Question 1

When quality cannot be easily judged in advance,what provides consumers with information about the quality of a product?

Accepted Answer

A)  A brand name
B)  A tie-in
C)  The quantity available for sale
D)  The amount of deadweight lossE) A) and B)
F) B) and C)

Question 2

One theory of advertising suggests that

Accepted Answer

A)  information on price is always a necessary ingredient of effective advertising.
B)  the content of advertising may be irrelevant to product success in the market.
C)  celebrity advertising is not effective in retail food markets.
D)  Post and Kellogg should not advertise new cereals.E) B) and C)
F) None of the above

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 too high.E) A) and C)
F) B) and D)

Question 4

For a profit-maximizing monopolistically competitive firm,price exceeds marginal cost

Accepted Answer

A)  in the short run but not in the long run.
B)  in the long run but not in the short run.
C)  in both the short run and the long run.
D)  in neither the short run nor the long run.E) All of the above
F) None of the above

Question 5

Long-run profit earned by a monopolistically competitive firm is driven to the competitive level due to

Accepted Answer

A)  a change in the technology that the firm utilizes.
B)  a shift of its demand curve.
C)  a shift of its supply curve.
D)  an increase in the firm's average cost of production.E) A) and B)
F) A) and C)

Question 6

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

Accepted Answer

A)  A large number of sellers.
B)  Firms are price takers.
C)  There is free entry into the market.
D)  Sellers offer products that are, in some way, different from their competitors' products.E) B) and C)
F) All of the above

Question 7

When McDonalds opens a store in Dhaka,Bangladesh,it has a strong incentive to enforce product quality consistent with stores in the United States.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A)  Compact discs
B)  Books
C)  Cookies
D)  WheatE) A) and B)
F) A) and D)

Question 9

Table 17-3
Traci's Hairstyling is one salon among many in the market for hairstyling. The following table presents cost and revenue data for Traci's Hairstyling.
 
-Refer to Table 17-3.Suppose the government forced Traci'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)  Traci's; Consumers
B)  Consumers; Traci's
C)  No one; Consumers
D)  No one; No oneE) C) and D)
F) B) and D)

Question 10

On a vacation to Cancun,Mexico,you find yourself eating every meal at the local McDonald's rather than having a hamburger from one of the street vendors.Your traveling companion claims that you are irrational,since you never eat McDonald's hamburgers when you are home and McDonald's hamburgers cost more than those prepared and sold by Cancun's street vendors.An economist would most likely explain your behavior by suggesting that

Accepted Answer

A)  your behavior is rational, but your friend's behavior is clearly irrational.
B)  you are clearly irrational.
C)  the McDonald's brand name suggests consistent quality.
D)  the advertising by McDonalds in Cancun is more persuasive than the advertising by McDonalds in your home town.E) B) and C)
F) B) and D)

Question 11

Excess capacity characterizes firms in monopolistically competitive markets,even in situations of long-run equilibrium.

Accepted Answer

A) True 
 B)False

Question 12

When a market is monopolistically competitive,the typical firm in the market is likely to experience a

Accepted Answer

A)  positive profit in the short run and in the long run.
B)  positive or negative profit in the short run and a zero profit in the long run.
C)  zero profit in the short run and a positive or negative profit in the long run.
D)  zero profit in the short run and in the long run.E) B) and D)
F) B) and C)

Question 13

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome? (i) 	Perfect competition
(ii) 	Monopolistic competition
(iii) 	Monopoly

Accepted Answer

A)  (i)  only
B)  (i)  and (ii)  only
C)  (ii)  and (iii)  only
D)  (i) , (ii) , and (iii) E) A) and B)
F) None of the above

Question 14

When a firm operates with excess capacity,it must be in a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 15

Entry by new firms into a monopolistically competitive market

Accepted Answer

A)  creates additional consumer surplus.
B)  imposes a positive externality on existing firms.
C)  leads to the same externalities that are observed when new firms enter a perfectly competitive market.
D)  increases the demand for existing firms' products.E) A) and C)
F) All of the above

Question 16

Select the type of market that is described by the following attributes: many firms,differentiated products,and free entry.

Accepted Answer

A)  Natural monopoly
B)  Perfectly competition
C)  Monopolistic competition
D)  MonopolyE) B) and D)
F) All of the above

Question 17

A monopolistically competitive market is characterized by barriers to entry.

Accepted Answer

A) True 
 B)False

Question 18

When a firm operates at efficient scale,it is producing at the minimum point on its average total cost curve.

Accepted Answer

A) True 
 B)False

Question 19

The traditional view of monopolistic competition holds that this type of industrial structure is inefficient because

Accepted Answer

A)  there are too few firms to reach an efficient level of production.
B)  firms do not operate at the output that minimizes average costs.
C)  advertising is not used extensively enough to yield an efficient differentiation of the products.
D)  consumers do not have enough choice among the product varieties available.E) None of the above
F) A) and B)

Question 20

When a firm exits a monopolistically competitive market,the individual demand curves faced by all remaining firms in that market will

Accepted Answer

A)  shift in a direction that is unpredictable without further information.
B)  shift to the right.
C)  shift to the left.
D)  remain unchanged.It is the supply curve that will shift.E) All of the above
F) B) and C)

Exam 17: Monopolistic Competition

When a firm operates at efficient scale,it is producing at the minimum point on its average total cost curve.

Correct Answer
verified

When a market is monopolistically competitive,the typical firm in the market is likely to experience a

Correct Answer
verified

Entry by new firms into a monopolistically competitive market

Correct Answer
verified

Long-run profit earned by a monopolistically competitive firm is driven to the competitive level due to

Correct Answer
verified

Critics of advertising argue that advertising

Correct Answer
verified

When a firm exits a monopolistically competitive market,the individual demand curves faced by all remaining firms in that market will

Correct Answer
verified

When a firm operates with excess capacity,it must be in a monopolistically competitive market.

Correct Answer
verified

A monopolistically competitive market is characterized by barriers to entry.

Correct Answer
verified

Excess capacity characterizes firms in monopolistically competitive markets,even in situations of long-run equilibrium.

Correct Answer
verified

The traditional view of monopolistic competition holds that this type of industrial structure is inefficient because

Correct Answer
verified

One theory of advertising suggests that

Correct Answer
verified

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome? (i) Perfect competition (ii) Monopolistic competition (iii) Monopoly

Correct Answer
verified

Correct Answer
verified

When McDonalds opens a store in Dhaka,Bangladesh,it has a strong incentive to enforce product quality consistent with stores in the United States.

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Select the type of market that is described by the following attributes: many firms,differentiated products,and free entry.

Correct Answer
verified

When quality cannot be easily judged in advance,what provides consumers with information about the quality of a product?

Correct Answer
verified

For a profit-maximizing monopolistically competitive firm,price exceeds marginal cost

Correct Answer
verified

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

Correct Answer
verified

Exam 17: Monopolistic Competition

When a firm operates at efficient scale,it is producing at the minimum point on its average total cost curve.

Correct AnswerverifiedShow Answer

When a market is monopolistically competitive,the typical firm in the market is likely to experience a

Correct AnswerverifiedShow Answer

Entry by new firms into a monopolistically competitive market

Correct AnswerverifiedShow Answer

Long-run profit earned by a monopolistically competitive firm is driven to the competitive level due to

Correct AnswerverifiedShow Answer

Critics of advertising argue that advertising

Correct AnswerverifiedShow Answer

When a firm exits a monopolistically competitive market,the individual demand curves faced by all remaining firms in that market will

Correct AnswerverifiedShow Answer

When a firm operates with excess capacity,it must be in a monopolistically competitive market.

Correct AnswerverifiedShow Answer

A monopolistically competitive market is characterized by barriers to entry.

Correct AnswerverifiedShow Answer

Excess capacity characterizes firms in monopolistically competitive markets,even in situations of long-run equilibrium.

Correct AnswerverifiedShow Answer

The traditional view of monopolistic competition holds that this type of industrial structure is inefficient because

Correct AnswerverifiedShow Answer

One theory of advertising suggests that

Correct AnswerverifiedShow Answer

In which of the following market structures does free entry and exit play an important role in the long-run equilibrium outcome? (i) Perfect competition (ii) Monopolistic competition (iii) Monopoly

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When McDonalds opens a store in Dhaka,Bangladesh,it has a strong incentive to enforce product quality consistent with stores in the United States.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Select the type of market that is described by the following attributes: many firms,differentiated products,and free entry.

Correct AnswerverifiedShow Answer

When quality cannot be easily judged in advance,what provides consumers with information about the quality of a product?

Correct AnswerverifiedShow Answer

For a profit-maximizing monopolistically competitive firm,price exceeds marginal cost

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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