Chapter 16

Refer to Table 16-4. Which of the following is likely to happen in the long run in this market? The market is currently in a long-run equilibrium. The market price is likely to fall. Firms are likely to enter the market since firms are earning a positive economic profit. Firms are likely to leave the market since firms are earning a negative economic profit.

Firms are likely to leave the market since firms are earning a negative economic profit.

Which of the following conditions is characteristic of a monopolistically competitive firm in both the short-run and the long run? P > MC MC = ATC P < MR All of the above are correct.

P > MC

Refer to Figure 16-1. Suppose that average total cost is $18 when Q=12. What is the profit-maximizing price and resulting profit? P=$12, profit=$0 P=$18, profit=$24 P=$18, profit=$72 P=$18, profit=$0

P=$18, profit=$0

Refer to Figure 16-2. At the profit-maximizing level of output, what is this firm's total cost of production? $1,200 $1,400 $1,875 $1,600

$1,400

Refer to Figure 16-3. The maximum total short-run economic profit for the monopolistically competitive firm in this figure is $1,500. $6,000. $10,500. $12,500.

$1,500.

Refer to Figure 16-8. In order to maximize its profit, the firm will choose to produce between 100 and 133.33 units of output. less than 100 units of output. more than 133.33 units of output. 100 units of output.

100 units of output.

A monopolistically competitive firm is currently producing 10 units of output. At this level of output the firm is charging a price equal to $10, has marginal revenue equal to $6, has marginal cost equal to $6, and has average total cost equal to $12. From this information we can infer that the firm is currently maximizing its profit. the profits of the firm are negative. firms are likely to leave this market in the long run. All of the above are correct.

All of the above are correct.

Suppose for some firm that average total cost is minimized at Q1 units of output. For a monopolistically competitive firm in long-run equilibrium, Q1 is also the level of output at which marginal cost equals average total cost. exceeds the level of output at which there is a point of tangency between the demand curve and the average total cost curve. exceeds the level of output at which marginal revenue equals marginal cost. All of the above are correct.

All of the above are correct.

Refer to Table 16-4. If the government forces this firm to produce at its efficient output level, how much profit will this firm earn? a $4 loss a $6 loss a $6 profit a $12 profit

a $6 loss

Refer to Figure 16-3. The firm in this figure is monopolistically competitive. It illustrates a short-run economic profit. the shut-down case. a long-run economic profit. a short-run loss.

a short-run economic profit.

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following? average revenue exceeds marginal revenue marginal revenue exceeds average revenue average revenue is equal to marginal revenue revenue is always maximized along with profit

average revenue exceeds marginal revenue

In a monopolistically competitive industry, a firm's demand curve also represent its marginal revenue. marginal cost. average revenue. profit.

average revenue.

A monopolistically competitive market has characteristics that are similar to a monopoly only. a competitive firm only. both a monopoly and a competitive firm. neither a monopoly nor a competitive firm.

both a monopoly and a competitive firm.

Joe's Juice Shop operates in a monopolistically competitive market. Joe's is currently producing where its average total cost is minimized. In the long run we would expect Joe's output to decrease and average total cost to increase. decrease and average total cost to decrease. remain unchanged as Joe's is doing the best it can. increase and average total costs to decrease.

decrease and average total cost to increase.

A firm in a monopolistically competitive market faces a downward-sloping demand curve because the firm's product is different from those offered by other firms. downward-sloping demand curve because there are only a few firms in the market. horizontal demand curve because there are many firms in the market. horizontal demand curve because firms can enter the market without restriction.

downward-sloping demand curve because the firm's product is different from those offered by other firms.

Because monopolistically competitive firms produce differentiated products, each firm faces a demand curve that is horizontal. faces a demand curve that is vertical. has no control over product price. has some control over product price.

has some control over product price.

The general term for market structures that fall somewhere between monopoly and perfect competition is incomplete markets. imperfectly competitive markets. oligopoly markets. monopolistically competitive markets.

imperfectly competitive markets.

A monopolistically competitive industry is characterized by many firms, differentiated products, and barriers to entry. many firms, differentiated products, and free entry. a few firms, identical products, and free entry. a few firms, differentiated products, and barriers to entry.

many firms, differentiated products, and free entry.

-Refer to Figure 16-6. Which of the graphs depicts the situation for a profit-maximizing firm in a monopolistically competitive market? panel c panel d panel a panel b

panel a

When a market is monopolistically competitive, the typical firm in the market is likely to experience a positive profit in the short run and in the long run. positive or negative profit in the short run and a zero profit in the long run. zero profit in the short run and a positive or negative profit in the long run. zero profit in the short run and in the long run.

positive or negative profit in the short run and a zero profit in the long run.

A concentration ratio measures the percentage of total sales of the top firm in the industry. reflects the level of competition in an industry. is inversely related to the price charged by the top firm in the industry. All of the above are correct.

reflects the level of competition in an industry.

In the short run, a firm operating in a monopolistically competitive market produces an output level where marginal revenue equals average total cost. sets price equal to demand where marginal revenue equals marginal cost. must earn zero economic profits. maximizes revenues as well as profits.

sets price equal to demand where marginal revenue equals marginal cost.

In monopolistically competitive markets, positive economic profits suggest that some existing firms will exit the market. suggest that new firms will enter the market. are sustained through government-imposed barriers to entry. are never possible.

suggest that new firms will enter the market.

Both monopolistic competition and oligopoly are market structures that fail to achieve the total surplus achieved by perfect competition. that feature only a few firms in each market. to which the concept of Nash equilibrium is frequently applied by economists. in which firms earn zero economic profit in the long run.

that fail to achieve the total surplus achieved by perfect competition.

An oligopoly is a market in which there are only a few sellers, each offering a product similar or identical to the products offered by other firms in the market. firms are price takers. the actions of one seller in the market have no impact on the other sellers' profits. there are many price-taking firms, each offering a product similar or identical to the products offered by other firms in the market.

there are only a few sellers, each offering a product similar or identical to the products offered by other firms in the market