Question 1

To be considered an oligopoly, the market must have a concentration ratio below 50%.

Accepted Answer

A) True 
 B)False

Question 2

Free entry and exit means that the number of firms in the market adjusts until

Accepted Answer

A)  producers continuously enter the market freely.
B)  the market grows to a profitable level.
C)  economic profits are driven to zero.
D)  products are free.E) C) and D)
F) None of the above

Question 3

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) All of the above
F) B) and C)

Question 4

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)  more advertising is needed to inform customers about product differences.
D)  consumers do not have enough choice among the product varieties available.E) B) and D)
F) A) and B)

Question 5

Evidence suggests that, in markets with differentiated products but little advertising,

Accepted Answer

A)  consumers are not confused by conflicting signals.
B)  firms are generally less profitable.
C)  markets are less efficient.
D)  consumers make better choices.E) A) and B)
F) A) and C)

Question 6

Which of the following industries has the highest concentration ratio?

Accepted Answer

A)  jeans
B)  fruit
C)  household laundry equipment
D)  restaurantsE) A) and B)
F) A) and C)

Question 7

In a monopolistically competitive market, the number of firms adjusts until economic profits are driven to zero.

Accepted Answer

A) True 
 B)False

Question 8

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 9

Monopolistic competition is characterized by which of the following attributes?
(i) free entry
(ii) product differentiation
(iii) many sellers

Accepted Answer

A)  (i)  and (iii)  only
B)  (i)  and (ii)  only
C)  (ii)  and (iii)  only
D)  (i) , (ii) , and (iii) E) A) and D)
F) C) and D)

Question 10

Examples of monopolistically competitive markets include the markets for

Accepted Answer

A)  restaurants and furniture.
B)  wheat and corn.
C)  postage stamps and wooden pencils.
D)  All of the above are correct.E) None of the above
F) All of the above

Question 11

Figure 16-1    
-Refer to Figure 16-1. Which of the following sets of explanations best describes the differences between the graphs above?

Accepted Answer

A)  Panel A: monopolistically competitive firm's demand curvePanel B: monopoly firm's demand curvePanel C: oligopoly firm's demand curvePanel D: perfectly competitive firm's demand curve
B)  Panel A: oligopoly firm's demand curvePanel B: perfectly competitive firm's demand curvePanel C: monopolistically competitive firm's demand curvePanel D: supply curve
C)  Panel A: perfectly competitive firm's demand curvePanel B: monopolistically competitive firm's demand curvePanel C: monopoly firm's demand curvePanel D: supply curve
D)  Panel A: monopolistically competitive firm's demand curvePanel B: monopoly firm's demand curvePanel C: perfectly competitive firm's demand curvePanel D: supply curveE) B) and C)
F) A) and D)

Question 12

Consider two industries in which firms hold the following market shares:
Industry A: 25%, 20%, 18%, 15%, 8%, 7%, 4%, 2%, 1%
Industry B: 30%, 10%, 9%, 8%, 8%, 8%, 8%, 6%, 6%, 5%, 2%
What are the concentration ratios for each industry? Which is more competitive?

Accepted Answer

The answer of Consider two industries in which firms hold...

Question 13

Which of the following statements regarding brand names in advertising is not correct?

Accepted Answer

A)  Brand names provide consumers with information about quality when quality cannot be easily judged in advance of purchase.
B)  Brand names give firms an incentive to maintain high quality to maintain the reputation of the firm.
C)  Brand names allow firms to produce and sell inferior products in the long run since people will continue to purchase the brand-name product.
D)  Brand names can cause consumers to perceive differences in products that do not actually exist.E) B) and D)
F) A) and D)

Question 14

The term excess capacity refers to the fact that a firm produces a lower quantity than it would if it operated at the efficient scale.

Accepted Answer

A) True 
 B)False

Question 15

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) None of the above
F) B) and D)

Question 16

Which of the following correctly lists the products in order from most advertised to least advertised?

Accepted Answer

A)  soft drinks, breakfast cereals, dog food
B)  corn, dog food, communication satellites
C)  dog food, communication satellites, corn
D)  wheat, corn, crude oilE) A) and B)
F) C) and D)

Question 17

Table 16-4
This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. 
-Refer to Table 16-4. Which of the following is likely to happen in the long run in this market?

Accepted Answer

A)  The market is currently in a long-run equilibrium.
B)  The market price is likely to rise.
C)  Firms are likely to enter the market since firms are earning a positive economic profit.
D)  Firms are likely to leave the market since firms are earning a negative economic profit.E) C) and D)
F) A) and B)

Question 18

When McDonald's 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 19

As new firms enter a monopolistically competitive market, profits of existing firms

Accepted Answer

A)  rise, and product diversity in the market increases.
B)  rise, and product diversity in the market decreases.
C)  decline, and product diversity in the market increases.
D)  decline, and product diversity in the market decreases.E) A) and B)
F) C) and D)

Question 20

Which of the following represents the best government policy to reduce the deadweight loss associated with a monopolistically competitive market?

Accepted Answer

A)  The government should regulate firms in a manner similar to natural monopolies.
B)  The government should encourage more firms to enter the industry because without government intervention, there are likely to be "too few" firms.
C)  The government should encourage some firms to exit the industry because without government intervention, there are likely to be "too many" firms.
D)  There is no government policy that can reduce deadweight loss without creating other problems.E) A) and B)
F) A) and C)

Exam 16: Monopolistic Competition

Which of the following statements regarding brand names in advertising is not correct?

Correct Answer
verified

Evidence suggests that, in markets with differentiated products but little advertising,

Correct Answer
verified

Examples of monopolistically competitive markets include the markets for

Correct Answer
verified

Monopolistic competition is characterized by which of the following attributes? (i) free entry (ii) product differentiation (iii) many sellers

Correct Answer
verified

Free entry and exit means that the number of firms in the market adjusts until

Correct Answer
verified

Which of the following represents the best government policy to reduce the deadweight loss associated with a monopolistically competitive market?

Correct Answer
verified

To be considered an oligopoly, the market must have a concentration ratio below 50%.

Correct Answer
verified

Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-4. Which of the following is likely to happen in the long run in this market?

Correct Answer
verified

When McDonald's 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

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

Correct Answer
verified

The term excess capacity refers to the fact that a firm produces a lower quantity than it would if it operated at the efficient scale.

Correct Answer
verified

Correct Answer
verified

As new firms enter a monopolistically competitive market, profits of existing firms

Correct Answer
verified

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 Answer
verified
If advertising increases information abo...
View Answer

Monopolistic competition is an

Correct Answer
verified

Which of the following correctly lists the products in order from most advertised to least advertised?

Correct Answer
verified

Which of the following industries has the highest concentration ratio?

Correct Answer
verified

Consider two industries in which firms hold the following market shares: Industry A: 25%, 20%, 18%, 15%, 8%, 7%, 4%, 2%, 1% Industry B: 30%, 10%, 9%, 8%, 8%, 8%, 8%, 6%, 6%, 5%, 2% What are the concentration ratios for each industry? Which is more competitive?

Correct Answer
verified

Figure 16-1 -Refer to Figure 16-1. Which of the following sets of explanations best describes the differences between the graphs above?

Correct Answer
verified

In a monopolistically competitive market, the number of firms adjusts until economic profits are driven to zero.

Correct Answer
verified

Exam 16: Monopolistic Competition

Which of the following statements regarding brand names in advertising is not correct?

Correct AnswerverifiedShow Answer

Evidence suggests that, in markets with differentiated products but little advertising,

Correct AnswerverifiedShow Answer

Examples of monopolistically competitive markets include the markets for

Correct AnswerverifiedShow Answer

Monopolistic competition is characterized by which of the following attributes? (i) free entry (ii) product differentiation (iii) many sellers

Correct AnswerverifiedShow Answer

Free entry and exit means that the number of firms in the market adjusts until

Correct AnswerverifiedShow Answer

Which of the following represents the best government policy to reduce the deadweight loss associated with a monopolistically competitive market?

Correct AnswerverifiedShow Answer

To be considered an oligopoly, the market must have a concentration ratio below 50%.

Correct AnswerverifiedShow Answer

Table 16-4 This table shows the demand schedule, marginal cost, and average total cost for a monopolistically competitive firm. -Refer to Table 16-4. Which of the following is likely to happen in the long run in this market?

Correct AnswerverifiedShow Answer

When McDonald's 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

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

Correct AnswerverifiedShow Answer

The term excess capacity refers to the fact that a firm produces a lower quantity than it would if it operated at the efficient scale.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

As new firms enter a monopolistically competitive market, profits of existing firms

Correct AnswerverifiedShow Answer

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

Monopolistic competition is an

Correct AnswerverifiedShow Answer

Which of the following correctly lists the products in order from most advertised to least advertised?

Correct AnswerverifiedShow Answer

Which of the following industries has the highest concentration ratio?

Correct AnswerverifiedShow Answer

Consider two industries in which firms hold the following market shares: Industry A: 25%, 20%, 18%, 15%, 8%, 7%, 4%, 2%, 1% Industry B: 30%, 10%, 9%, 8%, 8%, 8%, 8%, 6%, 6%, 5%, 2% What are the concentration ratios for each industry? Which is more competitive?

Correct AnswerverifiedShow Answer

Figure 16-1 -Refer to Figure 16-1. Which of the following sets of explanations best describes the differences between the graphs above?

Correct AnswerverifiedShow Answer

In a monopolistically competitive market, the number of firms adjusts until economic profits are driven to zero.

Correct AnswerverifiedShow Answer

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If advertising increases information abo...
View Answer

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