Question 1

Evaluate the following statement: "Advertisements that use celebrity endorsements are devoid of any value and do not enhance the efficient functioning of markets."

Accepted Answer

Some people argue that celebrity endorse...

Question 2

Carmen's Café is a monopolistic competitor. If Carmen is currently producing at the output level where her average total cost is minimized and the café is earning economic profits, then in the long run output will

Accepted Answer

A)   Decrease and average total cost will increase.
B)   Decrease and average total cost will decrease.
C)   Remain unchanged as Carmen's Café is doing the best it can.
D)   Increase and average total costs will decrease.E) All of the above
F) A) and B)

Question 3

Which of the following is not a characteristic of monopolistic competition?

Accepted Answer

A)   A large number of sellers
B)   Firms are price takers
C)   Free entry into the market
D)   A differentiated productE) A) and C)
F) A) and B)

Question 4

The use of the word "monopoly" in the name of the market structure called "monopolistic competition" refers to the fact that

Accepted Answer

A)   Monopolistically competitive firms charge prices equal to their marginal costs just like monopolists.
B)   A monopolistically competitive firm faces a downward-sloping demand curve for its differentiated product and so does a monopolist.
C)   Monopolistically competitive markets have free entry and exit just like a monopolistic market.
D)   Monopolistically competitive firms produce beyond their efficient scale and so do monopolists.E) A) and C)
F) None of the above

Question 5

List five goods that are likely sold in a monopolistically competitive market.

Accepted Answer

Books, CDs, movies, ...

Question 6

In the long run, firms in monopolistically competitive markets produce at the minimum of their average total cost curves.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not an argument put forth by economists in support of the use of advertising? Advertising:

Accepted Answer

A)   Increases competition.
B)   Provides information to customers about prices, new products, and location of retail outlets.
C)   Provides a creative outlet for artists and writers.
D)   Provides new firms with the means to attract customers from existing firms.E) A) and B)
F) None of the above

Question 8

The traditional view of monopolistic competition holds that this type of industrial structure is inefficient because

Accepted Answer

A)   There are too few firms to reach an efficient level of production.
B)   Firms do not operate at the output that minimizes average costs.
C)   Advertising is not used extensively enough to yield an efficient differentiation of the products.
D)   Consumers do not have enough choice among the product varieties available.E) A) and B)
F) All of the above

Question 9

Which of the following products is least likely to be sold in a monopolistically competitive market?

Accepted Answer

A)   Breakfast cereal
B)   Cotton
C)   Video games
D)   BeerE) A) and B)
F) All of the above

Question 10

Which of the following is true regarding the similarities and differences in monopolistic competition and monopoly?

Accepted Answer

A)   The monopolist faces a downward-sloping demand curve while the monopolistic competitor faces an elastic demand curve.
B)   The monopolist charges a price above marginal cost while the monopolistic competitor charges a price equal to marginal cost.
C)   The monopolist makes economic profits in the long run while the monopolistic competitor makes zero economic profits in the long run.
D)   Both the monopolist and the monopolistic competitor operate at the efficient scale.E) A) and C)
F) B) and C)

Question 11

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) All of the above

Question 12

Even advertising that appears to contain little information about the product may be useful because it provides a signal about the quality of the product.

Accepted Answer

A) True 
 B)False

Question 13

When a monopolistically competitive firm raises its price,

Accepted Answer

A)   Quantity demanded falls to zero.
B)   Quantity demanded declines, but not to zero.
C)   The market supply curve shifts outward.
D)   Quantity demanded remains constant.E) A) and D)
F) None of the above

Question 14

Exhibit 4 depicts a monopolistically competitor firm, which is

Accepted Answer

A)   Generating normal profits
B)   Generating profits in the short run.
C)   Generating zero profits in the long run.
D)   Generating losses in the short run.E) B) and D)
F) B) and C)

Question 15

Critics of advertising argue that advertising decreases competition while defenders of advertising argue that advertising increases competition and reduces prices to consumers.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

Monopolistically competitive f...

Question 17

Monopolistic competition is a market structure in which few firms sell similar products.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is true with regard to monopolistically competitive firms' scale of production and pricing decisions? Monopolistically competitive firms produce

Accepted Answer

A)   At the efficient scale and charge a price equal to marginal cost.
B)   At the efficient scale and charge a price above marginal cost.
C)   With excess capacity and charge a price above marginal cost.
D)   With excess capacity and charge a price equal to marginal cost.E) B) and C)
F) A) and D)

Question 19

Which of the following firms is most likely to spend a large percentage of their revenue on advertising?

Accepted Answer

A)   The producer of a highly differentiated consumer product
B)   The manufacturer of an undifferentiated commodity
C)   A perfect competitor
D)   The manufacturer of an industrial product
E)   The producer of a low quality product that costs the same to produce as a similar high quality product.F) A) and C)
G) B) and D)

Exam 15: Market Structures Ii: Monopolistic Competition

Exhibit 4 depicts a monopolistically competitor firm, which is

Correct Answer
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Evaluate the following statement: "Advertisements that use celebrity endorsements are devoid of any value and do not enhance the efficient functioning of markets."

Correct Answer
verified
Some people argue that celebrity endorse...
View Answer

Which of the following is not an argument put forth by economists in support of the use of advertising? Advertising:

Correct Answer
verified

The use of the word "monopoly" in the name of the market structure called "monopolistic competition" refers to the fact that

Correct Answer
verified

Which of the following products is least likely to be sold in a monopolistically competitive market?

Correct Answer
verified

Monopolistic competition is a market structure in which few firms sell similar products.

Correct Answer
verified

Carmen's Café is a monopolistic competitor. If Carmen is currently producing at the output level where her average total cost is minimized and the café is earning economic profits, then in the long run output will

Correct Answer
verified

Which of the following firms is most likely to spend a large percentage of their revenue on advertising?

Correct Answer
verified

Which of the following is not a characteristic of monopolistic competition?

Correct Answer
verified

Which of the following is true with regard to monopolistically competitive firms' scale of production and pricing decisions? Monopolistically competitive firms produce

Correct Answer
verified

Which of the following is true regarding the similarities and differences in monopolistic competition and monopoly?

Correct Answer
verified

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

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

Critics of advertising argue that advertising decreases competition while defenders of advertising argue that advertising increases competition and reduces prices to consumers.

Correct Answer
verified

Even advertising that appears to contain little information about the product may be useful because it provides a signal about the quality of the product.

Correct Answer
verified

The traditional view of monopolistic competition holds that this type of industrial structure is inefficient because

Correct Answer
verified

In the long run, firms in monopolistically competitive markets produce at the minimum of their average total cost curves.

Correct Answer
verified

When a monopolistically competitive firm raises its price,

Correct Answer
verified

List five goods that are likely sold in a monopolistically competitive market.

Correct Answer
verified
Books, CDs, movies, ...
View Answer

Exam 15: Market Structures Ii: Monopolistic Competition

Exhibit 4 depicts a monopolistically competitor firm, which is

Correct AnswerverifiedShow Answer

Evaluate the following statement: "Advertisements that use celebrity endorsements are devoid of any value and do not enhance the efficient functioning of markets."

Correct AnswerverifiedSome people argue that celebrity endorse...View AnswerShow Answer

Which of the following is not an argument put forth by economists in support of the use of advertising? Advertising:

Correct AnswerverifiedShow Answer

The use of the word "monopoly" in the name of the market structure called "monopolistic competition" refers to the fact that

Correct AnswerverifiedShow Answer

Which of the following products is least likely to be sold in a monopolistically competitive market?

Correct AnswerverifiedShow Answer

Monopolistic competition is a market structure in which few firms sell similar products.

Correct AnswerverifiedShow Answer

Carmen's Café is a monopolistic competitor. If Carmen is currently producing at the output level where her average total cost is minimized and the café is earning economic profits, then in the long run output will

Correct AnswerverifiedShow Answer

Which of the following firms is most likely to spend a large percentage of their revenue on advertising?

Correct AnswerverifiedShow Answer

Which of the following is not a characteristic of monopolistic competition?

Correct AnswerverifiedShow Answer

Which of the following is true with regard to monopolistically competitive firms' scale of production and pricing decisions? Monopolistically competitive firms produce

Correct AnswerverifiedShow Answer

Which of the following is true regarding the similarities and differences in monopolistic competition and monopoly?

Correct AnswerverifiedShow Answer

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

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

Critics of advertising argue that advertising decreases competition while defenders of advertising argue that advertising increases competition and reduces prices to consumers.

Correct AnswerverifiedShow Answer

Even advertising that appears to contain little information about the product may be useful because it provides a signal about the quality of the product.

Correct AnswerverifiedShow Answer

The traditional view of monopolistic competition holds that this type of industrial structure is inefficient because

Correct AnswerverifiedShow Answer

In the long run, firms in monopolistically competitive markets produce at the minimum of their average total cost curves.

Correct AnswerverifiedShow Answer

When a monopolistically competitive firm raises its price,

Correct AnswerverifiedShow Answer

List five goods that are likely sold in a monopolistically competitive market.

Correct AnswerverifiedBooks, CDs, movies, ...View AnswerShow Answer

Correct Answer
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Some people argue that celebrity endorse...
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Monopolistically competitive f...
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Correct Answer
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Correct Answer
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Books, CDs, movies, ...
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