mic tut 9 10

Refer to Figure 16-4. Panel b is consistent with a firm in a monopolistically competitive market

that is

• a. not in long-run equilibrium.

• b. in long-run equilibrium.

• c. producing its efficient scale of output.

• d. earning a positive economic profit.

When a profit-maximizing firm in a monopolistically competitive market is in long-run

equilibrium,

• a. the demand curve will be perfectly elastic.

• b. price exceeds marginal cost.

• c. marginal cost must be falling.

• d. marginal revenue exceeds marginal cost.

Cecilia's Café operates in a monopolistically competitive market. Cecilia's is currently producing

where its average total cost is minimized. In the long run we would expect Cecilia’s output to

• a. decrease and average total cost to increase.

• b. decrease and average total cost to decrease.

• c. remain unchanged as Cecilia's is doing the best it can.

• d. increase and average total costs to decrease.

Under which of the following market structures would the highest output of a particular good be

produced?

• a. perfect competition

• b. monopolistic competition

• c. oligopoly

• d. monopoly

A business-stealing externality is

• a. an externality that is likely to be punished under antitrust laws.

• b. the negative externality that occurs when one firm attempts to duplicate exactly the

  product of a different firm.

• c. an externality that is considered to be an explicit cost of business in monopolistically

  competitive markets.

• d. the negative externality associated with entry of new firms in a monopolistically

  competitive market.

Results of the study done by Lee Benham on advertising for eyeglasses would suggest that

• a. brand loyalty and market power in the eyeglass market was likely to be more

  pervasive in states that allowed advertising.

• b. eyeglass sales were more profitable in states that allowed advertising.

• c. optometrists would not be supportive of advertising restrictions.

• d. optometrists would enthusiastically endorse advertising restrictions.

Television advertisements aired during major sporting events are very expensive. A theory

asserting that people buy a product simply because it is advertised would suggest that information

on the high cost of advertising

• a. enhances the effectiveness of the advertisement.

• b. reduces people's willingness to purchase advertised products.

• c. is leaked to discredit the firms that spend so much on advertising.

• d. reduces the effective staying power of a product.

If a sawmill creates too much noise for local residents,

• a. noise restrictions will force residents to move out of the area.

• b. a sense of social responsibility will cause owners of the mill to reduce noise levels.

• c. the government can raise economic well-being through noise-control regulations.

• d. the government should avoid intervening because the market will allocate resources

  efficiently.

Refer to Figure 10-4. If this market is currently producing at Q2, then total economic well-being

would increase if output

• b. decreased to Q1.

• c. increased to Q3.

• d. stayed at Q2.

• a. increased beyond Q4.

Suppose that smoking creates a negative externality. If the government does not interfere in the

cigarette market, then

• a. the equilibrium quantity of cigarettes smoked will equal the socially optimal

  quantity of cigarettes smoked.

• b. the equilibrium quantity of cigarettes smoked will be greater than the socially

  optimal quantity of cigarettes smoked.

• c. the equilibrium quantity of cigarettes smoked will be less than the socially optimal

  quantity of cigarettes smoked.

• d. There is not enough information to answer the question.