Question 1

In perfect competition as well as in monopolistic competition,

Accepted Answer

A)  marginal revenue is equal to price for each firm.
B)  profit is positive in a long-run equilibrium for each firm.
C)  entry and exit by firms are restricted.
D)  there are many firms in a single market.E) None of the above
F) All of the above

Question 2

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 3

Firms in industries that have competitors but do not face so much competition that they are price takers are operating in either a(n)

Accepted Answer

A)  oligopoly or perfectly competitive market.
B)  oligopoly or monopoly market.
C)  oligopoly or monopolistically competitive market.
D)  monopoly or monopolistically competitive market.E) All of the above
F) C) and D)

Question 4

In a long-run equilibrium,

Accepted Answer

A)  excess capacity applies to monopolistically competitive firms but not to competitive firms.
B)  zero economic profit applies to competitive firms but not to monopolistically competitive firms.
C)  markup over marginal cost applies to both monopolistically competitive and competitive firms.
D)  product variety externalities apply to both perfectly competitive firms and monopolistically competitive firms.E) A) and C)
F) A) and D)

Question 5

The product-variety externality and the business-stealing externality are both spillover costs of new firms entering a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 6

For a profit-maximizing monopolistically competitive firm, marginal revenue equals 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) All of the above

Question 7

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) None of the above
F) A) and C)

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

Table 16-6
Beatrice's Birthday Cakes is one bakery among many in the market for birthday cakes. The following table presents cost and revenue data for birthday cakes at Beatrice's. 
-Refer to Table 16-6. Suppose the government forced Beatrice's to produce at the efficient scale of output. Who would be better off as a result of this policy? Who would be worse off as a result of this policy?

Accepted Answer

A)  Beatrice's would be better off; consumers would be worse off.
B)  Consumers would be better off; Beatrice's would be worse off.
C)  No one would be better off; consumers would be worse off.
D)  No one would be better off; no one would be worse off.E) B) and D)
F) All of the above

Question 10

If firms in a monopolistically competitive market are earning positive profits, then

Accepted Answer

A)  firms will likely be subject to regulation.
B)  barriers to entry will be strengthened.
C)  some firms will exit the market.
D)  new firms will enter the market.E) C) and D)
F) B) and C)

Question 11

Roberto consumes Coke exclusively. He claims that there is a clear taste difference and that competing brands of cola leave an unsavory taste in his mouth. In a blind taste test, Roberto is found to prefer Coke to store-brand cola eight out of ten times. The results of Roberto's taste test would refute claims by critics of brand names that

Accepted Answer

A)  consumers are always willing to pay more for brand names.
B)  brand names cause consumers to perceive differences that do not really exist.
C)  consumers with the lowest levels of income are the most likely to be influenced by brand name advertising.
D)  brand names are a form of socially efficient advertising.E) A) and D)
F) A) and C)

Question 12

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Accepted Answer

A)  average revenue exceeds marginal revenue
B)  marginal revenue equals marginal cost
C)  price exceeds marginal cost
D)  All of the above are correct.E) A) and B)
F) None of the above

Question 13

Due to free entry and exit in monopolistic competition, in the long run price must be equal to

Accepted Answer

The answer of Due to free entry and exit in...

Question 14

Two bottles of body wash sit side-by-side in a grocery store: Olay (a brand name)  sells for $6.00, while Up and Up (not a brand name)  sells for $3.00. Even defenders of brand names would have to admit that

Accepted Answer

A)  no rational consumer would spend twice as much for Olay as she would for Up and Up.
B)  the side-by-side presence of these two body washes conveys no useful information to consumers.
C)  Olay has no incentive to maintain the quality of its product just because of the Olay brand name.
D)  None of the above is correct.E) B) and D)
F) A) and B)

Question 15

Figure 16-14 
-Refer to Figure 16-14. Which letter identifies the profit-maximizing level of output for this firm?

Accepted Answer

The answer of Figure 16-14 
-Refer to Figure 16-14. Which...

Question 16

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?

Accepted Answer

A)  $0
B)  $5
C)  $12
D)  $16E) B) and C)
F) A) and D)

Question 17

Figure 16-14 
-Refer to Figure 16-14. If this firm were operating in a perfectly competitive market, it would charge a price equal to point

Accepted Answer

A)  I but in a monopolistically competitive market, the profit-maximizing price is C.
B)  G but in a monopolistically competitive market, the profit-maximizing price is C.
C)  C but in a monopolistically competitive market, the profit-maximizing price is G.
D)  G but in a monopolistically competitive market, the profit-maximizing price is J.E) C) and D)
F) B) and C)

Question 18

In a small college town, four microbreweries have opened in the last two years. Demonstrate the effect of new market entrants on demand for existing firms (microbreweries) that already served this market. Assume that the local community now places a moratorium on new liquor licenses for microbreweries. How will this moratorium affect the long-run profitability of incumbent firms?

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> The arrival of a new entrant should be ...

Question 19

​If a monopolistically competitive firms incurs an increase in fixed costs, its price will rise and its output will fall.

Accepted Answer

A) True 
 B)False

Question 20

The Mikati Philippines Hard Rock Cafe has the exact same menu as the Hard Rock Cafe in New York. This is an example of a brand name enhancing market efficiency for U.S. tourists visiting the Philippines.

Accepted Answer

A) True 
 B)False

Exam 16: Monopolistic Competition

In perfect competition as well as in monopolistic competition,

Correct Answer
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Due to free entry and exit in monopolistic competition, in the long run price must be equal to

Correct Answer
verified

In a long-run equilibrium,

Correct Answer
verified

The Mikati Philippines Hard Rock Cafe has the exact same menu as the Hard Rock Cafe in New York. This is an example of a brand name enhancing market efficiency for U.S. tourists visiting the Philippines.

Correct Answer
verified

Firms in industries that have competitors but do not face so much competition that they are price takers are operating in either a(n)

Correct Answer
verified

Figure 16-14 -Refer to Figure 16-14. If this firm were operating in a perfectly competitive market, it would charge a price equal to point

Correct Answer
verified

The product-variety externality and the business-stealing externality are both spillover costs of new firms entering a monopolistically competitive market.

Correct Answer
verified

Correct Answer
verified
The arrival of a new entrant should be ...
View 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 Answer
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Correct Answer
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Monopolistic competition is characterized by many buyers and sellers, product differentiation, and free entry.

Correct Answer
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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?

Correct Answer
verified

If a monopolistically competitive firms incurs an increase in fixed costs, its price will rise and its output will fall.

Correct Answer
verified

Correct Answer
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If firms in a monopolistically competitive market are earning positive profits, then

Correct Answer
verified

Two bottles of body wash sit side-by-side in a grocery store: Olay (a brand name) sells for $6.00, while Up and Up (not a brand name) sells for $3.00. Even defenders of brand names would have to admit that

Correct Answer
verified

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Correct Answer
verified

Monopolistic competition is an

Correct Answer
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Figure 16-14 -Refer to Figure 16-14. Which letter identifies the profit-maximizing level of output for this firm?

Correct Answer
verified

For a profit-maximizing monopolistically competitive firm, marginal revenue equals marginal cost in

Correct Answer
verified

Exam 16: Monopolistic Competition

In perfect competition as well as in monopolistic competition,

Correct AnswerverifiedShow Answer

Due to free entry and exit in monopolistic competition, in the long run price must be equal to

Correct AnswerverifiedShow Answer

In a long-run equilibrium,

Correct AnswerverifiedShow Answer

The Mikati Philippines Hard Rock Cafe has the exact same menu as the Hard Rock Cafe in New York. This is an example of a brand name enhancing market efficiency for U.S. tourists visiting the Philippines.

Correct AnswerverifiedShow Answer

Firms in industries that have competitors but do not face so much competition that they are price takers are operating in either a(n)

Correct AnswerverifiedShow Answer

Figure 16-14 -Refer to Figure 16-14. If this firm were operating in a perfectly competitive market, it would charge a price equal to point

Correct AnswerverifiedShow Answer

The product-variety externality and the business-stealing externality are both spillover costs of new firms entering a monopolistically competitive market.

Correct AnswerverifiedShow Answer

Correct Answerverified The arrival of a new entrant should be ...View AnswerShow 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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

​If a monopolistically competitive firms incurs an increase in fixed costs, its price will rise and its output will fall.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If firms in a monopolistically competitive market are earning positive profits, then

Correct AnswerverifiedShow Answer

Two bottles of body wash sit side-by-side in a grocery store: Olay (a brand name) sells for $6.00, while Up and Up (not a brand name) sells for $3.00. Even defenders of brand names would have to admit that

Correct AnswerverifiedShow Answer

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?

Correct AnswerverifiedShow Answer

Monopolistic competition is an

Correct AnswerverifiedShow Answer

Figure 16-14 -Refer to Figure 16-14. Which letter identifies the profit-maximizing level of output for this firm?

Correct AnswerverifiedShow Answer

For a profit-maximizing monopolistically competitive firm, marginal revenue equals marginal cost in

Correct AnswerverifiedShow Answer

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The arrival of a new entrant should be ...
View Answer

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Correct Answer
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Correct Answer
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If a monopolistically competitive firms incurs an increase in fixed costs, its price will rise and its output will fall.

Correct Answer
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Correct Answer
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