for a profit-maximizing firm in a monopolistically competitive market?

Accepted Answer

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

Question 10

Critics of advertising argue that firms use advertising to manipulate consumers' tastes.

Accepted Answer

A) True 
 B)False

Question 11

Evaluate the following statement in the context of business-stealing and product-variety externalities: "We have too many student apartments in this town already.Statistics show that vacancy rates average 15 percent during any given semester."

Accepted Answer

Business-stealing effect: if new entrant...

Question 12

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 C?

Accepted Answer

A)   about 23%
B)   about 34%
C)   about 43%
D)   about 52%E) C) and D)
F) B) and C)

Question 13

In the long run,a profit-maximizing firm in a monopolistically competitive market operates at

Accepted Answer

A)   efficient scale.
B)   a level of output at which average total cost is rising.
C)   a level of output at which average total cost is falling.
D)   the level of output at which total revenue is maximized.E) B) and C)
F) A) and D)

Question 14

A profit-maximizing firm in a monopolistically competitive market can earn positive,negative,or zero profits in the short run.

Accepted Answer

A) True 
 B)False

Question 15

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) A) and B)
F) A) and C)

Question 16

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Accepted Answer

A) True 
 B)False

Question 17

When a new firm enters a monopolistically competitive market,the individual demand curves faced by all existing firms in that market will

Accepted Answer

A)   shift to the left.
B)   shift to the right.
C)   shift in a direction that is unpredictable without further information.
D)   remain unchanged.It is the supply curve that will shift.E) None of the above
F) A) and B)

Question 18

Figure 16-4 
-Refer to Figure 16-4.Panel a shows a profit-maximizing monopolistically competitive firm that is

Accepted Answer

A)   earning zero economic profit.
B)   likely to exit the market in the long run.
C)   producing its efficient scale of output.
D)   not maximizing its profit.E) A) and C)
F) B) and C)

Question 19

A firm in a monopolistically competitive market is similar to a monopoly in the sense that

Accepted Answer

A)   (i) only
B)   (ii) only
C)   (i) and (ii) only
D)   (i) ,(ii) ,and (iii) onlyE) B) and D)
F) B) and C)

Question 20

Figure 16-5 
-Refer to Figure 16-5.Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is earning a positive profit?

Accepted Answer

A)   panel a
B)   panel b
C)   panel c
D)   panel dE) A) and C)
F) A) and B)

Exam 16: Monopolistic Competition

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Correct Answer
verified

Evaluate the following statement in the context of business-stealing and product-variety externalities: "We have too many student apartments in this town already.Statistics show that vacancy rates average 15 percent during any given semester."

Correct Answer
verified
Business-stealing effect: if new entrant...
View Answer

Figure 16-5 -Refer to Figure 16-5.Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is earning a positive profit?

Correct Answer
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Critics of advertising argue that firms use advertising to manipulate consumers' tastes.

Correct Answer
verified

Which of the following industries has the highest concentration ratio?

Correct Answer
verified

When a new firm enters a monopolistically competitive market,the individual demand curves faced by all existing firms in that market will

Correct Answer
verified

A firm in a monopolistically competitive market is similar to a monopoly in the sense that

Correct Answer
verified

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

Correct Answer
verified

Both monopolistic competition and oligopoly are market structures

Correct Answer
verified

A monopolistically competitive firm chooses its

Correct Answer
verified

In the long run,a profit-maximizing firm in a monopolistically competitive market operates at

Correct Answer
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Figure 16-6 -Refer to Figure 16-6.Which of the graphs depicts the situation for a profit-maximizing firm in a monopolistically competitive market?

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 C?

Correct Answer
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In monopolistically competitive markets,economic losses

Correct Answer
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In a monopolistically competitive industry,firms set price

Correct Answer
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A profit-maximizing firm in a monopolistically competitive market can earn positive,negative,or zero profits in the short run.

Correct Answer
verified

Figure 16-4 -Refer to Figure 16-4.Panel a shows a profit-maximizing monopolistically competitive firm that is

Correct Answer
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Which of the following statements is correct?

Correct Answer
verified

If we observe a great deal of advertising of dog food,we can infer that

Correct Answer
verified

Exam 16: Monopolistic Competition

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Correct AnswerverifiedShow Answer

Evaluate the following statement in the context of business-stealing and product-variety externalities: "We have too many student apartments in this town already.Statistics show that vacancy rates average 15 percent during any given semester."

Correct AnswerverifiedBusiness-stealing effect: if new entrant...View AnswerShow Answer

Figure 16-5 -Refer to Figure 16-5.Which of the graphs shown would be consistent with a firm in a monopolistically competitive market that is earning a positive profit?

Correct AnswerverifiedShow Answer

Critics of advertising argue that firms use advertising to manipulate consumers' tastes.

Correct AnswerverifiedShow Answer

Which of the following industries has the highest concentration ratio?

Correct AnswerverifiedShow Answer

When a new firm enters a monopolistically competitive market,the individual demand curves faced by all existing firms in that market will

Correct AnswerverifiedShow Answer

A firm in a monopolistically competitive market is similar to a monopoly in the sense that

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Both monopolistic competition and oligopoly are market structures

Correct AnswerverifiedShow Answer

A monopolistically competitive firm chooses its

Correct AnswerverifiedShow Answer

In the long run,a profit-maximizing firm in a monopolistically competitive market operates at

Correct AnswerverifiedShow Answer

Figure 16-6 -Refer to Figure 16-6.Which of the graphs depicts the situation for a profit-maximizing firm in a monopolistically competitive market?

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 C?

Correct AnswerverifiedShow Answer

In monopolistically competitive markets,economic losses

Correct AnswerverifiedShow Answer

In a monopolistically competitive industry,firms set price

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a monopolistically competitive market can earn positive,negative,or zero profits in the short run.

Correct AnswerverifiedShow Answer

Figure 16-4 -Refer to Figure 16-4.Panel a shows a profit-maximizing monopolistically competitive firm that is

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

If we observe a great deal of advertising of dog food,we can infer that

Correct AnswerverifiedShow Answer

Correct Answer
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Business-stealing effect: if new entrant...
View Answer

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