Deck 16: Monopolistic Competition

Question 1

The two types of imperfectly competitive markets are

A) monopoly and monopolistic competition.
B) monopoly and oligopoly.
C) monopolistic competition and oligopoly.
D) monopolistic competition and cartels.

Answer 1

C

Question 2

Monopolistic competition is a type of

A) oligopoly.
B) market structure.
C) price discrimination.
D) advertising strategy.

Answer 2

B

Question 3

The typical firm in the US economy

A) has some degree of market power.
B) sells its product for a price that is equal to the marginal cost of producing the last unit.
C) is perfectly competitive.
D) is a monopoly.

Answer 3

A

Question 4

A market structure with only a few sellers, each offering similar or identical products, is known as

A) oligopoly.
B) monopoly.
C) monopolistic competition.
D) perfect competition.

Question 5

Which of the following is a characteristic of monopolistic competition?

A) ownership of a key resource by a single firm
B) free entry
C) identical product
D) patents

Question 6

The general term for market structures that fall somewhere between monopoly and perfect competition is

A) incomplete markets.
B) imperfectly competitive markets.
C) oligopoly markets.
D) monopolistically competitive markets.

Question 7

The market for novels is

A) perfectly competitive.
B) a monopoly.
C) monopolistically competitive.
D) an oligopoly.

Question 8

One characteristic of an oligopoly market structure is:

A) firms in the industry are typically characterized by very diverse product lines.
B) firms in the industry have some degree of market power.
C) products typically sell at a price equal to their marginal cost of production.
D) the actions of one seller have no impact on the profitability of other sellers.

Question 9

The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)

A) perfectly competitive market.
B) monopolistically competitive market.
C) oligopoly.
D) monopoly.

Question 10

Which of the following statements is not correct?

A) Monopolistic competition is similar to monopoly because in each market structure the firm can charge a price above marginal costs.
B) Monopolistic competition is similar to perfect competition because both market structures are characterized by free entry.
C) Monopolistic competition is similar to oligopoly because both market structures are characterized by barriers to entry.
D) Monopolistic competition is similar to perfect competition because both market structures are characterized by many sellers.

Question 11

The two types of imperfectly competitive markets are

A) markets with advertising and markets with price competition.
B) public goods and common resources.
C) oligopoly and monopoly.
D) monopolistic competition and oligopoly.

Question 12

A monopolistically competitive market has characteristics that are similar to

A) a monopoly only.
B) a competitive firm only.
C) both a monopoly and a competitive firm.
D) neither a monopoly nor a competitive firm.

Question 13

Imperfectly competitive firms are characterized by

A) horizontal demand curves.
B) standardized products.
C) a large number of small firms.
D) price making ability.

Question 14

An oligopoly is a market in which

A) there are only a few sellers, each offering a product similar or identical to the products offered by other firms in the market.
B) firms are price takers.
C) the actions of one seller in the market have no impact on the other sellers' profits.
D) there are many price-taking firms, each offering a product similar or identical to the products offered by other firms in the market.

Question 15

An oligopoly

A) has a concentration ratio of less than 50 percent.
B) is a price taker.
C) is a type of imperfectly competitive market.
D) has many firms rather than just one firm or a few firms.

Question 16

In a market that is characterized by imperfect competition,

A) firms are price takers.
B) there are always a large number of firms.
C) there are at least a few firms that compete with one another.
D) the actions of one firm in the market never have any impact on the other firms' profits.

Question 17

Which of the following pairs illustrates the two extreme examples of market structures?

A) competition and oligopoly
B) competition and monopoly
C) monopoly and monopolistic competition
D) oligopoly and monopolistic competition

Question 18

Which of the following statements is not correct?

A) Monopolistic competition is different from monopoly because monopolistic competition is characterized by free entry, whereas monopoly is characterized by barriers to entry.
B) Both monopolistic competition and oligopoly fall in between the more extreme market structures of competition and monopoly.
C) Monopolistic competition is different from oligopoly because each seller in monopolistic competition is small relative to the market, whereas each seller can affect the actions of other sellers in an oligopoly.
D) Both monopolistic competition and perfect competition are characterized by product differentiation.

Question 19

Firms in industries that have competitors but do not face so much competition that they are price takers are operating in either a(n)

A) oligopoly or perfectly competitive market.
B) oligopoly or monopoly market.
C) oligopoly or monopolistically competitive market.
D) monopoly or monopolistically competitive market.

Question 20

A typical firm in the US economy would be classified as

A) perfectly competitive.
B) imperfectly competitive.
C) a duopolist.
D) an oligopolist.

Question 21

The lower the concentration ratio, the

A) more control an individual firm has to set prices.
B) more competitive the industry.
C) less competitive the industry.
D) Both a and c are correct.

Question 22

hich of the following industries has the highest concentration ratio?

A) dresses
B) apples
C) books
D) cigarettes

Question 23

A concentration ratio

A) measures the percentage of total sales of the top firm in the industry.
B) reflects the level of competition in an industry.
C) is inversely related to the price charged by the top firm in the industry.
D) All of the above are correct.

Question 24

Table 16-1
The following table shows the percentage of output supplied by the top eight firms in four different industries.
Refer to Table 16-1. Which industry has the lowest concentration ratio?

A) Industry A
B) Industry B
C) Industry C
D) Industry D

Question 25

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. What is the concentration ratio for Industry J?

A) about 14%
B) about 48%
C) about 74%
D) about 80%

Question 26

The breakfast cereal industry, with its concentration ratio of 80%, would best be described as a(n)

A) perfectly competitive market.
B) monopolistically competitive market.
C) oligopoly.
D) monopoly.

Question 27

Which of the following industries has the highest concentration ratio?

A) jeans
B) fruit
C) household laundry equipment
D) restaurants

Question 28

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. What is the concentration ratio for Industry L?

A) about 99%
B) about 77%
C) about 41%
D) about 16%

Question 29

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. What is the concentration ratio for Industry K?

A) about 8%
B) about 36%
C) about 48%
D) about 84%

Question 30

Crude oil is primarily supplied to the world market by a few Middle Eastern countries. Such a market is an example of a(n)

A) (i) and (ii) only
B) (ii) and (iii) only
C) (i) and (iii) only
D) (iii) only

Question 31

Table 16-1
The following table shows the percentage of output supplied by the top eight firms in four different industries.
Refer to Table 16-1. What is the concentration ratio in Industry D?
A) 23%

A) 39%
B) 58%
C) 72%

Question 32

Table 16-1
The following table shows the percentage of output supplied by the top eight firms in four different industries.
Refer to Table 16-1. What is the concentration ratio in Industry C?
A) 13%

A) 32%
B) 52%
C) 84%

Question 33

Which of the following industries has the lowest concentration ratio?

A) breakfast cereal
B) electric lamp bulbs
C) household laundry equipment
D) cigarettes

Question 34

Table 16-1
The following table shows the percentage of output supplied by the top eight firms in four different industries.
Refer to Table 16-1. What is the concentration ratio in Industry A?
A) 38%

A) 71%
B) 92%
C) 98%

Question 35

Table 16-1
The following table shows the percentage of output supplied by the top eight firms in four different industries.
Refer to Table 16-1. Which industry is the most competitive?

A) Industry A
B) Industry B
C) Industry C
D) Industry D

Question 36

The higher the concentration ratio, the

A) more control an individual firm has to set prices.
B) more competitive the industry.
C) less competitive the industry.
D) Both a and c are correct.

Question 37

Table 16-1
The following table shows the percentage of output supplied by the top eight firms in four different industries.
Refer to Table 16-1. What is the concentration ratio in Industry B?
A) 18%

A) 34%
B) 61%
C) 95%

Question 38

Table 16-1
The following table shows the percentage of output supplied by the top eight firms in four different industries.
Refer to Table 16-1. Which industry is the least competitive?

A) Industry A
B) Industry B
C) Industry C
D) Industry D

Question 39

Table 16-1
The following table shows the percentage of output supplied by the top eight firms in four different industries.
Refer to Table 16-1. Which industry has the highest concentration ratio?

A) Industry A
B) Industry B
C) Industry C
D) Industry D

Question 40

A concentration ratio

A) measures the percentage of total output supplied by the four largest firms in the industry.
B) reflects the level of competition in an industry.
C) is related to the control that each firm has over price.
D) All of the above are correct.

Question 41

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?

A) Industry J
B) Industry K
C) Industry L
D) Industry M

Question 42

One way in which monopolistic competition differs from oligopoly is that

A) there are no barriers to entry in oligopolies.
B) in oligopoly markets there are only a few sellers.
C) all firms in an oligopoly eventually earn zero economic profits.
D) strategic interactions between firms are rare in oligopolies.

Question 43

Table 16-3
The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries.
Refer to Table 16-3. Which industry has the highest concentration ratio?

A) Industry A
B) Industry B
C) Industry C
D) Industry D

Question 44

Table 16-3
The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries.
Refer to Table 16-3. Based on the concentration ratio, which industry is the least competitive?

A) Industry A
B) Industry B
C) Industry C
D) Industry D

Question 45

Scenario 16-1
Suppose the following are the sales for all of the firms in two different industries.
Refer to Scenario 16-1. Which of the following statements is correct regarding the competitiveness of these two industries?

A) Industry A and Industry B are equally competitive.
B) Industry A is more competitive than Industry B.
C) Industry A is less competitive than Industry B.
D) The competitiveness of these two industries cannot be determined from the information given.

Question 46

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 has the lowest concentration ratio?

A) Industry J
B) Industry K
C) Industry L
D) Industry M

Question 47

Table 16-3
The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries.
Refer to Table 16-3. What is the concentration ratio for Industry A?

A) approximately 52%
B) approximately 58%
C) approximately 66%
D) approximately 72%

Question 48

Table 16-3
The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries.
Refer to Table 16-3. What is the concentration ratio for Industry B?

A) approximately 46%
B) approximately 54%
C) approximately 57%
D) approximately 61%

Question 49

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 has the highest concentration ratio?

A) Industry J
B) Industry K
C) Industry L
D) Industry M

Question 50

Which of the following is an example of a monopolistically competitive industry?

A) electric lamp bulbs
B) aircraft manufacturing
C) corn
D) sweaters

Question 51

One key difference between an oligopoly market and a competitive market is that oligopolistic firms

A) are price takers while competitive firms are not.
B) can affect the profit of other firms in the market by the choices they make while firms in competitive markets do not affect each other by the choices they make.
C) sell completely unrelated products while competitive firms do not.
D) sell their product at a price equal to marginal cost while competitive firms do not.

Question 52

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. What is the concentration ratio for Industry M?

A) about 96%
B) about 52%
C) about 40%
D) about 22%

Question 53

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 most competitive?

A) Industry J
B) Industry K
C) Industry L
D) Industry M

Question 54

Table 16-3
The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries.
Refer to Table 16-3. Which industry has the lowest concentration ratio?

A) Industry A
B) Industry B
C) Industry C
D) Industry D

Question 55

Scenario 16-1
Suppose the following are the sales for all of the firms in two different industries.
Refer to Scenario 16-1. What are the concentration ratios for these industries?

A) Industry A: 22%, Industry B: 26%
B) Industry A: 41%, Industry B: 47%.
C) Industry A: 68%, Industry B: 79%
D) Industry A: 100%, Industry B: 100%.

Question 56

Which of the following is an example of a monopolistically competitive industry?

A) computer operating systems
B) tennis balls
C) movies
D) cable television

Question 57

Table 16-3
The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries.
Refer to Table 16-3. Based on the concentration ratio, which industry is the most competitive?

A) Industry A
B) Industry B
C) Industry C
D) Industry D

Question 58

Which of the following is unique to a monopolistically competitive firm when compared to an oligopoly?

A) The monopolistically competitive firm advertises.
B) The monopolistically competitive firm produces a quantity of output that falls short of the socially optimal level.
C) Monopolistic competition features many buyers.
D) Monopolistic competition features many sellers.

Question 59

Table 16-3
The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries.
Refer to Table 16-3. What is the concentration ratio for Industry C?

A) approximately 44%
B) approximately 48%
C) approximately 53%
D) approximately 56%

Question 60

Table 16-3
The following table shows the output produced by each of the top eight firms in four industries as well as the total industry output for those industries.
Refer to Table 16-3. What is the concentration ratio for Industry D?

A) approximately 48%
B) approximately 54%
C) approximately 60%
D) approximately 66%

Question 61

If there are many firms participating in a market, the market is either

A) an oligopoly or monopolistically competitive.
B) perfectly competitive or monopolistically competitive.
C) an oligopoly or perfectly competitive.
D) an oligopoly or a cartel.

Question 62

When an industry has many firms, the industry is

A) an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products.
B) an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products.
C) monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products.
D) perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products.

Question 63

In a monopolistically competitive market,

A) there are only a few sellers.
B) each firm takes the price of its product as given.
C) firms can enter or exit the market without restrictions.
D) each firm produces a product that is essentially identical to the products of other firms in the market.

Question 64

Which of the following goods are not likely to be sold in monopolistically competitive markets?

A) jeans
B) books
C) tap water
D) clocks

Question 65

Monopolistic competition differs from perfect competition because in monopolistically competitive markets

A) there are barriers to entry.
B) all firms can eventually earn economic profits.
C) each of the sellers offers a somewhat different product.
D) strategic interactions between firms are important.

Question 66

A similarity between monopoly and monopolistic competition is that in both market structures

A) strategic interactions among sellers are important.
B) there are a small number of sellers.
C) sellers are price makers rather than price takers.
D) there are only a few buyers but many sellers.

Question 67

Free entry and exit means that the number of firms in the market adjusts until

A) producers continuously enter the market freely.
B) the market grows to a profitable level.
C) economic profits are driven to zero.
D) products are free.

Question 68

A monopolistically competitive industry is characterized by

A) many firms, differentiated products, and barriers to entry.
B) many firms, differentiated products, and free entry.
C) a few firms, identical products, and free entry.
D) a few firms, differentiated products, and barriers to entry.

Question 69

Which of the following statements is correct?

A) Monopolistic competition is similar to monopoly because both market structures are characterized by firms being price makers rather than price takers.
B) Monopolistic competition is similar to perfect competition because both market structures are characterized by differentiated products.
C) Monopolistic competition is similar to oligopoly because both market structures are characterized by strategic interaction between firms in the market.
D) Monopolistic competition is similar to perfect competition because both market structures are characterized by perfectly elastic demand curves for firms.

Question 70

Which of the following goods are likely to be sold in a monopolistically competitive market?

A) jeans
B) breakfast cereal
C) electricity distribution in Chicago
D) postage stamps

Question 71

Which of the following is not a characteristic of monopolistic competition?

A) a large number of sellers
B) firms are price takers
C) free entry into the market
D) a differentiated product

Question 72

A monopolistically competitive market is characterized by

A) free entry, but not differentiated products.
B) differentiated products, but not long run profits.
C) long run profits, but not many firms.
D) many firms, but not free entry.

Question 73

A monopolistically competitive industry is characterized by

A) many firms selling products that are similar but not identical.
B) many firms selling identical products.
C) a few firms selling products that are similar but not identical.
D) a few firms selling highly different products.

Question 74

In both perfect competition and monopolistic competition, each firm

A) has some monopoly power.
B) sells a product that is at least slightly different from those of other firms.
C) faces a downward-sloping demand curve.
D) has many competitors.

Question 75

Examples of monopolistically competitive markets include the markets for

A) restaurants and furniture.
B) wheat and corn.
C) postage stamps and wooden pencils.
D) All of the above are correct.

Question 76

Which of the following conditions distinguishes monopolistic competition from perfect competition?

A) the number of sellers in the market
B) the freedom of entry and exit by firms in the market
C) the size of firms in the market
D) product differentiation

Question 77

A monopolistically competitive market

A) is imperfectly competitive, and all imperfectly competitive markets are monopolistically competitive.
B) is imperfectly competitive, but not all imperfectly competitive markets are monopolistically competitive.
C) is imperfectly competitive, whereas an oligopolistic market is not imperfectly competitive.
D) is not imperfectly competitive.

Question 78

Select the type of market that is described by the following attributes: many firms, differentiated products, and free entry.

A) natural monopoly
B) perfectly competition
C) monopolistic competition
D) monopoly

Question 79

A market structure in which there are many firms selling products that are similar but not identical is known as

A) oligopoly.
B) monopoly.
C) monopolistic competition.
D) perfect competition.

Question 80

Which of the following markets is not likely characterized by a monopolistically competitive market?

A) mobile telephone service
B) auto mechanic service
C) barbershops
D) jewelry