question
Monopolistic competition is similar to perfect competition because firms in both market
structures:
A) are price takers.
B) produce goods that are perfect substitutes.
C) find it beneficial to advertise.
D) do not face any barriers to entry to the industry in the long run.
structures:
A) are price takers.
B) produce goods that are perfect substitutes.
C) find it beneficial to advertise.
D) do not face any barriers to entry to the industry in the long run.
answer
D) do not face any barriers to entry to the industry in the long run.
question
Which of the following industries is MOST likely to be monopolistically competitive?
A) automobile production
B) fresh bagel shops
C) corn farming
D) electric utility production
A) automobile production
B) fresh bagel shops
C) corn farming
D) electric utility production
answer
B) fresh bagel shops
question
An example of monopolistic competition is the _____ industry.
A) restaurant
B) soft-drink
C) automobile
D) airline
A) restaurant
B) soft-drink
C) automobile
D) airline
answer
A) restaurant
question
The wedding dress industry is monopolistically competitive. As a result:
A) thousands of dress suppliers all sell identical products.
B) dresses tend to be differentiated among the many sellers serving this market.
C) it has freedom of entry but not exit.
D) prices tend to be lower than if the dress industry approximated perfect competition
A) thousands of dress suppliers all sell identical products.
B) dresses tend to be differentiated among the many sellers serving this market.
C) it has freedom of entry but not exit.
D) prices tend to be lower than if the dress industry approximated perfect competition
answer
B) dresses tend to be differentiated among the many sellers serving this market.
question
For the monopolistically competitive wild-caught seafood market, the demand curve for
any individual firm is _____, and there are _____ producers of seafood.
A) downward-sloping; few
B) upward-sloping; many
C) vertical; few
D) downward-sloping; many
any individual firm is _____, and there are _____ producers of seafood.
A) downward-sloping; few
B) upward-sloping; many
C) vertical; few
D) downward-sloping; many
answer
D) downward-sloping; many
question
The downward-sloping demand curve for a monopolistically competitive firm:
A) reflects product differentiation.
B) eventually will become perfectly elastic as more firms enter.
C) indicates collusion among firms in the industry.
D) ensures that the firm will produce at minimum average cost in the long run
A) reflects product differentiation.
B) eventually will become perfectly elastic as more firms enter.
C) indicates collusion among firms in the industry.
D) ensures that the firm will produce at minimum average cost in the long run
answer
A) reflects product differentiation.
question
Because most communities have a large number of similar but not identical substitutes,
the market for chiropractors is best considered to be:
A) an oligopoly.
B) perfect competition.
C) monopolistically competitive.
D) a monopoly.
the market for chiropractors is best considered to be:
A) an oligopoly.
B) perfect competition.
C) monopolistically competitive.
D) a monopoly.
answer
C) monopolistically competitive.
question
Which of the following is NOT a characteristic of monopolistic competition?
A) product differentiation
B) lack of barriers to entry and exit in the long run
C) many competing producers
D) tacit collusion
A) product differentiation
B) lack of barriers to entry and exit in the long run
C) many competing producers
D) tacit collusion
answer
D) tacit collusion
question
A common example of monopolistic competition is the market for:
A) oranges.
B) 1-inch nails.
C) automobiles.
D) gas stations.
A) oranges.
B) 1-inch nails.
C) automobiles.
D) gas stations.
answer
D) gas stations.
question
The sources of product differentiation do NOT include:
A) differences in location.
B) differences in quality.
C) the perception by consumers that products are different, even if they are physically
identical.
D) consumers' value in uniformity
A) differences in location.
B) differences in quality.
C) the perception by consumers that products are different, even if they are physically
identical.
D) consumers' value in uniformity
answer
D) consumers' value in uniformity
question
The demand curve for a firm in monopolistic competition is _____ facing a perfectly
competitive firm.
A) downward-sloping, unlike the horizontal demand curve
B) horizontal, unlike the downward-sloping demand curve
C) horizontal, the same as that
D) downward-sloping, the same as that
competitive firm.
A) downward-sloping, unlike the horizontal demand curve
B) horizontal, unlike the downward-sloping demand curve
C) horizontal, the same as that
D) downward-sloping, the same as that
answer
A) downward-sloping, unlike the horizontal demand curve
question
If a monopolistically competitive firm is producing the profit-maximizing level of
output and is earning an economic profit in the short run:
A) price is less than average total costs.
B) price is less than marginal cost.
C) marginal revenue is less than marginal cost.
D) marginal revenue equals marginal cost.
output and is earning an economic profit in the short run:
A) price is less than average total costs.
B) price is less than marginal cost.
C) marginal revenue is less than marginal cost.
D) marginal revenue equals marginal cost.
answer
D) marginal revenue equals marginal cost.
question
(Figure: Monopolistic Competitor) If the firm shown in the figure Monopolistic
Competitor maximizes its returns, it will:
A) earn a positive economic profit.
B) break even.
C) incur a loss.
D) incur a loss equal to its MR.
Competitor maximizes its returns, it will:
A) earn a positive economic profit.
B) break even.
C) incur a loss.
D) incur a loss equal to its MR.
answer
A) earn a positive economic profit.
question
In the long run, monopolistic competitors will:
A) earn zero economic profits.
B) produce at the minimum of their ATC curves.
C) set price where MC = MR.
D) collude with other firms.
A) earn zero economic profits.
B) produce at the minimum of their ATC curves.
C) set price where MC = MR.
D) collude with other firms.
answer
A) earn zero economic profits.
question
(Figure: Monopolistic Competitor) If the firm shown in the figure Monopolistic
Competitor produces at its profit-maximizing level, it will produce:
A) with excess capacity, since its P is greater than MC.
B) without excess capacity, since P is greater than ATC.
C) with excess capacity, since that output level is on the downward-sloping portion of
the ATC curve.
D) without excess capacity, since that output level is on the downward-sloping portion
of the MR curve.
Competitor produces at its profit-maximizing level, it will produce:
A) with excess capacity, since its P is greater than MC.
B) without excess capacity, since P is greater than ATC.
C) with excess capacity, since that output level is on the downward-sloping portion of
the ATC curve.
D) without excess capacity, since that output level is on the downward-sloping portion
of the MR curve.
answer
C) with excess capacity, since that output level is on the downward-sloping portion of
the ATC curve.
the ATC curve.
question
(Figure: Monopolistic Competition VI) The figure Monopolistic Competition VI
illustrates a firm in the _____; in the _____, the demand and marginal revenue curves
will shift to the _____.
A) short run; long run; right
B) long run; short run; left
C) short run; long run; left
D) long run; short run; right
illustrates a firm in the _____; in the _____, the demand and marginal revenue curves
will shift to the _____.
A) short run; long run; right
B) long run; short run; left
C) short run; long run; left
D) long run; short run; right
answer
A) short run; long run; right
question
(Figure: Monopolistic Competition VI) In the figure Monopolistic Competition VI, in
the long run firms will:
A) enter this market until all firms earn a zero economic profit.
B) exit this market until all remaining firms earn a zero economic profit.
C) enter this market, leading to excess profit for all of the firms.
D) exit this market, leading to excess profit for all of the remaining firms.
the long run firms will:
A) enter this market until all firms earn a zero economic profit.
B) exit this market until all remaining firms earn a zero economic profit.
C) enter this market, leading to excess profit for all of the firms.
D) exit this market, leading to excess profit for all of the remaining firms.
answer
B) exit this market until all remaining firms earn a zero economic profit.
question
In long-run equilibrium, a firm in monopolistic competition is similar to a monopoly
because it:
A) earns no economic profit.
B) charges a price equal to marginal cost.
C) charges a price greater than marginal cost.
D) charges a price equal to average total cost.
because it:
A) earns no economic profit.
B) charges a price equal to marginal cost.
C) charges a price greater than marginal cost.
D) charges a price equal to average total cost.
answer
C) charges a price greater than marginal cost.
question
Which of the following is TRUE of firms in both perfect competition and monopolistic
competition?
A) The long-run price is equal to marginal revenue, marginal cost, and average total
cost.
B) Long-run economic profits are equal to zero.
C) The long-run level of output is at the point where average total cost is minimized.
D) Price is equal to marginal cost, ensuring that the efficient level of output is
produced.
competition?
A) The long-run price is equal to marginal revenue, marginal cost, and average total
cost.
B) Long-run economic profits are equal to zero.
C) The long-run level of output is at the point where average total cost is minimized.
D) Price is equal to marginal cost, ensuring that the efficient level of output is
produced.
answer
B) Long-run economic profits are equal to zero.
question
In long-run equilibrium in monopolistic competition:
A) price is greater than average total cost.
B) price is equal to average total cost at an output below where average total cost is
minimized.
C) price is equal to average total cost at its minimum.
D) price is equal to average total cost at an output above where average total cost is
minimized.
A) price is greater than average total cost.
B) price is equal to average total cost at an output below where average total cost is
minimized.
C) price is equal to average total cost at its minimum.
D) price is equal to average total cost at an output above where average total cost is
minimized.
answer
B) price is equal to average total cost at an output below where average total cost is
minimized.
minimized.
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