Question 1

A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

Accepted Answer

A)  a decrease in profits for all hotels/motels.
B)  reduced efficiency of local lodging markets.
C)  a request by consumers to increase the number of billboards.
D)  increased price competition among hotels/motels in the community.E) A) and B)
F) B) and D)

Question 2

Figure 17-5
 
-Refer to Figure 17-5.This figure depicts a situation in a monopolistically competitive market.How much profit will the monopolistically competitive firm earn in this situation?

Accepted Answer

A)  A $10 profit.
B)  A $20 profit.
C)  A $200 profit.
D)  No profit, since monopolistically competitive firms never earn economic profit.E) A) and D)
F) A) and C)

Question 3

Because a monopolistically competitive firm has some market power,in the long-run the price of its good exceeds its

Accepted Answer

A)  average revenue.
B)  average total cost.
C)  marginal cost.
D)  profit per unit.E) A) and D)
F) None of the above

Question 4

Under which of the following market structures would the highest output of a particular good be produced?

Accepted Answer

A)  Perfect competition
B)  Monopolistic competition
C)  Oligopoly
D)  MonopolyE) B) and C)
F) A) and B)

Question 5

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

Accepted Answer

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.E) All of the above
F) None of the above

Question 6

The debate over whether advertising serves a valuable purpose in society is definitively answered by economists who study the tastes and preferences of individuals.

Accepted Answer

A) True 
 B)False

Question 7

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Accepted Answer

A)  firms are more likely to operate at efficient scale.
B)  there are likely to be too many firms in a monopolistically competitive market.
C)  market efficiency is likely to be enhanced by the entry of new firms.
D)  the market structure is likely to be in transition.E) A) and C)
F) A) and D)

Question 8

Professional organizations (for example,the American Medical Association and the American Bar Association)have been active advocates for regulation to restrict the right of professionals to advertise.Describe what economic incentives might exist for existing professionals to restrict advertising.

Accepted Answer

If advertising increases information abo...

Question 9

In the study done by Lee Benham on advertising for eyeglasses,

Accepted Answer

A)  advertising increased the average price.
B)  advertising decreased the average price.
C)  there was no difference in price, but quality was better in the states that didn't allow advertising.
D)  advertising appeared to have no effect whatsoever in the states that permitted advertising.E) C) and D)
F) All of the above

Question 10

Table 17-3
Traci's Hairstyling is one salon among many in the market for hairstyling. The following table presents cost and revenue data for Traci's Hairstyling.
 
-Refer to Table 17-3.When maximizing profit,what price does Traci's charge for hairstyling?

Accepted Answer

A)  $20
B)  $25
C)  $30
D)  $35E) A) and B)
F) B) and C)

Question 11

Suppose that monopolistically competitive firms in a certain market are experiencing losses.In the transition from this initial situation to a long-run equilibrium,

Accepted Answer

A)  the number of firms in the market decreases.
B)  each existing firm experiences a decrease in demand for its product.
C)  each firm experiences an upward shift to its marginal cost and average total cost curves.
D)  each existing firm's average total cost falls to bring economic profit back to zero.E) None of the above
F) B) and D)

Question 12

Figure 17-5
 
-Refer to Figure 17-5.This figure depicts a situation in a monopolistically competitive market.How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

Accepted Answer

A)  $200.00
B)  $312.50
C)  $400.00
D)  $800.00E) A) and D)
F) A) and C)

Question 13

Eunice consumes Coke exclusively.She claims that there is a clear taste difference and that competing brands of cola leave an unsavory residual taste in her mouth.However,in a blind taste test,Eunice is found to prefer generic store-brand cola to Coke eight out of ten times.The results of Eunice's taste test would reinforce claims by critics of brand names that

Accepted Answer

A)  consumers are always willing to pay more for brand names.
B)  brand names cause consumers to perceive differences that do not really exist.
C)  brand names cause consumers to be more sensitive to product differences.
D)  brand names are a form of socially efficient advertising.E) B) and D)
F) None of the above

Question 14

Entry of firms in a monopolistically competitive industry is characterized by two externalities.List these externalities and briefly describe how consumers and existing firms are influenced by these externalities.

Accepted Answer

Business-stealing effect: incumbent firm...

Question 15

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Accepted Answer

A) True 
 B)False

Question 16

Results of the study done by Lee Benham on advertising for eyeglasses would suggest that

Accepted Answer

A)  brand loyalty and market power in the eyeglass market was likely to be more pervasive in states that allowed advertising.
B)  eyeglass sales were more profitable in states that allowed advertising.
C)  optometrists would not be supportive of advertising restrictions.
D)  optometrists would enthusiastically endorse advertising restrictions.E) B) and D)
F) All of the above

Question 17

Table 17-1
 
-Refer to Table 17-1.This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm.How much profit will this firm earn when it chooses its output to maximize profit?

Accepted Answer

A)  A $4 loss.
B)  A $2 loss.
C)  A $6 profit.
D)  A $16 profit.E) A) and B)
F) None of the above

Exam 17: Monopolistic Competition

Entry of firms in a monopolistically competitive industry is characterized by two externalities.List these externalities and briefly describe how consumers and existing firms are influenced by these externalities.

Correct Answer
verified
Business-stealing effect: incumbent firm...
View Answer

Table 17-3 Traci's Hairstyling is one salon among many in the market for hairstyling. The following table presents cost and revenue data for Traci's Hairstyling. -Refer to Table 17-3.When maximizing profit,what price does Traci's charge for hairstyling?

Correct Answer
verified

A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

Correct Answer
verified

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Correct Answer
verified

The debate over whether advertising serves a valuable purpose in society is definitively answered by economists who study the tastes and preferences of individuals.

Correct Answer
verified

Because a monopolistically competitive firm has some market power,in the long-run the price of its good exceeds its

Correct Answer
verified

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Correct Answer
verified

In the study done by Lee Benham on advertising for eyeglasses,

Correct Answer
verified

Figure 17-5 -Refer to Figure 17-5.This figure depicts a situation in a monopolistically competitive market.How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

Correct Answer
verified

Professional organizations (for example,the American Medical Association and the American Bar Association)have been active advocates for regulation to restrict the right of professionals to advertise.Describe what economic incentives might exist for existing professionals to restrict advertising.

Correct Answer
verified
If advertising increases information abo...
View Answer

Table 17-1 -Refer to Table 17-1.This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm.How much profit will this firm earn when it chooses its output to maximize profit?

Correct Answer
verified

Suppose that monopolistically competitive firms in a certain market are experiencing losses.In the transition from this initial situation to a long-run equilibrium,

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Results of the study done by Lee Benham on advertising for eyeglasses would suggest that

Correct Answer
verified

Figure 17-5 -Refer to Figure 17-5.This figure depicts a situation in a monopolistically competitive market.How much profit will the monopolistically competitive firm earn in this situation?

Correct Answer
verified

Under which of the following market structures would the highest output of a particular good be produced?

Correct Answer
verified

Exam 17: Monopolistic Competition

Entry of firms in a monopolistically competitive industry is characterized by two externalities.List these externalities and briefly describe how consumers and existing firms are influenced by these externalities.

Correct AnswerverifiedBusiness-stealing effect: incumbent firm...View AnswerShow Answer

Table 17-3 Traci's Hairstyling is one salon among many in the market for hairstyling. The following table presents cost and revenue data for Traci's Hairstyling. -Refer to Table 17-3.When maximizing profit,what price does Traci's charge for hairstyling?

Correct AnswerverifiedShow Answer

A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

Correct AnswerverifiedShow Answer

Policymakers have generally come to accept the view that advertising enhances the efficiency of markets.

Correct AnswerverifiedShow Answer

The debate over whether advertising serves a valuable purpose in society is definitively answered by economists who study the tastes and preferences of individuals.

Correct AnswerverifiedShow Answer

Because a monopolistically competitive firm has some market power,in the long-run the price of its good exceeds its

Correct AnswerverifiedShow Answer

When the loss from a business-stealing externality exceeds the gain from a product-variety externality,

Correct AnswerverifiedShow Answer

In the study done by Lee Benham on advertising for eyeglasses,

Correct AnswerverifiedShow Answer

Figure 17-5 -Refer to Figure 17-5.This figure depicts a situation in a monopolistically competitive market.How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?

Correct AnswerverifiedShow Answer

Professional organizations (for example,the American Medical Association and the American Bar Association)have been active advocates for regulation to restrict the right of professionals to advertise.Describe what economic incentives might exist for existing professionals to restrict advertising.

Correct AnswerverifiedIf advertising increases information abo...View AnswerShow Answer

Table 17-1 -Refer to Table 17-1.This table shows the demand schedule,marginal cost,and average total cost for a monopolistically competitive firm.How much profit will this firm earn when it chooses its output to maximize profit?

Correct AnswerverifiedShow Answer

Suppose that monopolistically competitive firms in a certain market are experiencing losses.In the transition from this initial situation to a long-run equilibrium,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Results of the study done by Lee Benham on advertising for eyeglasses would suggest that

Correct AnswerverifiedShow Answer

Figure 17-5 -Refer to Figure 17-5.This figure depicts a situation in a monopolistically competitive market.How much profit will the monopolistically competitive firm earn in this situation?

Correct AnswerverifiedShow Answer

Under which of the following market structures would the highest output of a particular good be produced?

Correct AnswerverifiedShow Answer

Correct Answer
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Business-stealing effect: incumbent firm...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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If advertising increases information abo...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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