Exam 12: Monopolistic Competition

A) negative; exit from
B) negative; entry into
C) positive; exit from
D) positive; entry into

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A) Lower output and charge a higher price.
B) Greater output and charge a higher price.
C) Lower output and charge a lower price.
D) Greater output and charge a lower price.

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A) A factory producing women's clothing produces more than it can sell during a season.
B) Gas stations with infrequently used pumps are located at all four corners of an intersection.
C) A retail auto tire store orders too much inventory.
D) Monopolistically competitive firms do not exist in the real world.

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B

A) Allocative efficiency.
B) Production efficiency.
C) The wrong mix of output.
D) Marginal cost pricing.

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A) A competitive market.
B) Monopolistic competition.
C) Oligopoly.
D) Monopoly.

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A) Productive efficiency.
B) Allocative efficiency.
C) Maximum economies of scale.
D) Neither productive nor allocative efficiency.

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A) More price-elastic.
B) Less price-elastic.
C) Unitary elastic.
D) More income-elastic.

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A) Firms are allowed to establish significant barriers to entry.
B) Firms are encouraged to produce less output.
C) Firms are required to set price equal to marginal cost.
D) Firms are required to charge the same price.

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A) A completely new process is used to produce a familiar product.
B) One firm produces many varieties of a product.
C) Buyers perceive differences in the products of several companies.
D) Sellers perceive differences in the products of several companies.

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A) Create similar menus to those of each other.
B) Expand their franchises.
C) Increase revenues to build new stores.
D) Differentiate their products to establish and maintain brand loyalty.

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A) More firms will enter the market.
B) The market supply curve will shift to the left.
C) Price will rise.
D) The market demand curve will shift to the right.

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A) Has more control over its price.
B) Has less control over its price.
C) Still has no control over its price because all firms are price takers.
D) Has total control over its price.

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A

A) Improve resource allocation efficiency.
B) Decrease the price elasticity of demand for the product.
C) Become a valuable economic asset.
D) Increase demand for the product.

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A) Inefficiency and productive efficiency.
B) Inefficiency and productive inefficiency.
C) Efficiency and productive efficiency.
D) Efficiency and productive inefficiency.

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A) Resource misallocation.
B) Low entry barriers.
C) Marginal cost pricing.
D) Production efficiency.

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A

A) Losing sales to its competitors and therefore needed higher prices to maintain revenue.
B) Relying on the economy to improve in order to offset the loss in sales as a result of the price hikes.
C) Relying on brand loyalty to prevent a significant loss in sales.
D) Relying on very elastic demand.

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A) Many interdependent firms sell a homogeneous product.
B) A few firms produce a particular type of product.
C) Many firms produce a particular type of product, but each maintains some independent control over its own price.
D) A few firms produce all of the market supply of a good.

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