Question 1

In a monopolistically competitive market, new firms will enter the market as long as:

Accepted Answer

A)   P > AC.
B)   P = AC.
C)   P 
D)   P = MC.E) C) and D)
F) None of the above

Question 2

If consumers observe a lot of advertising for a product, they can infer that the producer:

Accepted Answer

A)   expects the product to be successful.
B)   thinks the product is of poor quality.
C)   does not want his brand name associated with that product.
D)   needs to rely on misinformation to get people to try the product.E) None of the above
F) A) and C)

Question 3

When P > MC, output is at the socially efficient level in a monopolistically competitive firm.

Accepted Answer

A) True 
 B)False  False

Question 4

An example of a monopolistic competitive industry is:

Accepted Answer

A)   produce.
B)   white T-shirts.
C)   sodas.
D)   sugar.E) B) and D)
F) A) and B) C

Question 5

Which of the following is/are TRUE?
I. Advertising embodies both information and persuasion.
II. Perfectly competitive firms and monopolistically competitive firms both advertise.
III. Monopolies and monopolistically competitive firms both advertise.

Accepted Answer

A)   I only
B)   I and II only
C)   I and III only
D)   I II and IIIE) A) and B)
F) A) and C)

Question 6

Advertising does not promote messages of quality.

Accepted Answer

A) True 
 B)False

Question 7

When does a monopolistic competitive industry not experience entrants into the market?

Accepted Answer

When there are no lo...

Question 8

Sometimes advertising does not appear to be about price, quality, or availability.

Accepted Answer

A) True 
 B)False

Question 9

In what ways is the market for books a monopoly?

Accepted Answer

Anyone can sell a mystery, but...

Question 10

Much advertising is about telling people what is out there.

Accepted Answer

A) True 
 B)False

Question 11

A monopolistic competitive firm produces a product like oil that has perfect substitutes.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is NOT an example of product differentiation?

Accepted Answer

A)   Shell versus Chevron
B)   Coca-Cola versus Pepsi
C)   Levi's versus American Eagle
D)   They are all examples of product differentiation.E) A) and C)
F) B) and C)

Question 13

Advertising designed to link fond lifetime memories with the use of a product is a form of:

Accepted Answer

A)   informative advertising that is designed to reduce market power.
B)   informative advertising that is designed to increase market power.
C)   differentiated advertising that tries to reduce consumer surplus.
D)   persuasive advertising that may actually increase consumer well-being.E) B) and C)
F) A) and B)

Question 14

Firms that expect their products to be successful:

Accepted Answer

A)   have more of an incentive to advertise.
B)   have less of an incentive to advertise.
C)   will only participate in price advertising.
D)   can better signal the quality of their product if they do not advertise.E) B) and C)
F) All of the above

Question 15

In the long run, a monopolistically competitive firm will operate where P = AC and will no longer have economic profits.

Accepted Answer

A) True 
 B)False

Question 16

Why does a monopolistic competitive industry experience zero economic profits in the long run?

Accepted Answer

When there are profits to be had, in the short run, new firms will enter the market. This will decrease the demand to the individual firm and reduce the profits until there are zero economic profits when the firm is forced to price its product at the average cost.

Question 17

In No Logo, Naomi Klein criticizes companies that prioritize the brand name over quality of their product. What function of advertising is Klein concerned about?

Accepted Answer

A)   informative
B)   signaling
C)   persuasion
D)   informative, signaling, and part of the productE) A) and B)
F) B) and C)

Question 18

Monopolistic competition is similar to that of monopoly, but it allows for free entry and exit of competing firms.

Accepted Answer

A) True 
 B)False

Question 19

Firms that are monopolistically competitive face a demand curve that is identical to one of a perfectly competitive firm.

Accepted Answer

A) True 
 B)False

Question 20

Both perfectly competitive markets and monopolistically competitive markets feature product differentiation.

Accepted Answer

A) True 
 B)False

Exam 17: Monopolistic Competition and Advertising

In a monopolistically competitive market, new firms will enter the market as long as:

Correct AnswerverifiedShow Answer

If consumers observe a lot of advertising for a product, they can infer that the producer:

Correct AnswerverifiedShow Answer

When P > MC, output is at the socially efficient level in a monopolistically competitive firm.

Correct AnswerverifiedFalse

An example of a monopolistic competitive industry is:

Correct AnswerverifiedC

Which of the following is/are TRUE? I. Advertising embodies both information and persuasion. II. Perfectly competitive firms and monopolistically competitive firms both advertise. III. Monopolies and monopolistically competitive firms both advertise.

Correct AnswerverifiedShow Answer

Advertising does not promote messages of quality.

Correct AnswerverifiedShow Answer

When does a monopolistic competitive industry not experience entrants into the market?

Correct AnswerverifiedWhen there are no lo...View AnswerShow Answer

Sometimes advertising does not appear to be about price, quality, or availability.

Correct AnswerverifiedShow Answer

In what ways is the market for books a monopoly?

Correct AnswerverifiedAnyone can sell a mystery, but...View AnswerShow Answer

Much advertising is about telling people what is out there.

Correct AnswerverifiedShow Answer

A monopolistic competitive firm produces a product like oil that has perfect substitutes.

Correct AnswerverifiedShow Answer

Which of the following is NOT an example of product differentiation?

Correct AnswerverifiedShow Answer

Advertising designed to link fond lifetime memories with the use of a product is a form of:

Correct AnswerverifiedShow Answer

Firms that expect their products to be successful:

Correct AnswerverifiedShow Answer

In the long run, a monopolistically competitive firm will operate where P = AC and will no longer have economic profits.

Correct AnswerverifiedShow Answer

Why does a monopolistic competitive industry experience zero economic profits in the long run?

Correct AnswerverifiedWhen there are profits to be had, in the short run, new firms will enter the market. This will decrease the demand to the individual firm and reduce the profits until there are zero economic profits when the firm is forced to price its product at the average cost.

In No Logo, Naomi Klein criticizes companies that prioritize the brand name over quality of their product. What function of advertising is Klein concerned about?

Correct AnswerverifiedShow Answer

Monopolistic competition is similar to that of monopoly, but it allows for free entry and exit of competing firms.

Correct AnswerverifiedShow Answer

Firms that are monopolistically competitive face a demand curve that is identical to one of a perfectly competitive firm.

Correct AnswerverifiedShow Answer

Both perfectly competitive markets and monopolistically competitive markets feature product differentiation.

Correct AnswerverifiedShow Answer

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False

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C

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When there are no lo...
View Answer

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Anyone can sell a mystery, but...
View Answer

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When there are profits to be had, in the short run, new firms will enter the market. This will decrease the demand to the individual firm and reduce the profits until there are zero economic profits when the firm is forced to price its product at the average cost.

Correct Answer
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