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Exam 16: Monopolistic Competition

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Question 41

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

A) a change in the technology that the firm utilizes
B) new firms entering the market causing a shift of its demand curve
C) new firms entering the market causing a shift of its supply curve
D) increased product differentiation

E) C) and D)
F) B) and D)

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Question 42

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A recent outbreak of E.coli was linked to a national fast-food restaurant chain.This is an example of a case that results in which of the following

A) Brand-name identity increases the effectiveness of markets.
B) Brand-name identity can be detrimental to the profitability of a firm.
C) Advertising is ineffective in salvaging perceptions of product quality.
D) Advertising cannot be used to establish brand loyalty.

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

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Question 43

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To maximize its profit,a monopolistically competitive firm chooses its level of output by looking for which of the following

In markets with differentiated products but without a lot of advertising,which of the following statements is supported by evidence

For a monopolistically competitive firm,what happens at the profit-maximizing quantity of output

If firms in a monopolistically competitive market are incurring economic losses,which scenario would best reflect the change facing incumbent firms as the market adjusts to its new equilibrium

What would likely occur if a law was introduced restricting the ability of hotels and motels to advertise on billboards outside of a resort community

When consumers are exposed to additional choices due to the introduction of a new product,what do we know

For many years, a certain cola brand operated a taste-test booth at local fairs across Canada. Visitors to the booth would be encouraged to take a blind taste test between the brand and its primary market competitor. The brand then used the taste-test results in advertising. What advertising theory does such an approach support? The brand no longer uses this as an advertising strategy, but rather, relies on celebrity endorsements and other forms of advertising. What advertising theory do you think now dominates the market between the brand and its primary competitor? Explain.

Scenario 16-1 Vacation Inns of Canada (VIC) has recently announced intentions of building a new spa resort complex in Vernon, British Columbia.Assume that the hotel and resort market in Vernon is characterized by monopolistic competition. -Refer to Scenario 16-1.As a result of the new VIC resort,tourists who stay in Vernon are likely to experience which of the following,and with what effect

Suppose that monopolistically competitive firms in a certain market are experiencing losses.What happens in the transition from this initial situation to a long-run equilibrium

Scenario 16-3 A monopolistically competitive firm has the following cost structure: The firm faces the following demand curve: -Refer to Scenario 16-3.If the government forces this firm to produce at its efficient scale,how many units will it produce and for what profit or loss

In the short run,a firm in a monopolistically competitive market operates much like what type of firm

When a firm in a monopolistically competitive market earns zero economic profit,its product price must equal marginal cost.

When a new firm enters a monopolistically competitive market,what will happen to the individual demand curves faced by all existing firms in that market

When firms sell highly differentiated consumer goods,what is one significant cost all firms are likely to incur

In a situation of long-run equilibrium,which statement explains the differences between a perfectly competitive firm and a monopolistically competitive firm

When a firm's demand (average-revenue) curve is tangent to its average-total-cost curve,which is the result regarding economic profits/losses

If firms in a monopolistically competitive market are earning economic profits,which scenario would best reflect the change facing incumbent firms as the market adjusts to its new equilibrium

Economists who argue that advertising enhances market efficiency suggest that celebrity advertising signals inferior product quality.