Question 1

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

Accepted Answer

A)  perfectly competitive market.
B)  monopolistically competitive market.
C)  oligopoly.
D)  monopoly.E) A) and B)
F) B) and C)

Question 2

Monopolistic competition differs from perfect competition because in monopolistically competitive markets

Accepted Answer

A)  there are barriers to entry.
B)  all firms can eventually earn economic profits.
C)  each of the sellers offers a somewhat different product.
D)  strategic interactions between firms are important.E) A) and B)
F) A) and C)

Question 3

Suppose for some firm that average total cost is minimized at Q1 units of output.For a monopolistically competitive firm in long-run equilibrium,Q1

Accepted Answer

A)  is also the level of output at which marginal cost equals average total cost.
B)  exceeds the level of output at which there is a point of tangency between the demand curve and the average total cost curve.
C)  exceeds the level of output at which marginal revenue equals marginal cost.
D)  All of the above are correct.E) A) and B)
F) None of the above D

Question 4

A monopolistically competitive industry is characterized by

Accepted Answer

A)  many firms,differentiated products,and barriers to entry.
B)  many firms,differentiated products,and free entry.
C)  a few firms,identical products,and free entry.
D)  a few firms,differentiated products,and barriers to entry.E) B) and C)
F) None of the above

Question 5

Regulation of a firm in a monopolistically competitive market

Accepted Answer

A)  usually implies a very small administrative burden.
B)  will lower the firm's costs.
C)  is commonly used to enhance market efficiency.
D)  is unlikely to improve market efficiency.E) C) and D)
F) A) and B)

Question 6

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

Accepted Answer

A)  average revenue exceeds marginal revenue
B)  marginal revenue equals marginal cost
C)  price exceeds marginal cost
D)  All of the above are correct.E) A) and B)
F) A) and C) D

Question 7

Although monopolistically competitive markets offer consumers a wide variety of differentiated products,there may still be insufficient variety if

Accepted Answer

A)  there are large fixed costs in the market.
B)  there are no barriers to entry in the market.
C)  the business-stealing externality is present in the market.
D)  the government does not impose regulations on the market.E) C) and D)
F) B) and D) A

Question 8

One thing that both critics of advertising and defenders of advertising agree on is that advertising fosters competition.

Accepted Answer

A) True 
 B)False

Question 9

When McDonald's opens a store in Dhaka,Bangladesh,it has a strong incentive to enforce product quality consistent with stores in the United States.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A)  P > demand and P = MR
B)  ATC > demand and MR = MC
C)  P > MC and demand = ATC
D)  P  MRE) None of the above
F) A) and B)

Question 11

For the economy as a whole,spending on advertising comprises about what percent of total firm revenue?

Accepted Answer

A)  0.5
B)  2
C)  10
D)  20E) B) and D)
F) B) and C)

Question 12

Monopolistic competition is a type of

Accepted Answer

A)  oligopoly.
B)  market structure.
C)  price discrimination.
D)  advertising strategy.E) B) and C)
F) None of the above

Question 13

Figure 16-4 
-Refer to Figure 16-4.Which of the panels depicts a firm in a monopolistically competitive market earning positive economic profits?

Accepted Answer

A)  panel a
B)  panel b
C)  panel c
D)  panel dE) All of the above
F) C) and D)

Question 14

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 15

Under which of the following market structures would consumers likely pay the highest price for a product?

Accepted Answer

A)  perfect competition
B)  monopolistic competition
C)  oligopoly
D)  monopolyE) None of the above
F) A) and B)

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements is correct?

Accepted Answer

A)  Cigarettes are likely to be produced in a monopolistically competitive industry.
B)  Novels are likely to be produced in a monopoly industry.
C)  Movies are likely to be produced in a monopolistically competitive industry.
D)  Milk is likely to be produced in an oligopoly industry.E) C) and D)
F) B) and D)

Question 18

In the short run,a firm in a monopolistically competitive market operates much like a

Accepted Answer

A)  firm in a perfectly competitive market.
B)  firm in an oligopoly.
C)  monopolist.
D)  monopsonist.E) A) and D)
F) C) and D)

Question 19

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Accepted Answer

A)  industrial products.
B)  homogeneous products.
C)  consumer goods for which there are no close substitutes.
D)  highly-differentiated consumer goods.E) A) and C)
F) A) and B)

Question 20

Assume the role of a critic of advertising.Describe the characteristics of advertising that reduce the effectiveness of markets and decrease the social welfare of society.

Accepted Answer

Advertising manipulates people's tastes ...

Exam 16: Monopolistic Competition

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

Correct AnswerverifiedShow Answer

Monopolistic competition differs from perfect competition because in monopolistically competitive markets

Correct AnswerverifiedShow Answer

Suppose for some firm that average total cost is minimized at Q1 units of output.For a monopolistically competitive firm in long-run equilibrium,Q1

Correct AnswerverifiedD

A monopolistically competitive industry is characterized by

Correct AnswerverifiedShow Answer

Regulation of a firm in a monopolistically competitive market

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedD

Although monopolistically competitive markets offer consumers a wide variety of differentiated products,there may still be insufficient variety if

Correct AnswerverifiedA

One thing that both critics of advertising and defenders of advertising agree on is that advertising fosters competition.

Correct AnswerverifiedShow Answer

When McDonald's opens a store in Dhaka,Bangladesh,it has a strong incentive to enforce product quality consistent with stores in the United States.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

For the economy as a whole,spending on advertising comprises about what percent of total firm revenue?

Correct AnswerverifiedShow Answer

Monopolistic competition is a type of

Correct AnswerverifiedShow Answer

Figure 16-4 -Refer to Figure 16-4.Which of the panels depicts a firm in a monopolistically competitive market earning positive economic profits?

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

Under which of the following market structures would consumers likely pay the highest price for a product?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

In the short run,a firm in a monopolistically competitive market operates much like a

Correct AnswerverifiedShow Answer

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Correct AnswerverifiedShow Answer

Assume the role of a critic of advertising.Describe the characteristics of advertising that reduce the effectiveness of markets and decrease the social welfare of society.

Correct AnswerverifiedAdvertising manipulates people's tastes ...View AnswerShow Answer

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Suppose for some firm that average total cost is minimized at Q₁ units of output.For a monopolistically competitive firm in long-run equilibrium,Q₁

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D

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D

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A

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Advertising manipulates people's tastes ...
View Answer