Question 1

Professional organizations (for example,the American Medical Association and the American Bar Association)have been active advocates for regulation to restrict the right of professionals to advertise.Describe what economic incentives might exist for existing professionals to restrict advertising.

Accepted Answer

If advertising increases information abo...

Question 2

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

Accepted Answer

Books,CDs,movies,com...

Question 3

Monopolistically competitive markets may be socially inefficient because

Accepted Answer

A)   most firms produce inferior products.
B)   government programs cannot effectively regulate price.
C)   firms earn zero economic profit.
D)   the market may have too much or too little entry by new firms.E) B) and D)
F) None of the above

Question 4

The typical firm in the US economy

Accepted Answer

A)   has some degree of market power.
B)   sells its product for a price that is equal to the marginal cost of producing the last unit.
C)   is perfectly competitive.
D)   is a monopoly.E) B) and C)
F) B) and D)

Question 5

Evidence from the market for eyeglasses suggests that advertising leads to

Accepted Answer

A)   lower-quality products for consumers.
B)   lower prices for consumers.
C)   higher prices for consumers.
D)   less concern on the part of consumers about price differences among similar goods.E) A) and B)
F) All of the above

Question 6

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

Accepted Answer

A)   P > ATC
B)   P = ATC
C)   P 
D)   Any of the above could be correct.E) None of the above
F) All of the above

Question 7

The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

Accepted Answer

A)   business-stealing externality that is observed in monopolistically competitive markets.
B)   product-variety externality that is observed in monopolistically competitive markets.
C)   inefficiencies of the long-term losses earned by monopolistically competitive firms.
D)   persistence of positive profits into the long run for monopolistically competitive firms.E) A) and B)
F) All of the above

Question 8

Figure 16-2
This figure depicts a situation in a monopolistically competitive market. 
-Refer to Figure 16-2.How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

Accepted Answer

A)   $200
B)   $312.50
C)   $400
D)   $800E) All of the above
F) A) and B)

Question 9

When a market is monopolistically competitive,the typical firm in the market can earn

Accepted Answer

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

Question 10

The market for wheat is most likely considered a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 11

When advertising is used to relay information about price,each firm is able to enhance market power.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following goods are not likely to be sold in monopolistically competitive markets?

Accepted Answer

A)   jeans
B)   books
C)   tap water
D)   clocksE) None of the above
F) A) and B)

Question 13

Which of the following goods are likely to be sold in a monopolistically competitive market?

Accepted Answer

A)   sweaters
B)   cola
C)   corn
D)   postage stampsE) B) and C)
F) A) and B)

Question 14

A typical firm in the US economy would be classified as

Accepted Answer

A)   perfectly competitive.
B)   imperfectly competitive.
C)   a duopolist.
D)   an oligopolist.E) None of the above
F) A) and B)

Question 15

Figure 16-8
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-8.The quantity of output at which the MC and ATC curves cross is the

Accepted Answer

A)   efficient scale of the firm.
B)   short-run equilibrium quantity of output for the firm.
C)   long-run equilibrium quantity of output for the firm.
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 16

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

Accepted Answer

A)   P > demand and P = MR
B)   ATC > demand and MR = MC
C)   P > MC and demand = ATC
D)   P  MRE) All of the above
F) A) and B)

Question 17

Figure 16-8
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-8.In order to maximize its profit,the firm will choose to produce

Accepted Answer

A)   less than 100 units of output.
B)   100 units of output.
C)   between 100 and 133.33 units of output.
D)   more than 133.33 units of output.E) C) and D)
F) B) and D)

Question 18

Some firms have an incentive to advertise because they sell a

Accepted Answer

A)   homogeneous product and charge a price equal to marginal cost.
B)   homogeneous product and charge a price above marginal cost.
C)   differentiated product and charge a price equal to marginal cost.
D)   differentiated product and charge a price above marginal cost.E) B) and C)
F) A) and D)

Question 19

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

Accepted Answer

A)   an increase in demand for each firm
B)   a decrease in demand for each firm
C)   a downward shift in the marginal cost curve for each firm
D)   an upward shift in the marginal cost curve for each firmE) A) and D)
F) All of the above

Question 20

Economists John Kenneth Galbraith and Friedrich Hayek disagreed about the roles of advertising and government.Which of the following is correct?

Accepted Answer

A)   Galbraith thought advertising artificially enhanced consumers' desires for private goods,while Hayek thought no producer could "determine" consumers' tastes though advertising.
B)   Galbraith believed in enhancing personal freedoms,while Hayek advocated larger government.
C)   Galbraith thought advertising was a waste of resources because it did not influence consumers,while Hayek thought advertising was powerful enough to "determine" consumers' tastes.
D)   Galbraith believed that the government should not interfere in markets,while Hayek believed that there was insufficient government regulation of marketing.E) B) and D)
F) B) and C)

Exam 16: Monopolistic Competition

The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

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Figure 16-8 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-8.In order to maximize its profit,the firm will choose to produce

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Figure 16-2 This figure depicts a situation in a monopolistically competitive market. -Refer to Figure 16-2.How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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

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

Correct AnswerverifiedShow Answer

Evidence from the market for eyeglasses suggests that advertising leads to

Correct AnswerverifiedShow Answer

Which of the following goods are likely to be sold in a monopolistically competitive market?

Correct AnswerverifiedShow Answer

Which of the following goods are not likely to be sold in monopolistically competitive markets?

Correct AnswerverifiedShow Answer

Professional organizations (for example,the American Medical Association and the American Bar Association)have been active advocates for regulation to restrict the right of professionals to advertise.Describe what economic incentives might exist for existing professionals to restrict advertising.

Correct AnswerverifiedIf advertising increases information abo...View AnswerShow Answer

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

Correct AnswerverifiedShow Answer

Some firms have an incentive to advertise because they sell a

Correct AnswerverifiedShow Answer

The market for wheat is most likely considered a monopolistically competitive market.

Correct AnswerverifiedShow Answer

The typical firm in the US economy

Correct AnswerverifiedShow Answer

Monopolistically competitive markets may be socially inefficient because

Correct AnswerverifiedShow Answer

When a market is monopolistically competitive,the typical firm in the market can earn

Correct AnswerverifiedShow Answer

Figure 16-8 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-8.The quantity of output at which the MC and ATC curves cross is the

Correct AnswerverifiedShow Answer

When advertising is used to relay information about price,each firm is able to enhance market power.

Correct AnswerverifiedShow Answer

Economists John Kenneth Galbraith and Friedrich Hayek disagreed about the roles of advertising and government.Which of the following is correct?

Correct AnswerverifiedShow Answer

A typical firm in the US economy would be classified as

Correct AnswerverifiedShow Answer

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Books,CDs,movies,com...
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If advertising increases information abo...
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