chapter quiz 16

In the short run, if the price is above average total cost in a monopolistically competitive market, the firm makes

.profits and firms enter the market.

For the economy as a whole, what percentage of firm revenue is spent on advertising?

2 percent

Which of the following is not put forth as a criticism of advertising and brand names?

Advertising increases competition, which causes unnecessary bankruptcies and layoffs.

Which of the following is true regarding the similarities and differences in monopolistic competition and monopoly?

The monopolist makes economic profits in the long run while the monopolistic competitor makes zero economic profits in the long run.

The use of the word "monopoly" in the name of the market structure called "monopolistic competition" refers to the fact that

a monopolistically competitive firm faces a downward-sloping demand curve for its differentiated product and so does a monopolist.

Which of the following firms has the least incentive to advertise?

a wholesaler of crude oil

One source of inefficiency in monopolistic competition is that

because price is above marginal cost, some units are not produced that buyers value in excess of the cost of production and this causes a deadweight loss.

The monopolistically competitive market shown in Exhibit will, in the long run,

cause producers to exit the market, which will shift the demand faced by incumbent firms to the right.

Which of the following products is least likely to be sold in a monopolistically competitive market?

cotton

Exhibit depicts a monopolistically competitive firm

generating zero profits in the long run.

If the monopolistic competitor described by Exhibit is producing at the profit-maximizing (loss-minimizing) level of output, it

is generating losses.

Which of the following is not a characteristic of a monopolistically competitive market?

long-run economic profits

Which of the following is true regarding the production and pricing decisions of monopolistically competitive firms? Monopolistically competitive firms choose the quantity at which marginal cost equals

marginal revenue and then use the demand curve to determine the price consistent with this quantity.

Which of the following firms is most likely to spend a large percentage of their revenue on advertising?

the producer of a highly differentiated consumer product

The use of the word "competition" in the name of the market structure called "monopolistic competition" refers to the fact that

there are many sellers in a monopolistically competitive market and there is free entry and exit in the market just like a competitive market.

Which of the following is true with regard to monopolistically competitive firms' scale of production and pricing decisions? Monopolistically competitive firms produce

with excess capacity and charge a price above marginal cost.