Question 1

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.

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Question 2

Assume the role of a critic of advertising. Describe the characteristics of advertising that reduce the effectiveness of markets and decrease the social welfare of society.

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Question 3

In many college towns, private independent bookstores typically locate on the periphery of the college campus. However, in some college towns, the university has used political power to restrict private bookstores near campus through community zoning laws. Use your knowledge of markets to predict the price and quality of service differences in the market for college textbooks under the two different market regimes.

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Question 4

Scenario 16-9
Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products.
-Refer to Scenario 16-9. Martina offers two reasons for agreeing with Dean's decision. What are they?

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Dean goes to the grocery store...

Question 5

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures can have positive profits in the short run?

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Question 6

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures features entry in the long run?

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Question 7

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

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Question 8

In the debate between the critics and defenders of advertising, what conclusion have policymakers come to regarding the effect of advertising on competition - advertising makes markets more competitive or less competitive?

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Question 9

Scenario 16-9
Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products.
-Refer to Scenario 16-9. Which friend is a critic of brand names?

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Dean goes to the grocery store...

Question 10

Scenario 16-9
Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products.
-Refer to Scenario 16-9. If advertising were banned in these markets, what would likely happen to the prices of chips and soda?

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The answer of Scenario 16-9
Dean goes to the grocery store...

Question 11

In a small college town, four microbreweries have opened in the last two years. Demonstrate the effect of new market entrants on demand for existing firms (microbreweries) that already served this market. Assume that the local community now places a moratorium on new liquor licenses for microbreweries. How will this moratorium affect the long-run profitability of incumbent firms?

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Question 12

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?

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Burger Bonanza, a major national burger...

Question 13

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 can consumers conclude from Burger Bonanza's willingness to spend $4 million on an advertising campaign?

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Burger Bonanza, a major national burger...

Question 14

What is meant by the term "excess capacity" as it relates to monopolistically competitive firms?

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Question 15

Why does a typical monopolistically competitive firm face a downward-sloping demand curve?

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Question 16

Use a graph to demonstrate why a profit-maximizing monopolistically competitive firm must operate at excess capacity. Explain why a perfectly competitive firm is not subject to the same constraint.

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Question 17

Scenario 16-9
Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products.
-Refer to Scenario 16-9. If Dean bought the brand name because of advertising he saw for the product, a defender of advertising would say

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Dean goes to the grocery store...

Question 18

Evaluate the following statement in the context of business-stealing and product-variety externalities: "We have too many student apartments in this town already. Statistics show that vacancy rates average 15 percent during any given semester."

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Question 19

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures results in production of the welfare-maximizing level of output?

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Question 20

List five goods that are likely sold in a monopolistically competitive market.

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Quiz 16: Monopolistic Competition

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.

Assume the role of a critic of advertising. Describe the characteristics of advertising that reduce the effectiveness of markets and decrease the social welfare of society.

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures can have positive profits in the short run?

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures features entry in the long run?

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

In the debate between the critics and defenders of advertising, what conclusion have policymakers come to regarding the effect of advertising on competition - advertising makes markets more competitive or less competitive?

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?

What is meant by the term "excess capacity" as it relates to monopolistically competitive firms?

Why does a typical monopolistically competitive firm face a downward-sloping demand curve?

Use a graph to demonstrate why a profit-maximizing monopolistically competitive firm must operate at excess capacity. Explain why a perfectly competitive firm is not subject to the same constraint.

Evaluate the following statement in the context of business-stealing and product-variety externalities: "We have too many student apartments in this town already. Statistics show that vacancy rates average 15 percent during any given semester."

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures results in production of the welfare-maximizing level of output?

List five goods that are likely sold in a monopolistically competitive market.