A monopolistically competitive market is characterized by
a. a single seller of a unique product that has few or no substitutes.
b. very high barriers to entry.
c. many small sellers selling a differentiated product.
d. a few firms producing either differentiated or identical products cor...
Final Exam Econ 231-02 || A+ Guaranteed.
A monopolistically competitive market is characterized by
a. a single seller of a unique product that has few or no substitutes.
b. very high barriers to entry.
c. many small sellers selling a differentiated product.
d. a few firms producing either differentiated or identical products correct answers c. many
small sellers selling a differentiated product.
Which of the following is the best example of a monopolistically competitive market?
a. retail clothing stores
b. corn
c. electric utilities
d. wheat correct answers a. retail clothing stores
. The movie You've Got Mail features a successful small bookstore competing with a new book
superstore around the block. The big superstore offers deep discounts, while the small
independent bookstore has better service and a more knowledgeable staff. The movie best
illustrates which of the following?
a. Homogeneous products are produced by both firms because consumers perceive books from
either store as the same.
b. Product differentiation occurs because consumers perceive the bookstores as different.
c. Monopoly production occurs because the movie is copyrighted.
d. Perfect competition occurs because many movie theaters are showing identical movies. correct
answers b. Product differentiation occurs because consumers perceive the bookstores as
different.
A convenience store is generally able to charge and obtain a higher price for its candy bars than
Walmart because the convenience store
a. differentiates based on quality.
b. advertises that its candy bars are identical to those sold at Walmart.
c. differentiates based on location.
d. differentiates based on style. correct answers c. differentiates based on location.
Which of the following market structures describes an industry in which all firms produce
differentiated output and there are few barriers to entry?
a. a cartel
b. perfect competition
c. oligopoly
d. monopolistic competition correct answers d. monopolistic competition
The descriptor "monopolistic" in the term "monopolistic competition" best describes
a. production of a unique product.
b. high barriers to entry.
c. product differentiation resulting in a downward-sloping demand curve for the firm's product.
, d. a few small firms. correct answers c. product differentiation resulting in a downward-sloping
demand curve for the firm's product.
If monopolistically competitive firms are incurring losses, existing firms would
a. leave the industry
b. reduce their costs.
c. begin to collude illegally.
d. charge higher prices. correct answers a. leave the industry
Monopolistically competitive firms
a. "compete away" economic profit to zero.
b. follow the price leader.
c. eventually become perfectly competitive.
d. necessarily earn short-run economic profits. correct answers a. "compete away" economic
profit to zero.
The theory of monopolistic competition predicts that, in long-run equilibrium, a monopolistically
competitive firm will
a. produce the output at which short-run average total cost equals marginal cost.
b. produce the output level at which price equals long-run marginal cost.
c. produce the output level at which price equals long-run average cost.
d. operate at minimum long-run average cost. correct answers c. produce the output level at
which price equals long-run average cost.
Both competitive and monopolistically competitive firms
a. can enforce price arrangements vigorously in court.
b. sell products that are identical.
c. can maximize profit by raising price.
d. can maximize profit by producing to the point where marginal cost equals marginal revenue.
correct answers d. can maximize profit by producing to the point where marginal cost equals
marginal revenue.
The marginal revenue of a monopolistically competitive firm will always be
a. more than the price.
b. the same as the price.
c. less than the price.
d. identical to the average total cost curve. correct answers c. less than the price.
As new firms enter a monopolistically competitive industry, it can be expected that
a. the output of existing firms will rise.
b. the profits of existing firms will rise.
c. profits of existing firms will fall.
d. market price will rise. correct answers c. profits of existing firms will fall.
You operate a monopolistically competitive firm and you notice that your company is making an
economic profit. Which of the following is most likely to happen?
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