Question 1

A firm in a monopolistically competitive market can earn both short-run and long-run profits.

Accepted Answer

A) True 
 B)False

Question 2

The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.

Accepted Answer

A) True 
 B)False

Question 3

A profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competitive market because the firm in the monopolistically competitive market

Accepted Answer

A)   is characterized by market-share maximization.
B)   has no barriers to entry.
C)   faces a downward-sloping demand curve for its product.
D)   faces a horizontal demand curve at the market clearing price.E) B) and D)
F) B) and C)

Question 4

Which of the following is a characteristic of monopolistic competition?

Accepted Answer

A)   ownership of a key resource by a single firm
B)   free entry
C)   identical product
D)   patentsE) None of the above
F) A) and C)

Question 5

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

Accepted Answer

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

Question 6

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product,the firm will

Accepted Answer

A)   be able to increase its markup over marginal cost.
B)   eventually have to reduce price to remain competitive.
C)   increase the welfare of society.
D)   reduce its average total cost.E) C) and D)
F) B) and D)

Question 7

For a profit-maximizing monopolistically competitive firm,price exceeds marginal cost in

Accepted Answer

A)   the short run but not in the long run.
B)   the long run but not in the short run.
C)   both the short run and the long run.
D)   neither the short run nor the long run.E) A) and D)
F) A) and B)

Question 8

In comparison to perfect competition,monopolistic competition is characterized by

Accepted Answer

A)   efficient scale.
B)   pricing at marginal cost.
C)   excess capacity.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 9

Figure 16-8
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-8.As the figure is drawn,the firm is in

Accepted Answer

A)   a short-run equilibrium but it is not in a long-run equilibrium.
B)   a long-run equilibrium but it is not in a short-run equilibrium.
C)   a short-run equilibrium as well as a long-run equilibrium.
D)   neither a short-run equilibrium nor a long-run equilibrium.E) None of the above
F) A) and B)

Question 10

Imperfectly competitive firms are characterized by

Accepted Answer

A)   horizontal demand curves.
B)   standardized products.
C)   a large number of small firms.
D)   price making ability.E) A) and D)
F) None of the above

Question 11

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 W
B)   Industry X
C)   Industry Y
D)   Industry ZE) B) and C)
F) B) and D)

Question 12

The lower the concentration ratio,the

Accepted Answer

A)   more control an individual firm has to set prices.
B)   more competitive the industry.
C)   less competitive the industry.
D)   Both a and c are correct.E) All of the above
F) A) and B)

Question 13

Consider monopoly,monopolistic competition,and perfect competition.In which of these three market structures does a profit-maximizing firm charge a price that exceeds marginal cost?

Accepted Answer

A)   monopoly only
B)   monopoly and monopolistic competition only
C)   monopoly,monopolistic competition,and perfect competition
D)   The answer cannot be determined without knowing whether the market is in the long run or short run.E) A) and B)
F) A) and D)

Question 14

Figure 16-3 
-Refer to Figure 16-3.What,if any,long run adjustment will take place in this industry?

Accepted Answer

The answer of Figure 16-3 
-Refer to Figure 16-3.What,if any,long...

Question 15

Monopolistic competition is an

Accepted Answer

A)   efficient market structure because long-run profits are zero.
B)   efficient market structure because each firm produces at its efficient scale.
C)   inefficient market structure because there is deadweight loss.
D)   Both a and b are correct.E) All of the above
F) None of the above

Question 16

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

Accepted Answer

A)   positive economic profits.
B)   economic losses.
C)   zero economic profits.
D)   All of the above are possible.E) B) and C)
F) None of the above

Question 17

Figure 16-2 
-Refer to Figure 16-2.If this firm profit-maximizes,what price will it charge?

Accepted Answer

The answer of Figure 16-2 
-Refer to Figure 16-2.If this...

Question 18

The "monopoly" in monopolistically competitive markets is most likely a result of firms having some pricing power due to product differentiation.

Accepted Answer

A) True 
 B)False

Question 19

Table 16-3
The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries.
 
-Refer to Table 16-3.What is the concentration ratio for Industry C?

Accepted Answer

A)   approximately 44%
B)   approximately 48%
C)   approximately 53%
D)   approximately 56%E) C) and D)
F) A) and B)

Question 20

A monopolistically competitive firm has the following cost structure:  The firm faces the following demand curve:
 To maximize profit (or minimize losses) ,the firm will produce

Accepted Answer

A)   2 units.
B)   3 units.
C)   4 units.
D)   5 units.E) B) and D)
F) All of the above

Exam 16: Monopolistic Competition

A firm in a monopolistically competitive market can earn both short-run and long-run profits.

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If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product,the firm will

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Monopolistic competition is an

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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?

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

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The business-stealing externality states that entry of a new firms imposes a cost on existing firms because they lose customers.

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

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A monopolistically competitive firm has the following cost structure: The firm faces the following demand curve: To maximize profit (or minimize losses) ,the firm will produce

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Consider monopoly,monopolistic competition,and perfect competition.In which of these three market structures does a profit-maximizing firm charge a price that exceeds marginal cost?

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Table 16-3 The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries. -Refer to Table 16-3.What is the concentration ratio for Industry C?

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Imperfectly competitive firms are characterized by

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Figure 16-3 -Refer to Figure 16-3.What,if any,long run adjustment will take place in this industry?

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The "monopoly" in monopolistically competitive markets is most likely a result of firms having some pricing power due to product differentiation.

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A profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competitive market because the firm in the monopolistically competitive market

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For a profit-maximizing monopolistically competitive firm,price exceeds marginal cost in

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Which of the following is a characteristic of monopolistic competition?

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Figure 16-2 -Refer to Figure 16-2.If this firm profit-maximizes,what price will it charge?

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The lower the concentration ratio,the

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Figure 16-8 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-8.As the figure is drawn,the firm is in

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In comparison to perfect competition,monopolistic competition is characterized by

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