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Exam 16: Monopolistic Competition

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Question 231

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One way in which monopolistic competition differs from oligopoly is that

A) there are no barriers to entry in oligopolies.
B) in oligopoly markets there are only a few sellers.
C) all firms in an oligopoly eventually earn zero economic profits.
D) strategic interactions between firms are rare in oligopolies.

E) A) and D)
F) A) and C)

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Question 232

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The two types of imperfectly competitive markets are

A) monopoly and monopolistic competition.
B) monopoly and oligopoly.
C) monopolistic competition and oligopoly.
D) monopolistic competition and cartels.

E) None of the above
F) A) and B)

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Question 233

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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."

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. How much profit will this firm earn at the monopolistically competitive price?

Excess capacity is

A profit-maximizing firm operating in a monopolistically competitive market that is in a long-run equilibrium has

Critics of advertising argue that advertising

In a monopolistically competitive market, social welfare would be enhanced if

Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. Suppose ATC = $36 when Q = 24. Then the

The LookGood BePopular (LGBP) Clothing Company embarked on a new advertising campaign in which a group of young beautiful people are having fun eating out at a restaurant wearing the company's clothes. Critics of advertising argue that this advertisement

New firms will likely enter a monopolistically competitive market when price exceeds

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

Which market structure would likely have the highest concentration ratio?

Scenario 16-7 Consider the problem facing two firms, YumYum and Bertollini, in the frozen food market. Each firm has just come up with an idea for a new "frozen meal for two" which it would sell for $9. Assume that the marginal cost for each new product is a constant $2, and the only fixed cost is for advertising. Each company knows that if it spends $12 million on advertising it will get 1.5 million consumers to try its new product. YumYum has done market research which suggests that its product does not have any "staying" power in the market. Even though it could get 1.5 million consumers to buy the product once, it is unlikely that they will continue to buy the product in the future. Bertollini's market research suggests that its product is very good, and consumers who try the product will continue to be consumers over the ensuing year. On the basis of its market research, Bertollini estimates that its initial 1.5 million customers will buy one unit of the product each month in the coming year, for a total of 18 million units. -Refer to Scenario 16-7. Which of the following is most likely?

Which market structure(s) is(are) considered highly concentrated?

Which of the following statements is not correct?

Scenario 16-8 Burger Bonanza, a major national burger chain, recently decided to spend $4 million on an advertising campaign featuring a world famous actor to promote its new Bomber Burger. -Refer to Scenario 16-8. What can consumers conclude from Burger Bonanza's willingness to spend $4 million on an advertising campaign?

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

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

A monopolistically competitive market has characteristics that are similar to