Question 1

Two bags of chips sit side-by-side in a grocery store: Ruffles (a brand name) sells for $3.00,while Crunchy Chips (not a brand name) sells for $1.50.In a typical day the store sells some of each type of chips,which suggests that

Accepted Answer

A)   no rational consumer would spend twice as much for Ruffles as he would for Crunchy Chips.
B)   some consumers must perceive that Ruffles is a higher quality product.
C)   Ruffles has no incentive to maintain the quality of its product just because of the Ruffles brand name.
D)   None of the above is correct. B

Question 2

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.

Question 3

Refer to Scenario 16-3.What two benefits are conveyed by the brand name Burger Bonanza?

Accepted Answer

information about qu...

Question 4

Among arguments for and against advertising,both sides agree that advertising leads to

Accepted Answer

A)   higher prices and less competitive markets.
B)   higher prices and more competitive markets.
C)   lower prices and more competitive markets.
D)   None of the above is correct.The debate fails to resolve the question of advertising's effect on prices and competition.

Question 5

Critics of advertising argue that in some markets advertising may

Accepted Answer

A)   attract products of lower quality into the market.
B)   attract less informed buyers into the market.
C)   decrease elasticity of demand allowing firms to charge a larger markup over marginal cost.
D)   enhance competition in markets to an unnecessary degree.

Question 6

Which of the following pairs illustrates the two extreme examples of market structures?

Accepted Answer

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

Question 7

One characteristic of an oligopoly market structure is:

Accepted Answer

A)   firms in the industry are typically characterized by very diverse product lines.
B)   firms in the industry have some degree of market power.
C)   products typically sell at a price equal to their marginal cost of production.
D)   the actions of one seller have no impact on the profitability of other sellers.

Question 8

A market structure with only a few sellers,each offering similar or identical products,is known as

Accepted Answer

A)   oligopoly.
B)   monopoly.
C)   monopolistic competition.
D)   perfect competition.

Question 9

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

Accepted Answer

A)   produces an output level where marginal revenue equals average total cost.
B)   sets price equal to demand where marginal revenue equals marginal cost.
C)   must earn zero economic profits.
D)   maximizes revenues as well as profits.

Question 10

Table 16-6
Traci's Hairstyling is one salon among many in the market for hairstyling.The following table presents cost and revenue data for haircuts at Traci's Hairstyling.
 
-Refer to Table 16-6.Given the cost and revenue data,Traci's is

Accepted Answer

A)   not in a long-run equilibrium.More businesses will enter the hair salon market in the long-run.
B)   not in a short-run equilibrium.
C)   not in a long-run equilibrium.Some businesses currently in the hair salon market will exit the market in the long-run.
D)   in a long-run equilibrium.

Question 11

If firms in a monopolistically competitive market are incurring economic losses,which of the following scenarios would best describe the change remaining firms would face as the market adjusts to the long-run equilibrium?

Accepted Answer

A)   a downward shift in the marginal cost curve for each firm
B)   an upward shift in the marginal cost curve for each firm
C)   a decrease in demand for each firm
D)   an increase in demand for each firm

Question 12

Which of the following best describes the idea of excess capacity in monopolistic competition?

Accepted Answer

A)   Firms produce more output than is socially desirable.
B)   The output produced by a typical firm is less than what would occur at the minimum point on its ATC curve.
C)   Due to product differentiation,firms choose output levels where price equals average total cost.
D)   Firms keep some surplus output on hand in case there is a shift in the demand for their product.

Question 13

Firms in monopolistically competitive markets and monopolies can earn long-run profits due to barriers to entry.

Accepted Answer

A) True 
 B)False

Question 14

A recent outbreak of hepatitis was linked to a national fast-food restaurant chain.This is an example of a case in which

Accepted Answer

A)   brand name identity increases the effectiveness of markets.
B)   brand name identity can be detrimental to the profitability of a firm.
C)   advertising is ineffective in salvaging perceptions of product quality.
D)   advertising cannot be used to establish brand loyalty. B

Question 15

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 B?

Accepted Answer

A)   about 12%
B)   about 32%
C)   about 39%
D)   about 51%

Question 16

A firm charges a price that exceeds marginal cost

Accepted Answer

A)   when the market is a monopoly.
B)   when the market is a monopoly or monopolistically competitive.
C)   when the market is monopolistically competitive or perfectly competitive.
D)   when the market is perfectly competitive,monopolistically competitive,or monopolistic. B

Question 17

A monopolistically competitive market is like both a competitive market and a monopoly in that firms in all three market structures

Accepted Answer

A)   can earn economic profits in the short run.
B)   can earn economic profits in the long run.
C)   charge a price above marginal cost.
D)   All of the above are correct.

Question 18

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 ...

Question 19

A monopolistically competitive firm's choice of output level is virtually identical to the choice made by

Accepted Answer

A)   a perfectly competitive firm.
B)   a duopolist.
C)   a monopolist.
D)   an oligopolist.

Question 20

Which of the following is a commonly-cited benefit of advertising?

Accepted Answer

A)   Advertising can be a signal of the quality of a product.
B)   Advertising impedes competition.
C)   Advertising reduces the deadweight loss associated with monopolistic competition.
D)   Advertising encourages free entry,which increases profits.

Exam 16: Monopolistic Competition

Two bags of chips sit side-by-side in a grocery store: Ruffles (a brand name) sells for $3.00,while Crunchy Chips (not a brand name) sells for $1.50.In a typical day the store sells some of each type of chips,which suggests that

Correct AnswerverifiedB

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 AnswerverifiedShow Answer

Refer to Scenario 16-3.What two benefits are conveyed by the brand name Burger Bonanza?

Correct Answerverifiedinformation about qu...View AnswerShow Answer

Among arguments for and against advertising,both sides agree that advertising leads to

Correct AnswerverifiedShow Answer

Critics of advertising argue that in some markets advertising may

Correct AnswerverifiedShow Answer

Which of the following pairs illustrates the two extreme examples of market structures?

Correct AnswerverifiedShow Answer

One characteristic of an oligopoly market structure is:

Correct AnswerverifiedShow Answer

A market structure with only a few sellers,each offering similar or identical products,is known as

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Table 16-6 Traci's Hairstyling is one salon among many in the market for hairstyling.The following table presents cost and revenue data for haircuts at Traci's Hairstyling. -Refer to Table 16-6.Given the cost and revenue data,Traci's is

Correct AnswerverifiedShow Answer

If firms in a monopolistically competitive market are incurring economic losses,which of the following scenarios would best describe the change remaining firms would face as the market adjusts to the long-run equilibrium?

Correct AnswerverifiedShow Answer

Which of the following best describes the idea of excess capacity in monopolistic competition?

Correct AnswerverifiedShow Answer

Firms in monopolistically competitive markets and monopolies can earn long-run profits due to barriers to entry.

Correct AnswerverifiedShow Answer

A recent outbreak of hepatitis was linked to a national fast-food restaurant chain.This is an example of a case in which

Correct AnswerverifiedB

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 B?

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A firm charges a price that exceeds marginal cost

Correct AnswerverifiedB

A monopolistically competitive market is like both a competitive market and a monopoly in that firms in all three market structures

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

A monopolistically competitive firm's choice of output level is virtually identical to the choice made by

Correct AnswerverifiedShow Answer

Which of the following is a commonly-cited benefit of advertising?

Correct AnswerverifiedShow Answer

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B

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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B

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B

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Advertising manipulates people's tastes ...
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