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Exam 16: Monopolistic Competition

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Question 81

Multiple Choice

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Table 16-6 Beatrice's Birthday Cakes is one bakery among many in the market for birthday cakes. The following table presents cost and revenue data for birthday cakes at Beatrice's. -Refer to Table 16-6. What is the profit-maximizing output for Beatrice's Birthday Cakes?

A) 3 cakes
B) 4 cakes
C) 5 cakes
D) 6 cakes

E) B) and C)
F) A) and D)

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Question 82

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​Which of the following goods is most likely to be associated with monopolistic competition?

A) ​Gasoline
B) ​Milk
C) ​Cookies
D) ​Wheat

E) None of the above
F) A) and B)

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Question 83

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If advertising decreases the elasticity of demand for specific brand names of hard liquor, we would expect firms to be able to charge a larger markup over marginal cost.

It has been said that many of the patrons in McDonald's restaurants in foreign locations are American tourists. A likely reason why many Americans dine at McDonald's while vacationing abroad is

Which of the following is most likely sold in a monopolistically competitive market?

Assume the role of a defender of advertising. Describe the characteristics of advertising that enhance the effectiveness of markets and increase the social welfare of society.

Figure 16-8 The lines in the figures below illustrate the potential effect of entry and exit in a monopolistically competitive market on either the demand curve or the marginal cost curve of existing firms. -Refer to Figure 16-8. Panel (d) illustrates the change that would occur if existing firms faced

Figure 16-2. The figure is drawn for a monopolistically competitive firm. -Refer to Figure 16-2. If the average variable cost is $24 at the profit-maximizing quantity, and if the firm's fixed costs amount to $60, then the firm's maximum profit is

In the short run, a firm operating in a monopolistically competitive market

Figure 16-1 -Refer to Figure 16-1. Which of the graphs illustrates a relatively elastic, though not perfectly elastic, demand curve consistent with a market that has many substitute products?

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

Table 16-2 The following table shows the total output produced by the top six firms as well as the total industry output for each industry. -Refer to Table 16-2. Which industry is the least competitive?

Figure 16-13 -Refer to Figure 16-13. Use the letters to identify the area of total cost for this firm.

On a vacation to China, you find yourself eating every meal at the local Burger King rather than buying a meal from one of the street vendors. Your traveling companion claims that you are irrational, since you never eat Burger King hamburgers when you are home, and Burger King's hamburgers cost more than the meals prepared and sold by China's street vendors. An economist would most likely explain your behavior by suggesting that

Entry of new firms in monopolistically competitive industries can convey a positive externality on consumers because new products result in more consumer surplus. This externality is called the

Figure 16-13 -Refer to Figure 16-13. Which of the following areas represents the profit for this profit maximizing monopolistically competitive firm?

Figure 16-12 -Refer to Figure 16-12. If this firm profit-maximizes, how much output will it produce?

Scenario 16-8 Burger Bonanza, a major national burger chain, recently decided to spend $4 million on an advertising campaign featuring a world famous actor to promote its new Bomber Burger. -Refer to Scenario 16-8. What two benefits are conveyed by the brand name Burger Bonanza?

Figure 16-14 -Refer to Figure 16-14. Use the letters to identify the deadweight loss from this firm producing at its profit-maximizing level of output.

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