Question 1

Brand names are rarely used to convey information about product quality.

Accepted Answer

A) True 
 B)False

Question 2

Scenario 16-1
Vacation Inns of America (VIA) has recently announced intentions to build a new hotel/resort complex in Myrtle Beach,South Carolina.Assume that the hotel/resort market in Myrtle Beach is characterized by monopolistic competition.
-Refer to Scenario 16-1.As a result of the new VIA hotel/resort,existing hotels,motels,and lodging facilities in Myrtle Beach are likely to experience a

Accepted Answer

A)   product-variety externality,which harms producers.
B)   product-variety externality,which benefits producers.
C)   business-stealing externality,which harms producers.
D)   business-stealing externality,which benefits producers.E) B) and C)
F) None of the above

Question 3

In the short run,a firm operating in a monopolistically competitive market can earn

Accepted Answer

A)   positive economic profits.
B)   economic losses.
C)   zero economic profits.
D)   All of the above are possible.E) B) and C)
F) B) and D)

Question 4

Critics of advertising argue that advertising

Accepted Answer

A)   creates desires that otherwise might not exist.
B)   enhances competition.
C)   benefits television viewers who enjoy tv commercials.
D)   All of the above are correct.E) A) and D)
F) B) and C)

Question 5

Table 16-2
The following table shows the total output produced by the top six firms as well as the total industry output for each industry.
 
-Refer to Table 16-2.Which industry has the lowest concentration ratio?

Accepted Answer

A)   Industry A
B)   Industry B
C)   Industry C
D)   Industry DE) A) and B)
F) C) and D)

Question 6

The lower the concentration ratio,the

Accepted Answer

A)   more control an individual firm has to set prices.
B)   more competitive the industry.
C)   less competitive the industry.
D)   Both a and c are correct.E) B) and D)
F) B) and C)

Question 7

If advertising decreases the elasticity of demand for specific brand names of hard liquor,we would expect firms to be able to charge a larger markup over marginal cost.

Accepted Answer

A) True 
 B)False

Question 8

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) A) and C)

Question 9

Monopolistic competition is characterized by a few sellers offering similar products,whereas oligopoly is characterized by many sellers offering differentiated products.

Accepted Answer

A) True 
 B)False

Question 10

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Accepted Answer

A)   firms are more likely to operate at efficient scale.
B)   there are likely to be too many firms in a monopolistically competitive market.
C)   market efficiency is likely to be enhanced by the entry of new firms.
D)   all firms are earning economic losses.E) None of the above
F) A) and D)

Question 11

Defenders of advertising

Accepted Answer

A)   concede that advertising increases firms' market power.
B)   concede that advertising makes entry by new firms more difficult.
C)   contend that firms use advertising to provide useful information to consumers.
D)   All of the above are correct.E) A) and D)
F) C) and D)

Question 12

Consider monopoly,monopolistic competition,and perfect competition.In which of these three market structures does a profit-maximizing firm experience zero economic profit?

Accepted Answer

A)   perfect competition only
B)   perfect competition and monopolistic competition only
C)   perfect competition,monopolistic competition,and monopoly
D)   The answer cannot be determined without knowing whether the market is in the long run or short run.E) A) and C)
F) C) and D)

Question 13

If "too much choice" is a problem for consumers,it would occur in which market structure(s) ?

Accepted Answer

A)   perfect competition
B)   monopoly
C)   monopolistic competition
D)   perfect competition and monopolistic competitionE) C) and D)
F) A) and B)

Question 14

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) None of the above
F) All of the above

Question 15

Which of the following is unique to a monopolistically competitive firm when compared to an oligopoly?

Accepted Answer

A)   The monopolistically competitive firm advertises.
B)   The monopolistically competitive firm produces a quantity of output that falls short of the socially optimal level.
C)   Monopolistic competition features many buyers.
D)   Monopolistic competition features many sellers.E) A) and D)
F) B) and C)

Question 16

In a monopolistically competitive market,

Accepted Answer

A)   there are only a few sellers.
B)   each firm takes the price of its product as given.
C)   firms can enter or exit the market without restrictions.
D)   each firm produces a product that is essentially identical to the products of other firms in the market.E) C) and D)
F) A) and B)

Question 17

Oligopoly is characterized by a few sellers offering similar products,whereas monopolistic competition is characterized by many sellers offering differentiated products.

Accepted Answer

A) True 
 B)False

Question 18

With respect to monopolistic competition,

Accepted Answer

A)   both the business-stealing externality and the product-variety externality are positive externalities.
B)   the business-stealing externality is a positive externality,while the product-variety externality is a negative externality.
C)   the business-stealing externality is a negative externality,while the product-variety externality is a positive externality.
D)   both the business-stealing externality and the product-variety externality are negative externalities.E) B) and D)
F) C) and D)

Question 19

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Accepted Answer

A)   industrial products.
B)   homogeneous products.
C)   consumer goods for which there are no close substitutes.
D)   highly-differentiated consumer goods.E) A) and B)
F) None of the above

Question 20

Edward Chamberlin argued that governments should

Accepted Answer

A)   ban the use of brand names.
B)   not enforce the trademarks that companies use to identify their products.
C)   vigorously enforce the trademarks that companies use to identify their products.
D)   tax companies whose products have brand names in proportion to how much consumers recognize their products.E) All of the above
F) B) and C)

Exam 16: Monopolistic Competition

If "too much choice" is a problem for consumers,it would occur in which market structure(s) ?

Correct Answer
verified

In the short run,a firm operating in a monopolistically competitive market can earn

Correct Answer
verified

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Correct Answer
verified

With respect to monopolistic competition,

Correct Answer
verified

If advertising decreases the elasticity of demand for specific brand names of hard liquor,we would expect firms to be able to charge a larger markup over marginal cost.

Correct Answer
verified

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Correct Answer
verified

In a monopolistically competitive market,

Correct Answer
verified

Critics of advertising argue that advertising

Correct Answer
verified

Consider monopoly,monopolistic competition,and perfect competition.In which of these three market structures does a profit-maximizing firm experience zero economic profit?

Correct Answer
verified

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

Correct Answer
verified

The lower the concentration ratio,the

Correct Answer
verified

Brand names are rarely used to convey information about product quality.

Correct Answer
verified

Defenders of advertising

Correct Answer
verified

Monopolistic competition is characterized by a few sellers offering similar products,whereas oligopoly is characterized by many sellers offering differentiated products.

Correct Answer
verified

Oligopoly is characterized by a few sellers offering similar products,whereas monopolistic competition is characterized by many sellers offering differentiated products.

Correct Answer
verified

Which of the following is unique to a monopolistically competitive firm when compared to an oligopoly?

Correct Answer
verified

Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2.Which industry has the lowest concentration ratio?

Correct Answer
verified

Edward Chamberlin argued that governments should

Correct Answer
verified

Monopolistically competitive markets may be socially inefficient because

Correct Answer
verified

Correct Answer
verified

Exam 16: Monopolistic Competition

If "too much choice" is a problem for consumers,it would occur in which market structure(s) ?

Correct AnswerverifiedShow Answer

In the short run,a firm operating in a monopolistically competitive market can earn

Correct AnswerverifiedShow Answer

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Correct AnswerverifiedShow Answer

With respect to monopolistic competition,

Correct AnswerverifiedShow Answer

If advertising decreases the elasticity of demand for specific brand names of hard liquor,we would expect firms to be able to charge a larger markup over marginal cost.

Correct AnswerverifiedShow Answer

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Correct AnswerverifiedShow Answer

In a monopolistically competitive market,

Correct AnswerverifiedShow Answer

Critics of advertising argue that advertising

Correct AnswerverifiedShow Answer

Consider monopoly,monopolistic competition,and perfect competition.In which of these three market structures does a profit-maximizing firm experience zero economic profit?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The lower the concentration ratio,the

Correct AnswerverifiedShow Answer

Brand names are rarely used to convey information about product quality.

Correct AnswerverifiedShow Answer

Defenders of advertising

Correct AnswerverifiedShow Answer

Monopolistic competition is characterized by a few sellers offering similar products,whereas oligopoly is characterized by many sellers offering differentiated products.

Correct AnswerverifiedShow Answer

Oligopoly is characterized by a few sellers offering similar products,whereas monopolistic competition is characterized by many sellers offering differentiated products.

Correct AnswerverifiedShow Answer

Which of the following is unique to a monopolistically competitive firm when compared to an oligopoly?

Correct AnswerverifiedShow Answer

Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2.Which industry has the lowest concentration ratio?

Correct AnswerverifiedShow Answer

Edward Chamberlin argued that governments should

Correct AnswerverifiedShow Answer

Monopolistically competitive markets may be socially inefficient because

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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