Solved by verified expert :51. When a profit-maximizing firm in a
monopolistically competitive market charges a price higher than marginal cost,
a. it
is violating the antitrust laws.
b. it
must be losing money.
c. there
is a deadweight loss, but it is exactly offset by the benefit of excess
capacity.
d. None
of the above are correct.
52. The deadweight loss that is associated with a
monopolistically competitive market is a result of
a. price
falling short of marginal cost in order to increase market share.
b. price
exceeding marginal cost.
c. operating
in a regulated industry.
d. excessive
advertising costs.
53. Regulation of a firm in a monopolistically
competitive market
a. usually
implies a very small administrative burden.
b. will
lower the firm’s costs.
c. is
commonly used to enhance market efficiency.
d. is
unlikely to improve market efficiency.
54. The administrative burden of regulating price
in a monopolistically competitive market is
a. small
due to economies of scale.
b. large
because price is usually below marginal cost.
c. large
because of the large number of firms that produce differentiated products.
d. small
because firms produce with excess capacity.
55. If regulators required firms in
monopolistically competitive markets to set price equal to marginal cost,
a. firms
would most likely experience economic losses.
b. firms
would also operate at maximum efficient scale.
c. new
firms would be likely to enter the market.
d. the
most efficient firms are not likely to be affected.
56. If regulators required firms in
monopolistically competitive markets to set price equal to marginal cost,
a. firms
would respond by lowering their costs.
b. firms
would require a subsidy to stay in business
c. new
firms that enter the market would operate at efficient scale.
d. the
most efficient firms would not be affected.
57. Inefficiency in monopolistically competitive
markets can be identified with
a. inferior
products produced by most firms.
b. government
programs that effectively regulate price.
c. their
similarities to perfectly competitive markets.
d. not
having the “ideal” number of firms in the industry.
58. Before a new firm enters a monopolistically
competitive market with a new product, it considers
a. the
profit opportunities.
b. the
business-stealing externality.
c. the
product-variety externality.
d. All
of the above are correct.
59. The product-variety externality is associated
with
a. the
producer surplus that accrues to incumbent firms in a monopolistically
competitive industry.
b. loss
of consumer surplus from exposure to additional advertising.
c. the
consumer surplus that is generated from the introduction of a new product.
d. the
opportunity cost of firms exiting a monopolistically competitive industry.
60. When consumers are exposed to additional
choices that result from the introduction of a new product,
a. their
satisfaction is likely to be lowered as a result of their having to make
additional choices.
b. a
product-variety externality is said to occur.
c. an
advertising externality is said to occur.
d. consumers
are likely to experience negative consumption externalities.
