Chapter 14 Post-Test
Which of the following shows a drawback of advertising?
A magazine ad causes Mei to buy a dress she doesn't need and can't afford.
The cotton industry shifted from high economic profits to zero economic profits, where it has stayed for many years. Considering this, which of the following decisions would be most likely?
Anne decides not to enter this market because she won't make any profits.
Which of the following happens when a firm produces below the level where average total cost is minimized?
Excess capacity
Which of the following equations motivates monopolistically competitive firms to attract more customers?
P > MC
Firms fail to reach _______ efficiency because they do not produce enough output to reach the lowest cost.
Productive
Which of the following is an example of a monopolistically competitive market?
Ramon pays more for a chocolate bar than it costs the seller to produce it.
Which of the following is an accurate statement about the sellers in a monopolistically competitive market?
They can achieve a type of monopoly with their own brands
Why do perfectly competitive firms avoid using advertising?
They can sell all they want at the market price without ads
Finding the _______ is achieved in step 3 of the three-step method for monopolistic competition.
Total costs
The P* - ATC x q* is used to find _______.
Total economic profit
If the market for CD players is taking large economic losses, which of the following examples would most likely happen?
Various producers of CD players will exit the market.
Which of the following is most likely an example of monopolistic competition?
Yocow produces yogurt that is somewhat different from the many other yogurt brands
How is monopolistic competition similar to perfect competition?
Both have zero long-run economic profit
A _______ in an advertisement often signals that a product is high quality.
Celebrity endorsement
Which of the following examples would most likely use extensive advertising?
CleanRinse, Inc. makes a laundry detergent that has eight substitutes.
Which of the following is most likely an example of monopolistic competition?
Dishwashing liquid producers
Which of the following is a common criticism of advertising?
It creates a demonstration effect
The equations DLR = ATC and MRLR = MC show _______.
Long-run equilibrium in the monopolistically competitive firm
Which of the following examples would most likely cause the demand for espionage movies to be reduced for individual producers?
Many espionage films enter the market
Which of the following provides consumers with many choices between brands and produce slightly different products?
Monopolistic competition
Which of the following is a similarity between productive efficiency and allocative efficiency?
Monopolistically competitive firms fail to reach either
BigShoulders Inc. makes significant profits for 20 consecutive years. This company is most likely a
Monopoly
_______ is one of the four main types of product differentiation.
Service
Which of the following formulas is used in step 3 of the three-step method for monopolistic competition?
TC = ATC x q
Which of the following is an example of monopolistic competition?
The Italian restaurant business has too many restaurants for the number of customers.