Question 1

Critics of markets that are characterised by firms that sell brand-name products argue that brand names encourage consumers to pay more for branded products that:

Accepted Answer

A)   are indistinguishable from generic products
B)   are very different from generic products
C)   have elastic demand curves
D)   consumer advocate groups have found to be inferiorE) A) and C)
F) None of the above

Question 2

Graph 17-4
 
-Refer to Graph 17-4. Panel b in the set of figures shown is consistent with a firm in a monopolistically competitive market that is:

Accepted Answer

A)   incurring economic gains
B)   in a short-run equilibrium, but not a long-run equilibrium
C)   in both a short-run and a long-run equilibrium
D)   in a long-run equilibrium, but not a short-run equilibriumE) A) and D)
F) B) and C)

Question 3

Excess capacity:

Accepted Answer

A)   is a characteristic of rising average total cost curves
B)   is solely a characteristic of mark-up pricing
C)   tells economists little about the desirability of a market outcome
D)   is the primary source of market inefficiency in monopolistically competitive marketsE) None of the above
F) All of the above

Question 4

A small number of sellers in a market makes rigorous competition:

Accepted Answer

A)   less likely and strategic interactions among them vitally important
B)   less likely and strategic interactions among them unimportant
C)   more likely and strategic interactions among them vitally important
D)   more likely and strategic interactions among them unimportantE) A) and D)
F) B) and C)

Question 5

Eunice consumes Coke exclusively. She claims that there is a clear taste difference and that competing brands of cola leave an unsavoury 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 10 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 are a form of socially efficient advertising
D)   brand names cause consumers to be more sensitive to product differencesE) A) and B)
F) None of the above

Question 6

Advertising that uses celebrity endorsements is most likely intended to:

Accepted Answer

A)   provide a signal of product quality
B)   be useful only for psychological effects
C)   increase elasticity of demand for the advertised product
D)   reduce the ability of markets to allocate resources efficientlyE) A) and B)
F) A) and C)

Question 7

If advertising decreases the elasticity of demand for specific brand names of hard liquor, we would expect firms to be more able to exercise market power.

Accepted Answer

A) True 
 B)False

Question 8

Suppose that a profit-maximising firm in a monopolistically competitive market is at long-run equilibrium, then:

Accepted Answer

A)   the demand curve will be unitary elastic
B)   average revenue will exceed the price
C)   price will exceed marginal cost
D)   marginal revenue exceeds marginal costE) A) and C)
F) A) and B)

Question 9

Movies that prominently display name-brand consumer products are most likely sending a message about:

Accepted Answer

A)   subliminal satisfaction from consumption
B)   psychological manipulation
C)   product quality
D)   product priceE) A) and C)
F) A) and B)

Question 10

Evaluate the following statement: 'Advertisements that use celebrity endorsements are devoid of any value and do not enhance the efficient functioning of markets'.

Accepted Answer

Some people argue that celebri...

Question 11

Brand names can improve product quality because firms will want to avoid the financial loss that would follow a fall in reputation. Firms will thus work harder to maintain high quality.

Accepted Answer

A) True 
 B)False

Question 12

The profit-maximising rule for a firm in a monopolistically competitive market is to select the quantity at which marginal revenue is equal to marginal cost.

Accepted Answer

A) True 
 B)False

Question 13

When a profit-maximising firm in a monopolistically competitive market is producing the long-run equilibrium quantity:

Accepted Answer

A)   it will be earning economic profits
B)   its demand curve will be tangent to its average total cost curve
C)   its average revenue will equal marginal cost
D)   its marginal revenue will exceed marginal costE) B) and C)
F) A) and D)

Question 14

The product-variety externality associated with monopolistic competition arises because in monopolistically competitive markets:

Accepted Answer

A)   entry and exit are not restricted
B)   firms produce at excess capacity
C)   firms try to differentiate their products
D)   firms produce homogeneous productsE) B) and C)
F) A) and D)

Question 15

What is the similarity between a long-run equilibrium in a monopolistically competitive market with a monopoly? What is the difference?

Accepted Answer

The similarity is that in both markets, ...

Question 16

The primary claim of defenders of advertising is that:

Accepted Answer

A)   it conveys information about firm profitability
B)   it enhances the information available to consumers
C)   it is psychological rather than informational
D)   all of the above are trueE) None of the above
F) A) and D)

Question 17

Which of the following are important differences between monopolistically competitive markets and perfectly competitive markets? (i)  the number of sellers
(ii)  product differentiation among the sellers
(iii)  slope of the firm's demand function.

Accepted Answer

A)   (i)  and (ii) 
B)   (ii)  and (iii) 
C)   (i)  only
D)   (ii)  onlyE) None of the above
F) A) and B)

Question 18

Just like a competitive firm, a monopolistically competitive market has insignificant barriers to entry.

Accepted Answer

A) True 
 B)False

Question 19

When firms are encouraged to enter monopolistically competitive markets:

Accepted Answer

A)   the diversity of products in the market must be small
B)   they are guaranteed economic profits upon entry
C)   some firms in the market must be making economic profits
D)   no firms can experience economic lossesE) B) and C)
F) A) and B)

Question 20

Graph 17-1
 
-Refer to Graph 17-1. Which of the following graphs would most likely represent a profit-maximising firm in a monopolistically competitive market?

Accepted Answer

A)   panel a
B)   panel b
C)   panel c
D)   panel dE) None of the above
F) A) and C)

Exam 18: Monopolistic Competition

Excess capacity:

Correct Answer
verified

Which of the following are important differences between monopolistically competitive markets and perfectly competitive markets? (i) the number of sellers (ii) product differentiation among the sellers (iii) slope of the firm's demand function.

Correct Answer
verified

Critics of markets that are characterised by firms that sell brand-name products argue that brand names encourage consumers to pay more for branded products that:

Correct Answer
verified

Suppose that a profit-maximising firm in a monopolistically competitive market is at long-run equilibrium, then:

Correct Answer
verified

Evaluate the following statement: 'Advertisements that use celebrity endorsements are devoid of any value and do not enhance the efficient functioning of markets'.

Correct Answer
verified
Some people argue that celebri...
View Answer

If advertising decreases the elasticity of demand for specific brand names of hard liquor, we would expect firms to be more able to exercise market power.

Correct Answer
verified

A small number of sellers in a market makes rigorous competition:

Correct Answer
verified

When a profit-maximising firm in a monopolistically competitive market is producing the long-run equilibrium quantity:

Correct Answer
verified

Advertising that uses celebrity endorsements is most likely intended to:

Correct Answer
verified

The primary claim of defenders of advertising is that:

Correct Answer
verified

Graph 17-4 -Refer to Graph 17-4. Panel b in the set of figures shown is consistent with a firm in a monopolistically competitive market that is:

Correct Answer
verified

When firms are encouraged to enter monopolistically competitive markets:

Correct Answer
verified

Brand names can improve product quality because firms will want to avoid the financial loss that would follow a fall in reputation. Firms will thus work harder to maintain high quality.

Correct Answer
verified

Movies that prominently display name-brand consumer products are most likely sending a message about:

Correct Answer
verified

The profit-maximising rule for a firm in a monopolistically competitive market is to select the quantity at which marginal revenue is equal to marginal cost.

Correct Answer
verified

The product-variety externality associated with monopolistic competition arises because in monopolistically competitive markets:

Correct Answer
verified

What is the similarity between a long-run equilibrium in a monopolistically competitive market with a monopoly? What is the difference?

Correct Answer
verified
The similarity is that in both markets, ...
View Answer

Correct Answer
verified

Graph 17-1 -Refer to Graph 17-1. Which of the following graphs would most likely represent a profit-maximising firm in a monopolistically competitive market?

Correct Answer
verified

Just like a competitive firm, a monopolistically competitive market has insignificant barriers to entry.

Correct Answer
verified

Exam 18: Monopolistic Competition

Excess capacity:

Correct AnswerverifiedShow Answer

Which of the following are important differences between monopolistically competitive markets and perfectly competitive markets? (i) the number of sellers (ii) product differentiation among the sellers (iii) slope of the firm's demand function.

Correct AnswerverifiedShow Answer

Critics of markets that are characterised by firms that sell brand-name products argue that brand names encourage consumers to pay more for branded products that:

Correct AnswerverifiedShow Answer

Suppose that a profit-maximising firm in a monopolistically competitive market is at long-run equilibrium, then:

Correct AnswerverifiedShow Answer

Evaluate the following statement: 'Advertisements that use celebrity endorsements are devoid of any value and do not enhance the efficient functioning of markets'.

Correct AnswerverifiedSome people argue that celebri...View AnswerShow Answer

If advertising decreases the elasticity of demand for specific brand names of hard liquor, we would expect firms to be more able to exercise market power.

Correct AnswerverifiedShow Answer

A small number of sellers in a market makes rigorous competition:

Correct AnswerverifiedShow Answer

When a profit-maximising firm in a monopolistically competitive market is producing the long-run equilibrium quantity:

Correct AnswerverifiedShow Answer

Advertising that uses celebrity endorsements is most likely intended to:

Correct AnswerverifiedShow Answer

The primary claim of defenders of advertising is that:

Correct AnswerverifiedShow Answer

Graph 17-4 -Refer to Graph 17-4. Panel b in the set of figures shown is consistent with a firm in a monopolistically competitive market that is:

Correct AnswerverifiedShow Answer

When firms are encouraged to enter monopolistically competitive markets:

Correct AnswerverifiedShow Answer

Brand names can improve product quality because firms will want to avoid the financial loss that would follow a fall in reputation. Firms will thus work harder to maintain high quality.

Correct AnswerverifiedShow Answer

Movies that prominently display name-brand consumer products are most likely sending a message about:

Correct AnswerverifiedShow Answer

The profit-maximising rule for a firm in a monopolistically competitive market is to select the quantity at which marginal revenue is equal to marginal cost.

Correct AnswerverifiedShow Answer

The product-variety externality associated with monopolistic competition arises because in monopolistically competitive markets:

Correct AnswerverifiedShow Answer

What is the similarity between a long-run equilibrium in a monopolistically competitive market with a monopoly? What is the difference?

Correct AnswerverifiedThe similarity is that in both markets, ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Graph 17-1 -Refer to Graph 17-1. Which of the following graphs would most likely represent a profit-maximising firm in a monopolistically competitive market?

Correct AnswerverifiedShow Answer

Just like a competitive firm, a monopolistically competitive market has insignificant barriers to entry.

Correct AnswerverifiedShow 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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Some people argue that celebri...
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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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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The similarity is that in both markets, ...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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