Question 1

Monopolistically competitive firms will achieve the most efficient allocation of society's resources because there are no significant barriers to entry into the industry.

Accepted Answer

A) True 
 B)False

Question 2

In the long run, the representative firm in monopolistic competition tends to have

Accepted Answer

A)  excess capacity.
B)  economic profits.
C)  no product differentiation.
D)  a perfectly elastic demand curve.

Question 3

Which statement concerning monopolistic competition is false?

Accepted Answer

A)  In the long run P = ATC > MC.
B)  Firms may experience losses in the short run.
C)  Firms differentiate their products, but the products are relatively substitutable.
D)  Firms may experience positive economic profits in the long run.

Question 4

In the long run, the price charged by the monopolistically competitive firm attempting to maximize profits

Accepted Answer

A)  must be less than ATC.
B)  must be more than ATC.
C)  may be either equal to ATC, less than ATC, or more than ATC.
D)  will be equal to ATC.

Question 5

Keely says that heâ€™s glad that his morning coffee is sold in a monopolistically competitive market rather than a purely competitive market.If this is true for most things Keely buys, it suggests that he

Accepted Answer

A)  is most concerned about paying the lowest price possible.
B)  cares most about allocative efficiency.
C)  is willing to pay extra for product variety.
D)  is a creature of habit who always buys the same type of a particular good.

Question 6

Monopolistically competitive firms are inefficient because they produce at a point on the rising segment of their average cost curves.

Accepted Answer

A) True 
 B)False

Question 7

Pure competition results in a lower price but identical output level compared to those in monopolistic competition.

Accepted Answer

A) True 
 B)False

Question 8

Monopolistically competitive and purely competitive industries are similar in that

Accepted Answer

A)  both are assured of short-run economic profits.
B)  both produce differentiated products.
C)  the demand curves facing individual firms are perfectly elastic in both industries.
D)  there are few, if any, barriers to entry.

Question 9

The long-run equilibrium position of the monopolistically competitive firm occurs at a point where average costs are

Accepted Answer

A)  constant.
B)  increasing.
C)  decreasing.
D)  at their minimum point.

Question 10

Which of the following is correct for a monopolistically competitive firm in long-run equilibrium?

Accepted Answer

A)  MC = ATC.
B)  MC exceeds MR.
C)  P exceeds minimum ATC.
D)  P = MC.

Question 11

The four-firm concentration ratio cannot have a value above 1.0.

Accepted Answer

A) True 
 B)False

Question 12

In which of these continuums of degrees of competition (highest to lowest)  is monopolistic competition properly placed?

Accepted Answer

A)  pure competition, oligopoly, pure monopoly, monopolistic competition
B)  oligopoly, pure competition, monopolistic competition, pure monopoly
C)  monopolistic competition, pure competition, pure monopoly, oligopoly
D)  pure competition, monopolistic competition, oligopoly, pure monopoly

Question 13

Communist central planners didnâ€™t care about product differentiation, opting instead for a uniform design of products in order to achieve

Accepted Answer

A)  higher prices and profits for their firms.
B)  mass production and lower costs.
C)  allocative efficiency in society.
D)  purely competitive markets.

Question 14

At long-run equilibrium in monopolistic competition, there is

Accepted Answer

A)  allocative efficiency but not productive efficiency.
B)  productive efficiency but not allocative efficiency.
C)  both allocative and productive efficiency.
D)  neither allocative nor productive efficiency.

Question 15

If some firms leave a monopolistically competitive industry, the demand curves of the remaining firms will

Accepted Answer

A)  be unaffected.
B)  shift to the left.
C)  become more elastic.
D)  shift to the right.

Question 16

Long-run profits of individual firms in monopolistic competition will be larger than their short-run profits.

Accepted Answer

A) True 
 B)False

Question 17

A significant difference between a monopolistically competitive firm and a purely competitive firm is that the

Accepted Answer

A)  former has fewer barriers to entry into the industry.
B)  latter recognizes that price must be reduced to sell more output.
C)  latterâ€™s demand curve is perfectly elastic.
D)  latter differentiates its product.Difficulty: 01 Easy

Question 18

Monopolistic competition is characterized by a

Accepted Answer

A)  few dominant firms and low entry barriers.
B)  large number of firms and substantial entry barriers.
C)  large number of firms and low entry barriers.
D)  few dominant firms and substantial entry barriers.

Question 19

(Last Word)  If the minimum wage in the restaurant industry increases over time, eventually we would expect

Accepted Answer

A)  the restaurant industry to expand as higher wages drive up demand.
B)  there to be fewer of all types of restaurants, but no change in the proportion of mom and pop restaurants relative to chain restaurants.
C)  the ratio of mom and pop restaurants to highly capitalized chain restaurants to increase.
D)  the ratio of highly capitalized chain restaurants to mom and pop restaurants to increase.

Question 20

Compared to pure competition, monopolistic competition

Accepted Answer

A)  provides greater product differentiation at the cost of lower productive efficiency.
B)  offers less product differentiation but attains a higher productive efficiency.
C)  provides greater product differentiation and achieves greater productive efficiency.
D)  offers less product differentiation and lower productive efficiency.

Exam 13: Monopolistic Competition

The four-firm concentration ratio cannot have a value above 1.0.

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Communist central planners didnâ€™t care about product differentiation, opting instead for a uniform design of products in order to achieve

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Monopolistic competition is characterized by a

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Monopolistically competitive firms will achieve the most efficient allocation of society's resources because there are no significant barriers to entry into the industry.

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Compared to pure competition, monopolistic competition

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Monopolistically competitive and purely competitive industries are similar in that

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At long-run equilibrium in monopolistic competition, there is

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In the long run, the representative firm in monopolistic competition tends to have

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Which statement concerning monopolistic competition is false?

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Monopolistically competitive firms are inefficient because they produce at a point on the rising segment of their average cost curves.

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Pure competition results in a lower price but identical output level compared to those in monopolistic competition.

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A significant difference between a monopolistically competitive firm and a purely competitive firm is that the

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In the long run, the price charged by the monopolistically competitive firm attempting to maximize profits

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The long-run equilibrium position of the monopolistically competitive firm occurs at a point where average costs are

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Long-run profits of individual firms in monopolistic competition will be larger than their short-run profits.

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If some firms leave a monopolistically competitive industry, the demand curves of the remaining firms will

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(Last Word) If the minimum wage in the restaurant industry increases over time, eventually we would expect

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Keely says that heâ€™s glad that his morning coffee is sold in a monopolistically competitive market rather than a purely competitive market.If this is true for most things Keely buys, it suggests that he

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Which of the following is correct for a monopolistically competitive firm in long-run equilibrium?

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In which of these continuums of degrees of competition (highest to lowest) is monopolistic competition properly placed?

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