Econ Exam 3 Chapter 16
16.Refer to Figure 16‐2. How much output will the monopolistically competitive firm produce in this situation? a. 20 units b. 25 units c. 40 units d. 80 units
A
17.Refer to Figure 16‐2. This firm is operating a. in the short run and earning a positive economic profit. b. in the short run and breaking even. c. in the long run and earning a positive economic profit. d. in the long run and incurring and economic loss
A
14.Refer to Figure 16‐2. How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price? a. $200 b. $312.50 c. $400 d. $800
A
19.In monopolistically competitive markets, economic losses a. suggest that some existing firms will exit the market. b. suggest that new firms will enter the market. c. are minimized through government‐imposed barriers to entry. d. are never possible.
A
23.Refer to Table 16‐5. How much profit will this firm earn at the monopolistically competitive price? a. $0 b. $5 c. $12 d. $16
A
26.When a firm operates with excess capacity, a. additional production would lower the average total cost. b. additional production would increase the average total cost. c. it must be a perfectly competitive firm. d. it must be a monopolistically competitive firm.
A
28.The relationship between advertising and product differentiation is a. positive; the more differentiated the product, the more a firm is likely to spend on advertising. b. negative; the more differentiated the product, the less a firm is likely to spend on advertising. c. zero; there is no relationship between product differentiation and advertising. d. irrelevant; firms with differentiated products do not need to advertise.
A
29.Compared to other firms, firms that sell highly differentiated products likely incur significant costs associated with a. advertising. b. the product‐variety externality. c. intermediate materials. d. taxes and regulation.
A
30.In which of the following product markets are we likely to observe the largest amount of advertising? a. markets with highly differentiated products b. perfectly competitive markets c. markets in which industrial products are sold d. markets in which there is very little difference between different firms' products
A
8.A profit‐maximizing firm in a monopolistically competitive market is characterized by which of the following? a. average revenue exceeds marginal revenue b. marginal revenue exceeds average revenue c. average revenue is equal to marginal revenue d. revenue is always maximized along with profit
A
Check Aplia
A
1. Monopolistic competition is a type of a. oligopoly. b. market structure. c. price discrimination. d. advertising strategy.
B
12.Refer to Figure 16‐2. At the profit‐maximizing level of output, what is this firm's total cost of production? a. $1,200 b. $1,400 c. $1,600 d. $1,875
B
13.Refer to Figure 16‐2. What is the profit‐maximizing price, quantity, and resulting profit? a. P=$60, Q=20 units, profit=$200 b. P=$80, Q=20 units, profit=$200 c. P=$75, Q=25 units, profit=$100 d. P=$60, Q=40 units, profit=$0
B
18.Refer to Figure 16‐2. Which of the following will occur in the long run in this industry? a. Firms will exit this industry. b. Firms will enter this industry. c. This firm will continue to earn positive economic profits. d. This firm will incur losses.
B
2. Which of the following pairs illustrates the two extreme examples of market structures? a. competition and oligopoly b. competition and monopoly c. monopoly and monopolistic competition d. oligopoly and monopolistic competition
B
25.Consider monopoly, monopolistic competition, and perfect competition. In which of these three market structures does a profit‐maximizing firm charge a price that exceeds marginal cost? a. monopoly only b. monopoly and monopolistic competition only c. monopoly, monopolistic competition, and perfect competition d. The answer cannot be determined without knowing whether the market is in the long run or short run.
B
31.Defenders of advertising argue that it is not rational for profit‐maximizing firms to spend money on advertising for products that have a. superior quality. b. inferior or mediocre quality. c. low prices. d. limited availability.
B
4. If there are many firms participating in a market, the market is either a. an oligopoly or monopolistically competitive. b. perfectly competitive or monopolistically competitive. c. an oligopoly or perfectly competitive. d. an oligopoly or a cartel.
B
7. Product differentiation in monopolistically competitive markets ensures that, for profit‐ maximizing firms, a. marginal revenue will equal average total cost. b. price will exceed marginal cost. c. marginal cost will exceed average revenue. d. average variable cost will be declining.
B
15.Refer to Figure 16‐2. How much profit will the monopolistically competitive firm earn in this situation? a. $0 b. $80 c. $200 d. $400
C
21. Refer to Table 16‐5. What price should this firm charge to maximize profit? a. $6 b. $12 c. $18 d. $24
C
24.Refer to Table 16‐5. Which of the following statements regarding this monopolistically competitive firm is correct? a. New firms will enter this market in the long run since firm profits are greater than zero. b. Firms will leave this market in the long run since firm profits are less than zero. c. This firm is currently in long‐run equilibrium. d. This firm is currently in long‐run equilibrium, and the firm is producing its efficient scale of output.
C
3. Firms in industries that have competitors but do not face so much competition that they are price takers are operating in either a(n) a. oligopoly or perfectly competitive market. b. oligopoly or monopoly market. c. oligopoly or monopolistically competitive market. d. monopoly or monopolistically competitive market.
C
6. In the short run, a firm in a monopolistically competitive market operates much like a a. firm in a perfectly competitive market. b. firm in an oligopoly. c. monopolist. d. monopsonist.
C
11.Refer to Figure 16‐2. What price will the monopolistically competitive firm charge in this market? a. $60 b. $70 c. $75 d. $80
D
20.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 a. is also the level of output at which marginal cost equals average total cost. b. exceeds the level of output at which there is a point of tangency between the demand curve and the average total cost curve. c. exceeds the level of output at which marginal revenue equals marginal cost. d. All of the above are correct.
D
22.Refer to Table 16‐5. What is this firm's total cost at the profit‐maximizing quantity? a. $12 b. $18 c. $32 d. $36
D
27.Regulation of a firm in a monopolistically competitive market a. usually implies a very small administrative burden. b. will lower the firm's costs. c. is commonly used to enhance market efficiency. d. is unlikely to improve market efficiency
D
32.Advertisements that appear to convey no information at all a. are usually associated with "infomercials." b. are useless to consumers but valuable to firms. c. are useless to firms but valuable to consumers for their entertainment quality alone. d. may convey information to consumers by providing them with a signal that firms are willing to spend significant amounts of money to advertise.
D
5. In perfect competition as well as in monopolistic competition, a. marginal revenue is equal to price for each firm. b. profit is positive in a long‐run equilibrium for each firm. c. entry and exit by firms are restricted. d. there are many firms in a single market.
D