Question 1

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) A) and D)
F) B) and D)

Question 2

In the long run,

Accepted Answer

A)   monopolistically competitive firms earn a higher profit than perfectly competitive firms because monopolistically competitive firms have some monopoly power.
B)   monopolistically competitive firms produce a higher output than perfectly competitive firms because competition drives the perfectly competitive firm's output down.
C)   both monopolistically competitive and perfectly competitive firms produce where P = MC.
D)   both monopolistically competitive and perfectly competitive firms produce where P = ATC.E) B) and C)
F) A) and B)

Question 3

Critics of advertising argue that advertising

Accepted Answer

A)   creates demand for products that people otherwise do not want or need.
B)   lowers barriers to entry into an industry because new firms can more easily establish themselves as competitors.
C)   increases competition by providing information about prices.
D)   encourages monopolization of markets by raising entry barriers.E) None of the above
F) A) and B)

Question 4

A monopolistically competitive firm chooses the quantity to produce where

Accepted Answer

A)   price equals marginal cost.
B)   demand equals marginal cost.
C)   marginal revenue equals marginal cost.
D)   Both a and c are correct.E) A) and B)
F) C) and D)

Question 5

When a profit-maximizing firm in a monopolistically competitive market is producing the long-run equilibrium quantity,

Accepted Answer

A)   its average revenue will equal its marginal cost.
B)   its marginal revenue will exceed its marginal cost.
C)   it will be earning positive economic profits.
D)   its demand curve will be tangent to its average-total-cost curve.E) A) and B)
F) A) and C)

Question 6

Suppose that monopolistically competitive firms in a certain market are earning positive profits.In the transition from this initial situation to a long-run equilibrium,

Accepted Answer

A)   the number of firms in the market decreases.
B)   each existing firm experiences a decrease in demand for its product.
C)   each existing firm experiences a rightward shift of its marginal revenue curve.
D)   each existing firm experiences an upward shift in its average total cost curve.E) C) and D)
F) None of the above

Question 7

When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium,

Accepted Answer

A)   the demand curve will be perfectly elastic.
B)   price exceeds marginal cost.
C)   marginal cost must be falling.
D)   marginal revenue exceeds marginal cost.E) B) and D)
F) A) and B)

Question 8

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.E) All of the above
F) C) and D)

Question 9

When a profit-maximizing firm in a monopolistically competitive market charges a price higher than marginal cost,

Accepted Answer

A)   the firm must be earning a positive economic profit.
B)   the firm may be incurring economic losses
C)   there is a deadweight loss to society,but it is exactly offset by the benefit of excess capacity.
D)   new firms will enter the market in the long run.E) A) and C)
F) A) and D)

Question 10

Among the following situations,which one is least likely to apply to a monopolistically competitive firm?

Accepted Answer

A)   profit is positive in the short run
B)   total cost exceeds total revenue in the short run
C)   profit is positive in the long run
D)   total revenue equals total cost in the long runE) A) and B)
F) A) and C)

Question 11

A firm that would experience higher average total cost by increasing production is operating with excess capacity.

Accepted Answer

A) True 
 B)False

Question 12

For a profit-maximizing firm in a monopolistically competitive market,when price is equal to average total cost,price must lie above marginal cost.

Accepted Answer

A) True 
 B)False

Question 13

Advertising

Accepted Answer

A)   provides information about products,including prices and seller locations.
B)   has been proven to increase competition and reduce prices compared to markets without advertising.
C)   signals quality to consumers,because advertising is expensive.
D)   All of the above are correct.E) None of the above
F) A) and C)

Question 14

In his 1958 book,The Affluent Society,John Kenneth Galbraith argued that

Accepted Answer

A)   brand names give firms an incentive to produce and sell high-quality products.
B)   consumers' tastes cannot,in any real sense,be "determined" by advertising.
C)   firms use advertising to create demand for products that people otherwise do not want or need.
D)   firms use advertising to send a signal to consumers about the quality of their products.E) A) and B)
F) All of the above

Question 15

Figure 16-5 
-Refer to Figure 16-5.Which of the graphs depicts a monopolistically competitive firm in long-run equilibrium?

Accepted Answer

A)   panel a
B)   panel b
C)   panel c
D)   None of the above is correct.E) B) and C)
F) A) and C)

Question 16

Monopolistic competition is characterized by many buyers and sellers,product differentiation,and barriers to entry.

Accepted Answer

A) True 
 B)False

Exam 16: Monopolistic Competition

A firm that would experience higher average total cost by increasing production is operating with excess capacity.

Correct Answer
verified

Monopolistic competition is characterized by many buyers and sellers,product differentiation,and barriers to entry.

Correct Answer
verified

A monopolistically competitive firm chooses the quantity to produce where

Correct Answer
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Advertising

Correct Answer
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When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium,

Correct Answer
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Among the following situations,which one is least likely to apply to a monopolistically competitive firm?

Correct Answer
verified

When a profit-maximizing firm in a monopolistically competitive market charges a price higher than marginal cost,

Correct Answer
verified

In comparison to perfect competition,monopolistic competition is characterized by

Correct Answer
verified

Critics of advertising argue that advertising

Correct Answer
verified

When a profit-maximizing firm in a monopolistically competitive market is producing the long-run equilibrium quantity,

Correct Answer
verified

For a profit-maximizing firm in a monopolistically competitive market,when price is equal to average total cost,price must lie above marginal cost.

Correct Answer
verified

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

Correct Answer
verified

Figure 16-5 -Refer to Figure 16-5.Which of the graphs depicts a monopolistically competitive firm in long-run equilibrium?

Correct Answer
verified

In the long run,

Correct Answer
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Suppose that monopolistically competitive firms in a certain market are earning positive profits.In the transition from this initial situation to a long-run equilibrium,

Correct Answer
verified

In his 1958 book,The Affluent Society,John Kenneth Galbraith argued that

Correct Answer
verified

Exam 16: Monopolistic Competition

A firm that would experience higher average total cost by increasing production is operating with excess capacity.

Correct AnswerverifiedShow Answer

Monopolistic competition is characterized by many buyers and sellers,product differentiation,and barriers to entry.

Correct AnswerverifiedShow Answer

A monopolistically competitive firm chooses the quantity to produce where

Correct AnswerverifiedShow Answer

Advertising

Correct AnswerverifiedShow Answer

When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium,

Correct AnswerverifiedShow Answer

Among the following situations,which one is least likely to apply to a monopolistically competitive firm?

Correct AnswerverifiedShow Answer

When a profit-maximizing firm in a monopolistically competitive market charges a price higher than marginal cost,

Correct AnswerverifiedShow Answer

In comparison to perfect competition,monopolistic competition is characterized by

Correct AnswerverifiedShow Answer

Critics of advertising argue that advertising

Correct AnswerverifiedShow Answer

When a profit-maximizing firm in a monopolistically competitive market is producing the long-run equilibrium quantity,

Correct AnswerverifiedShow Answer

For a profit-maximizing firm in a monopolistically competitive market,when price is equal to average total cost,price must lie above marginal cost.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Figure 16-5 -Refer to Figure 16-5.Which of the graphs depicts a monopolistically competitive firm in long-run equilibrium?

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In the long run,

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Suppose that monopolistically competitive firms in a certain market are earning positive profits.In the transition from this initial situation to a long-run equilibrium,

Correct AnswerverifiedShow Answer

In his 1958 book,The Affluent Society,John Kenneth Galbraith argued that

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