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ECON2302 - KC - Ch16

Economics Chapter 16 review

QuestionAnswer
The "monopoly" in monopolistically competitive markets is most likely a result of firms having some pricing power due to product differentiation. True or false? TRUE
When McDonald's opens up a store in Dhaka, Bangladesh, it has a strong incentive to enforce product quality consistent with stores in the United States. True or false? TRUE
In the long run, monopolistically competitive firms produce where demand equals marginal cost. True or false? FALSE
The "product-variety externality" states the benefits to consumers from the introduction of a new product. True or false? TRUE
Economists who argue that advertising enhances market efficiency suggest that celebrity advertising signals inferior product quality. True or false? FALSE
A monopolistically competitive market is like a monopoly in that firms in both market structures set price above marginal cost.
A markup of price over marginal cost is inconsistent with free entry and zero profit. True or false? FALSE
One key different between an oligopoly market and a competitive market is that oligopolistic firms 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.
In markets where restrictions on advertising have been used to curtail competition, the U.S. courts have generally overturned laws that prohibit advertising.
The government may not be able to improve the inefficiencies of a monopolistically competitive market. True or false? TRUE
Regulation of a firm in a monopolistically competitive market is unlikely to improve market efficiency.
The "product-variety externality" states that entry of a new firm conveys a negative externality on consumers. True or false? FALSE
Definition of oligopoly: a market structure in which only a few sellers offer similar or identical products.
Definition of monopolistic competition: a market structure in which many firms sell products that are similar but not identical.
Created by: debra473
 

 



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