Chapter 16
firms that sell highly differentiated consumer goods, such as soft drinks, breakfast cereals, & dog food, typically spend what percent of their revenues on advertising?
10-20.
a monopolistically competitive firm's choice of output level is virtually identical to the choice made by...
a monopolist.
the free entry & exit of firms in a monopolistically competitive market guarantees that...
both economic profits & economic losses disappear in the long run.
for a profit-maximizing monopolistically competitive firm, price exceeds marginal cost in...
both the short run & the long run.
the primary claim of defenders of advertising is that it...
enhances the information available to consumers.
which of the following is a characteristic of monopolistic competition?
free entry.
evidence from the market for eyeglasses suggest that advertising leads to...
lower prices for consumers.
a monopolistically competitive industry is characterized by...
many firms selling products that are similar but not identical.
which of the following markets impose deadweight losses on society?
monopolistic competition & monopoly.
a market structure in which there are many firms selling products that are similar but not identical is known as...
monopolistic competition.
hotels in New York City frequently experience an average vacancy rate of about percent of the (i.e., on an average night, 80 percent of the hotel rooms are full). this kind of movie excess capacity is indicative of what kind of market?
monopolistic competition.
in which of the following markets is economic profit driven to zero in the long run?
monopolistic competition.
the market for novels is...
monopolistically competitive.
since a firm in a monopolistically competitive market faces a...
downward-sloping demand curve, it will always operate with the excess capacity.
a profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competitive market because the firm in the monopolistically competitive market...
faces a downward-sloping demand curve for its product.
the profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which...
marginal revenue is equal to marginal cost.
a profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?
price exceeds marginal cost.
for a monopolistically competitive firm, at the profit-maximizing quantity of output,...
price exceeds marginal cost.
monopolistic competition is considered inefficient because...
price exceeds marginal cost.
advertising that uses celebrity endorsements is most likely intended to...
provide a signal of product quality.
for the economy as a whole, spending on advertising comprises about what percent of total firm revenue?
2.
which of the following conditions is characteristic of a monopolistically competitive firm in short-run equilibrium?
P = AR MR = MC P > MC P > ATC P = ATC P < ATC
when a firm operates with excess capacity,...
additional production would lower the average total cost.
which of the following is a commonly-cited benefit of advertising?
advertising can be a signal of the quality of a product.
excess capacity is...
an example of the inefficiencies of monopolistically competitive markets.
for a monopolistically competitive firm...
average revenue & price are the same.
in a monopolistically competitive industry, a firm's demand curve also represent its...
average revenue.
to maximize its profit, a monopolistically competitive firm...
chooses its quantity & price, just as a monopoly does.
which of the following pairs illustrates the two extreme examples of market structures?
competition & monopoly.
defenders of advertising...
contend that firms use advertising to provide useful information to consumers.
critics of advertising argue that advertising...
creates desires that otherwise might not exist. hinders competition. often fails to convey substantive information.
some firms have an incentive to advertise because they sell a...
differentiated product & charge a price above marginal cost.
