Question 1

Economists measure a market's domination by a small number of firms with a statistic called the

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The answer of Economists measure a market's domination by a...

Question 2

​In the long run, a monopolistically competitive firm produces at efficient scale.

Accepted Answer

Monopolistically competitive firms do not produce at efficient scale in the long run due to excess capacity and lower productivity compared to perfectly competitive firms.

Question 3

​A monopolistically competitive firm cannot earn an economic profit in the long run.

Accepted Answer

In the long run, firms in a monopolistically competitive market will face competition from other firms producing similar products, which will drive down their demand and profits, making it impossible to earn economic profits. Firms in this market structure will only be able to earn normal profits in the long run.

Question 4

Consider two industries in which firms hold the following market shares:
Industry A: 25%, 20%, 18%, 15%, 8%, 7%, 4%, 2%, 1%
Industry B: 30%, 10%, 9%, 8%, 8%, 8%, 8%, 6%, 6%, 5%, 2%
What are the concentration ratios for each industry? Which is more competitive?

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The answer of Consider two industries in which firms hold...

Question 5

​A monopolistically competitive firm is a price-taker.

Accepted Answer

A monopolistically competitive firm is not a price-taker but has some control over the price because of product differentiation.

Question 6

Suppose there is a market in which the firms hold the following market shares: 25%, 20%, 18%, 15%, 8%, 7%, 4%, 2%, 1%. What is the concentration ratio for this market?

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The answer of Suppose there is a market in which...

Question 7

There is general disagreement among economists about the role of advertising, but there is widespread agreement about the role of brand names on market efficiency.

Accepted Answer

Economists also have differing opinions on the role of brand names in market efficiency, with some arguing they enhance efficiency by signaling quality and reducing search costs, while others contend they can create market power and inefficiencies through consumer manipulation and loyalty beyond objective product quality.

Question 8

​In the long run, a monopolistically competitive firm's demand curve becomes more elastic and shifts to the left

Accepted Answer

In the long run, new firms can enter the market and offer similar products, making consumers more willing to switch to substitutes. This increases the elasticity of demand for the original firm's product and ultimately shifts the demand curve to the left.

Question 9

The market structure in which each firm has a monopoly over the product it makes, but many other firms make similar products that compete for the same customers is called

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The answer of The market structure in which each firm...

Question 10

Which market structure(s) is(are) considered highly concentrated?

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The answer of Which market structure(s) is(are) considered highly concentrated?...

Question 11

Which market structure(s) is(are) imperfectly competitive?

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The answer of Which market structure(s) is(are) imperfectly competitive?...

Question 12

Table 16-7
A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20. 
-Refer to Table 16-7. If this firm has a constant marginal cost of $7, what is the profit-maximizing level of output?

Accepted Answer

The answer of Table 16-7
A monopolistically competitive firm faces the...

Question 13

Free entry eliminates long-run profits for firms in competitive and monopolistic industries.

Accepted Answer

Free entry eliminates barriers to entry and increases competition, which reduces profits for firms in both competitive and monopolistic industries in the long run.

Question 14

Table 16-7
A monopolistically competitive firm faces the following demand schedule for its product. In addition, the firm has total fixed costs equal to 20. 
-Refer to Table 16-7. When this firm profit maximizes and faces a constant marginal cost of $7, what is the amount of its markup over marginal cost?

Accepted Answer

The answer of Table 16-7
A monopolistically competitive firm faces the...

Question 15

The government may not be able to improve the inefficiencies of a monopolistically competitive market.

Accepted Answer

Monopolistically competitive markets have many firms that differentiate their products, which leads to inefficiencies such as higher prices and lower output than would occur under perfect competition. However, government intervention may not be able to improve these inefficiencies due to the complex nature of these markets and the difficulty in regulating product differentiation.

Question 16

Which type of market structure has the fewest number of firms?

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The answer of Which type of market structure has the...

Question 17

Firms in monopolistically competitive markets and monopolies can earn long-run profits due to barriers to entry.

Accepted Answer

In monopolistically competitive markets, firms can earn short-term profits, but in the long run, the entry of new firms erodes these profits, leading to zero economic profit. Monopolies can earn long-run profits due to high barriers to entry that prevent new firms from entering the market.

Question 18

Describe the shape of the monopolistically competitive firm's demand curve.

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The answer of Describe the shape of the monopolistically competitive...

Question 19

​If a monopolistically competitive firms incurs an increase in fixed costs, its price will rise and its output will fall.

Accepted Answer

In the short run, an increase in fixed costs does not affect the price or output level of a monopolistically competitive firm because the firm's price and output decisions are based on marginal costs, not fixed costs.

Question 20

Which market structure(s) include(s) many firms with differentiated products who can enter and exit the market freely?

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The answer of Which market structure(s) include(s) many firms with...

Quiz 16: Monopolistic Competition