Question 1

In monopolistic competition, short-run positive economic profits of firms in the market will cause the market demand to expand.

Accepted Answer

A) True 
 B)False

Question 2

If an industry evolves from oligopoly to monopolistic competition, we would expect

Accepted Answer

A)  the four-firm concentration ratio to increase.
B)  the four-firm concentration ratio to decrease.
C)  the four-firm concentration ratio to remain the same.
D)  barriers to entry to strengthen.

Question 3

The entry of more firms into a monopolistically competitive market tends to increase the excess capacity of firms in the industry in the long run.

Accepted Answer

A) True 
 B)False

Question 4

Suppose some firms exit an industry characterized by monopolistic competition.We would expect the demand curve of a firm already in the industry to

Accepted Answer

A)  shift to the left.
B)  shift to the right.
C)  become less elastic.
D)  remain the same since entering firms serve other customers in the market.

Question 5

Under monopolistic competition, entry to the industry is

Accepted Answer

A)  completely free of barriers.
B)  more difficult than under pure competition but not nearly as difficult as under pure monopoly.
C)  more difficult than under pure monopoly.
D)  blocked.

Question 6

(Consider This)  In Wendyâ€™s 1987 commercial depicting a Soviet fashion show, one objective was to portray McDonaldâ€™s and Burger King products as

Accepted Answer

A)  all the same and not very appealing.
B)  produced inefficiently.
C)  unpredictable in terms of features and quality.
D)  only appealing to old women.

Question 7

Monopolistically competitive firms exist due to high barriers to entry.

Accepted Answer

A) True 
 B)False

Question 8

In monopolistic competition, easy industry entry and exit drives long-run profits of firms to zero.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements is not true for a monopolistically competitive industry?

Accepted Answer

A)  Firms tend to operate with excess capacity.
B)  Each firm faces a downward-sloping demand curve.
C)  These firms earn zero economic profits in the long run.
D)  Firms operate at the lowest point of their ATC curves in the long run.

Question 10

Which statement concerning monopolistic competition is false?

Accepted Answer

A)  Long-run equilibrium under monopolistic competition and pure competition both entail zero economic profits for firms.
B)  Monopolistic competition is likely to result in a greater variety of product brands than pure competition.
C)  The monopolistically competitive demand curve is more elastic than the demand curve facing a monopoly.
D)  Long-run equilibrium in monopolistic competition does not entail any economic inefficiency because of easy entry and exit.Topic: Product Variety

Question 11

In the short run, a profit-maximizing monopolistically competitive firm sets it price

Accepted Answer

A)  equal to marginal revenue.
B)  equal to marginal cost.
C)  above marginal cost.
D)  below marginal cost.

Question 12

We would expect the four-firm concentration ratio of the restaurant industry in a large metropolitan area to be about 0.80, or 80 percent, and higher.

Accepted Answer

A) True 
 B)False

Question 13

Monopolistically competitive firms have some control over the price of their products.

Accepted Answer

A) True 
 B)False

Question 14

If the representative firm in a monopolistically competitive industry has an optimal output where P < ATC, the industry will expand in the long run.

Accepted Answer

A) True 
 B)False

Question 15

Monopolistic competition entails a deadweight loss to society, even if the firms earn zero economic profits.

Accepted Answer

A) True 
 B)False

Question 16

If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes,

Accepted Answer

A)  the likelihood of realizing economic profits in the long run would be enhanced.
B)  individual firms would now be operating at outputs where their average total costs would be higher.
C)  the industry would more closely approximate pure competition.
D)  the likelihood of collusive pricing would increase.

Exam 13: Monopolistic Competition

If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes,

Correct Answer
verified

If the representative firm in a monopolistically competitive industry has an optimal output where P < ATC, the industry will expand in the long run.

Correct Answer
verified

Monopolistic competition entails a deadweight loss to society, even if the firms earn zero economic profits.

Correct Answer
verified

Suppose some firms exit an industry characterized by monopolistic competition.We would expect the demand curve of a firm already in the industry to

Correct Answer
verified

(Consider This) In Wendyâ€™s 1987 commercial depicting a Soviet fashion show, one objective was to portray McDonaldâ€™s and Burger King products as

Correct Answer
verified

Monopolistically competitive firms exist due to high barriers to entry.

Correct Answer
verified

In the short run, a profit-maximizing monopolistically competitive firm sets it price

Correct Answer
verified

If an industry evolves from oligopoly to monopolistic competition, we would expect

Correct Answer
verified

Which statement concerning monopolistic competition is false?

Correct Answer
verified

Under monopolistic competition, entry to the industry is

Correct Answer
verified

We would expect the four-firm concentration ratio of the restaurant industry in a large metropolitan area to be about 0.80, or 80 percent, and higher.

Correct Answer
verified

Which of the following statements is not true for a monopolistically competitive industry?

Correct Answer
verified

Monopolistically competitive firms have some control over the price of their products.

Correct Answer
verified

In monopolistic competition, easy industry entry and exit drives long-run profits of firms to zero.

Correct Answer
verified

The entry of more firms into a monopolistically competitive market tends to increase the excess capacity of firms in the industry in the long run.

Correct Answer
verified

In monopolistic competition, short-run positive economic profits of firms in the market will cause the market demand to expand.

Correct Answer
verified

Exam 13: Monopolistic Competition

If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes,

Correct AnswerverifiedShow Answer

If the representative firm in a monopolistically competitive industry has an optimal output where P < ATC, the industry will expand in the long run.

Correct AnswerverifiedShow Answer

Monopolistic competition entails a deadweight loss to society, even if the firms earn zero economic profits.

Correct AnswerverifiedShow Answer

Suppose some firms exit an industry characterized by monopolistic competition.We would expect the demand curve of a firm already in the industry to

Correct AnswerverifiedShow Answer

(Consider This) In Wendyâ€™s 1987 commercial depicting a Soviet fashion show, one objective was to portray McDonaldâ€™s and Burger King products as

Correct AnswerverifiedShow Answer

Monopolistically competitive firms exist due to high barriers to entry.

Correct AnswerverifiedShow Answer

In the short run, a profit-maximizing monopolistically competitive firm sets it price

Correct AnswerverifiedShow Answer

If an industry evolves from oligopoly to monopolistic competition, we would expect

Correct AnswerverifiedShow Answer

Which statement concerning monopolistic competition is false?

Correct AnswerverifiedShow Answer

Under monopolistic competition, entry to the industry is

Correct AnswerverifiedShow Answer

We would expect the four-firm concentration ratio of the restaurant industry in a large metropolitan area to be about 0.80, or 80 percent, and higher.

Correct AnswerverifiedShow Answer

Which of the following statements is not true for a monopolistically competitive industry?

Correct AnswerverifiedShow Answer

Monopolistically competitive firms have some control over the price of their products.

Correct AnswerverifiedShow Answer

In monopolistic competition, easy industry entry and exit drives long-run profits of firms to zero.

Correct AnswerverifiedShow Answer

The entry of more firms into a monopolistically competitive market tends to increase the excess capacity of firms in the industry in the long run.

Correct AnswerverifiedShow Answer

In monopolistic competition, short-run positive economic profits of firms in the market will cause the market demand to expand.

Correct AnswerverifiedShow Answer

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