question
Which of the following conditions does NOT describe a firm in a monopolistically competitive market?
a. It sells a product different from its competitors.
b. It takes its price as given by market conditions.
c. It maximizes profit both in the short run and in the long run.
d. It has the freedom to enter or exit in the long run.
a. It sells a product different from its competitors.
b. It takes its price as given by market conditions.
c. It maximizes profit both in the short run and in the long run.
d. It has the freedom to enter or exit in the long run.
answer
b. It takes its price as given by market conditions.
question
Which of the following markets best fits the definition of monopolistic competition?
a. wheat
b. tap water
c. crude oil
d. haircuts
a. wheat
b. tap water
c. crude oil
d. haircuts
answer
d. haircuts
question
A monopolistically competitive firm will increase its production if
a. marginal revenue is greater than marginal cost.
b. marginal revenue is greater than average total cost.
c. price is greater than marginal cost.
d. price is greater than average total cost.
a. marginal revenue is greater than marginal cost.
b. marginal revenue is greater than average total cost.
c. price is greater than marginal cost.
d. price is greater than average total cost.
answer
a. marginal revenue is greater than marginal cost.
question
New firms will enter a monopolistically competitive market if
a. marginal revenue is greater than marginal cost.
b. marginal revenue is greater than average total cost.
c. price is greater than marginal cost.
d. price is greater than average total cost.
a. marginal revenue is greater than marginal cost.
b. marginal revenue is greater than average total cost.
c. price is greater than marginal cost.
d. price is greater than average total cost.
answer
d. price is greater than average total cost.
question
What is true of a monopolistically competitive market in long-run equilibrium?
a. Price is greater than marginal cost.
b. Price is equal to marginal revenue.
c. Firms make positive economic profits.
d. Firms produce at the minimum of average total cost.
a. Price is greater than marginal cost.
b. Price is equal to marginal revenue.
c. Firms make positive economic profits.
d. Firms produce at the minimum of average total cost.
answer
a. Price is greater than marginal cost.
question
If advertising makes consumers more loyal to particular brands, it could ________ the elasticity of demand and ________ the markup of price over marginal cost.
a. increase, increase
b. increase, decrease
c. decrease, increase
d. decrease, decrease
a. increase, increase
b. increase, decrease
c. decrease, increase
d. decrease, decrease
answer
c. decrease, increase
question
oligopoly
answer
a market structure in which only a few sellers offer similar or identical products
question
monopolistic competition
answer
a market structure in which many firms sell products that are similar but not identical
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