Question 1

Scenario 16-7
Consider the problem facing two firms, YumYum and Bertollini, in the frozen food market. Each firm has just come up with an idea for a new "frozen meal for two" which it would sell for $9. Assume that the marginal cost for each new product is a constant $2, and the only fixed cost is for advertising. Each company knows that if it spends $12 million on advertising it will get 1.5 million consumers to try its new product. YumYum has done market research which suggests that its product does not have any "staying" power in the market. Even though it could get 1.5 million consumers to buy the product once, it is unlikely that they will continue to buy the product in the future. Bertollini's market research suggests that its product is very good, and consumers who try the product will continue to be consumers over the ensuing year. On the basis of its market research, Bertollini estimates that its initial 1.5 million customers will buy one unit of the product each month in the coming year, for a total of 18 million units.
-Refer to Scenario 16-7. If Bertollini decides to advertise its product it can expect to

Accepted Answer

A)  earn a profit of $162 million per year.
B)  earn a profit of $147 million per year.
C)  earn a profit of $114 million per year.
D)  earn a profit of $48 million per year.E) All of the above
F) C) and D)

Question 2

Economists measure a market's domination by a small number of firms with a statistic called the

Accepted Answer

concentrat...

Question 3

A monopolistically competitive market

Accepted Answer

A)  usually has too many firms, reducing the economic profit of each firm to zero.
B)  usually has too few firms, reducing the product variety for consumers.
C)  may have too many or too few firms, and the government can intervene to achieve the optimal number of firms.
D)  may have too many or too few firms, but the government can do little to rectify the situation.E) None of the above
F) B) and D)

Question 4

A markup of price over marginal cost is inconsistent with free entry and zero profit.

Accepted Answer

A) True 
 B)False

Question 5

Figure 16-10
The figure is drawn for a monopolistically-competitive firm. 
-Refer to Figure 16-10. In response to the situation represented by the figure, we would expect

Accepted Answer

A)  some of the firms that are currently in the market to exit.
B)  the demand for this firm's product to increase, assuming this firm does not exit.
C)  this firm's profit to move from its current value toward zero.
D)  All of the above are correct.E) C) and D)
F) B) and D)

Question 6

A monopolistically competitive firm has the following cost structure:  The firm faces the following demand curve: 
To maximize profit (or minimize losses) , the firm will produce

Accepted Answer

A)  20 units.
B)  30 units.
C)  40 units.
D)  50 units.E) C) and D)
F) B) and C)

Question 7

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. What is this firm's profit-maximizing level of output?

Accepted Answer

A)  0 units of output
B)  3 units of output
C)  4 units of output
D)  5 units of outputE) A) and B)
F) B) and D)

Question 8

Why does a typical monopolistically competitive firm face a downward-sloping demand curve?

Accepted Answer

Because its product ...

Question 9

Figure 16-12 
-Refer to Figure 16-12. If this firm minimized cost, how much output will it produce?

Accepted Answer

The answer of Figure 16-12 
-Refer to Figure 16-12. If...

Question 10

A monopolistically competitive industry is characterized by

Accepted Answer

A)  many firms selling products that are similar but not identical.
B)  many firms selling identical products.
C)  a few firms selling products that are similar but not identical.
D)  a few firms selling highly different products.E) C) and D)
F) A) and D)

Question 11

Figure 16-5 
-Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will not encourage either the entry or exit of firms in a monopolistically competitive industry?

Accepted Answer

A)  panel a
B)  panel b
C)  panel c
D)  panel dE) A) and B)
F) B) and C)

Question 12

The market for novels is

Accepted Answer

A)  perfectly competitive.
B)  a monopoly.
C)  monopolistically competitive.
D)  an oligopoly.E) B) and C)
F) A) and D)

Question 13

The relationship between advertising and product differentiation is

Accepted Answer

A)  positive; the more differentiated the product, the more a firm is likely to spend on advertising.
B)  negative; the more differentiated the product, the less a firm is likely to spend on advertising.
C)  zero; there is no relationship between product differentiation and advertising.
D)  irrelevant; firms with differentiated products do not need to advertise.E) B) and D)
F) C) and D)

Question 14

​As competitors enter a monopolistically competitive industry, the incumbent firms demand curves shift
​

Accepted Answer

A)  ​To the left and become less elastic
B)  ​To the right and becomes less elastic
C)  ​To the left and becomes more elastic
D)  ​To the right and becomes more elasticE) B) and D)
F) A) and C)

Question 15

Figure 16-4 
-Refer to Figure 16-4. Which of the following will occur in the long run in this industry?

Accepted Answer

A)  Firms will exit this industry.
B)  Firms will enter this industry.
C)  This firm will continue to earn positive economic profits.
D)  This firm will incur losses.E) B) and C)
F) A) and D)

Question 16

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 17

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. What is this firm's total cost at the profit-maximizing quantity?

Accepted Answer

A)  $12
B)  $18
C)  $32
D)  $36E) C) and D)
F) None of the above

Question 18

A downward-sloping demand curve

Accepted Answer

A)  is a feature of all monopolistically competitive firms.
B)  means that the firm in question will never experience a zero profit.
C)  causes marginal revenue to exceed price.
D)  prohibits firms from earning positive economic profits in the long run.E) B) and C)
F) A) and D)

Question 19

Figure 16-2. The figure is drawn for a monopolistically competitive firm. 
-Refer to Figure 16-2. In order to maximize profit, the firm will charge a price of

Accepted Answer

A)  $16.
B)  $24.
C)  $32.
D)  $36.E) A) and B)
F) B) and C)

Question 20

Suppose that monopolistically competitive firms in a certain market are earning positive profits. In the transition from this initial situation to a long-run equilibrium,

Accepted Answer

A)  the number of firms in the market decreases.
B)  each existing firm experiences a decrease in demand for its product.
C)  each existing firm experiences a rightward shift of its marginal revenue curve.
D)  each existing firm experiences an upward shift in its average total cost curve.E) A) and B)
F) A) and C)

Exam 16: Monopolistic Competition

Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. In order to maximize profit, the firm will charge a price of

Correct Answer
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Figure 16-5 -Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will not encourage either the entry or exit of firms in a monopolistically competitive industry?

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Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. In response to the situation represented by the figure, we would expect

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A monopolistically competitive market

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Figure 16-4 -Refer to Figure 16-4. Which of the following will occur in the long run in this industry?

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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. What is this firm's total cost at the profit-maximizing quantity?

Correct Answer
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A monopolistically competitive industry is characterized by

Correct Answer
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Suppose that monopolistically competitive firms in a certain market are earning positive profits. In the transition from this initial situation to a long-run equilibrium,

Correct Answer
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The market for novels is

Correct Answer
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Why does a typical monopolistically competitive firm face a downward-sloping demand curve?

Correct Answer
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Because its product ...
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Oligopoly is characterized by a few sellers offering similar products, whereas monopolistic competition is characterized by many sellers offering differentiated products.

Correct Answer
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A markup of price over marginal cost is inconsistent with free entry and zero profit.

Correct Answer
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Figure 16-12 -Refer to Figure 16-12. If this firm minimized cost, how much output will it produce?

Correct Answer
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Economists measure a market's domination by a small number of firms with a statistic called the

Correct Answer
verified
concentrat...
View Answer

The relationship between advertising and product differentiation is

Correct Answer
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A monopolistically competitive firm has the following cost structure: The firm faces the following demand curve: To maximize profit (or minimize losses) , the firm will produce

Correct Answer
verified

Correct Answer
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A downward-sloping demand curve

Correct Answer
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As competitors enter a monopolistically competitive industry, the incumbent firms demand curves shift

Correct Answer
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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. What is this firm's profit-maximizing level of output?

Correct Answer
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Exam 16: Monopolistic Competition

Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. In order to maximize profit, the firm will charge a price of

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Figure 16-5 -Refer to Figure 16-5. Which of the graphs depicts a short-run equilibrium that will not encourage either the entry or exit of firms in a monopolistically competitive industry?

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Figure 16-10 The figure is drawn for a monopolistically-competitive firm. -Refer to Figure 16-10. In response to the situation represented by the figure, we would expect

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A monopolistically competitive market

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Figure 16-4 -Refer to Figure 16-4. Which of the following will occur in the long run in this industry?

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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. What is this firm's total cost at the profit-maximizing quantity?

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A monopolistically competitive industry is characterized by

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Suppose that monopolistically competitive firms in a certain market are earning positive profits. In the transition from this initial situation to a long-run equilibrium,

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The market for novels is

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Why does a typical monopolistically competitive firm face a downward-sloping demand curve?

Correct AnswerverifiedBecause its product ...View AnswerShow Answer

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

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A markup of price over marginal cost is inconsistent with free entry and zero profit.

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Figure 16-12 -Refer to Figure 16-12. If this firm minimized cost, how much output will it produce?

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Economists measure a market's domination by a small number of firms with a statistic called the

Correct Answerverifiedconcentrat...View AnswerShow Answer

The relationship between advertising and product differentiation is

Correct AnswerverifiedShow Answer

A monopolistically competitive firm has the following cost structure: The firm faces the following demand curve: To maximize profit (or minimize losses) , the firm will produce

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A downward-sloping demand curve

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​As competitors enter a monopolistically competitive industry, the incumbent firms demand curves shift ​

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. What is this firm's profit-maximizing level of output?

Correct AnswerverifiedShow Answer

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Because its product ...
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concentrat...
View Answer

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As competitors enter a monopolistically competitive industry, the incumbent firms demand curves shift

Correct Answer
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