micro ch 16

Which of the following pairs illustrates the two extreme examples of market structures?

competition and monopoly

Entry by new firms into a monopolistically competitive market

creates additional consumer surplus.

Refer to Table 16-1. Which industry is the least competitive?

Industry A

Refer to Table 16-1. Which industry is the most competitive?

Industry D

Refer to Scenario 16-3. How much profit will Peter earn each day if he chooses the price and quantity that maximize his profit?

$176

Refer to Figure 16-3. How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

$200

Refer to Scenario 16-3. What price should Peter charge per double scoop ice cream cone to maximize his profit?

$4.40

Refer to Figure 16-3. What price will the monopolistically competitive firm charge in this market?

$80

Crude oil is primarily supplied to the world market by a few Middle Eastern countries. Such a market is an example of a(n) (i) imperfectly competitive market. (ii) monopoly market. (iii) oligopoly market.

(i) and (iii) only

A monopolistically competitive firm chooses the quantity to produce where

- marginal revenue equals marginal cost.

The firm has total fixed costs of $120 and a constant marginal cost of $12 per unit. We can conclude that

- this market is in long-run equilibrium.

Evidence suggests that, in markets with differentiated products but little advertising,

-markets are less efficient

In the short run, a firm in a monopolistically competitive market operates much like a

-monopolist

Firms that sell highly differentiated consumer goods, such as soft drinks, breakfast cereals, and dog food, typically spend what percent of their revenues on advertising?

10-20

Refer to Table 16-1. What is the concentration ratio in Industry B?

61%

Refer to Scenario 16-3. How many double scoop ice cream cones should Peter sell per day to maximize his profit?

80

Refer to Table 16-1. What is the concentration ratio in Industry A?

92%

The higher the concentration ratio, the

Both a and c are correct.

A monopolistically competitive market has characteristics that are similar to

both a monopoly and a competitive firm.

Critics of advertising argue that in some markets advertising may

decrease elasticity of demand allowing firms to charge a larger markup over marginal cost.

Some firms have an incentive to advertise because they sell a

differentiated product and charge a price above marginal cost.

When firms in a monopolistically competitive market engage in price-related advertising, defenders of advertising argue that

each firm has less market power.

One characteristic of an oligopoly market structure is:

firms in the industry have some degree of market power.

In which of the following market structures can firms earn economic profits in the long run?

monopoly

Product differentiation in monopolistically competitive markets ensures that, for profit-maximizing firms,

price will exceed marginal cost.

Scenario 16-4 Delish, a moderately priced restaurant, has recently announced intentions to open a restaurant in Boston, MA. Assume that the restaurant market in Boston is characterized by monopolistic competition. Refer to Scenario 16-4. As a result of the new restaurant, diners in Boston are likely to experience a

product-variety externality, which is a positive externality.

Examples of monopolistically competitive markets include the markets for

restaurants and furniture.

In monopolistically competitive markets, economic losses

suggest that some existing firms will exit the market.

If a monopolistically competitive firm can increase its level of production and lower its average total cost of production at the same time then

the firm has excess capacity.