Question 1

Why does a firm in monopolistic competition face a downward-sloping demand curve?

Accepted Answer

Because the firm's product is

Question 2

Firms gain control over price in monopolistic competition by differentiating their products.

Accepted Answer

A) True 
 B)False

Question 3

As new firms enter an industry,the existing firms will decrease their output.

Accepted Answer

A) True 
 B)False

Question 4

Assume that there is only one firm producing electric toothbrushes and the firm's demand curve is the same as the market demand curve.If a second firm that also produces electric toothbrushes enters the market,the profit of the first firm decreases because

Accepted Answer

A)  the competition between the two firms causes the price to go down. 
B)  it produces less electric toothbrushes. 
C)  its average cost of production rises due to higher demand. 
D)  Both A and B are correct. 
A)  the competition between the two firms causes the price to go down. 
B)  it produces less electric toothbrushes. 
C)  its average cost of production rises due to higher demand. 
D)  Both A and B are correct.

Question 5

What happens in the long run if firms in a monopolistically competitive industry are earning positive economic profits? Explain.

Accepted Answer

If firms in a monopolistically competiti

Question 6

If there is free entry in a market,then in the long-run economic profit will be above average.

Accepted Answer

A) True 
 B)False

Question 7

Under a monopolistically competitive market structure,firms will continue to enter the market until the economic profit is eliminated.

Accepted Answer

A) True 
 B)False

Question 8

Under monopolistic competition,the typical firm maximizes profit at the point where marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 9

When a profit-maximizing firm in monopolistic competition is in long-run equilibrium,

Accepted Answer

A)  the demand curve it faces will be perfectly elastic. 
B)  its marginal cost will be falling. 
C)  its price will be greater than its marginal cost. 
D)  its marginal revenue will be greater than its marginal cost. 
A)  the demand curve it faces will be perfectly elastic. 
B)  its marginal cost will be falling. 
C)  its price will be greater than its marginal cost. 
D)  its marginal revenue will be greater than its marginal cost.

Question 10

Assume that the Indian restaurant industry is monopolistically competitive in London.Garam Masala,an Indian restaurant near Piccadilly Circus,lowers its prices by 10%,but all the other Indian restaurants in London keep their prices unchanged.Which of the following is most likely to occur?

Accepted Answer

A)  All other Indian restaurants will not be able to sell any food since none of them lowered their prices. 
B)  Garam Masala will lose some of its customers. 
C)  Garam Masala's profits will definitely increase. 
D)  The number of customers served by Garam Masala will increase. 
A)  All other Indian restaurants will not be able to sell any food since none of them lowered their prices. 
B)  Garam Masala will lose some of its customers. 
C)  Garam Masala's profits will definitely increase. 
D)  The number of customers served by Garam Masala will increase.

Question 11

List four ways in which product differentiation can be achieved.

Accepted Answer

(1) Physical charact

Question 12

Which of the following statements is true?

Accepted Answer

A)  An assumption of monopolistic competition is that firms can differentiate their products. 
B)  An assumption of perfect competition is that firms can differentiate their products. 
C)  Monopolistic competition is not subject to free entry and exit. 
D)  An assumption of monopolistic competition is that there are only a few large firms in the industry. 
A)  An assumption of monopolistic competition is that firms can differentiate their products. 
B)  An assumption of perfect competition is that firms can differentiate their products. 
C)  Monopolistic competition is not subject to free entry and exit. 
D)  An assumption of monopolistic competition is that there are only a few large firms in the industry.

Question 13

-In the long run,the monopolistically competitive firm in Figure 11.3 would produce ________ units and charge ________ per unit.

Accepted Answer

A)  7; $50 
B)  10; $48 
C)  11; $48 
D)  10; $45 
A)  7; $50 
B)  10; $48 
C)  11; $48 
D)  10; $45

Question 14

When a profit-maximizing firm in monopolistic competition is producing its long-run equilibrium quantity,

Accepted Answer

A)  it will be earning economic profit. 
B)  its marginal revenue will exceed its marginal cost. 
C)  its price will equal its marginal cost. 
D)  its price will be equal to its average total cost. 
A)  it will be earning economic profit. 
B)  its marginal revenue will exceed its marginal cost. 
C)  its price will equal its marginal cost. 
D)  its price will be equal to its average total cost.

Question 15

As new firms enter an industry,the demand curve facing each existing firm will shift to the right.

Accepted Answer

A) True 
 B)False

Question 16

There are patents and regulations that can prevent firms from entering a monopolistically competitive market.

Accepted Answer

A) True 
 B)False

Question 17

In monopolistic competition,the presence of free entry suggests that

Accepted Answer

A)  some firms will earn economic profits in the long run. 
B)  some firms will be forced to incur losses in the long run. 
C)  all firms will earn zero economic profit in the long run. 
D)  all firms will earn zero economic profit in both the short run and the long run. 
A)  some firms will earn economic profits in the long run. 
B)  some firms will be forced to incur losses in the long run. 
C)  all firms will earn zero economic profit in the long run. 
D)  all firms will earn zero economic profit in both the short run and the long run.

Question 18

Monopolistically competitive firms can use advertising

Accepted Answer

A)  to lower economies of scale. 
B)  to collude against other firms. 
C)  to inform consumers about the features of their products. 
D)  to increase the price charged for their products. 
A)  to lower economies of scale. 
B)  to collude against other firms. 
C)  to inform consumers about the features of their products. 
D)  to increase the price charged for their products.

Question 19

In the short run,a firm in monopolistic competition operates much like a

Accepted Answer

A)  monopolist. 
B)  firm in perfect competition. 
C)  price taker. 
D)  all of the above 
A)  monopolist. 
B)  firm in perfect competition. 
C)  price taker. 
D)  all of the above

Question 20

As a result of product differentiation,a firm in a monopolistically competitive market

Accepted Answer

A)  always has some market power. 
B)  is very similar to a firm in a perfectly competitive market. 
C)  faces a perfectly elastic demand curve. 
D)  is very similar to a monopolist. 
A)  always has some market power. 
B)  is very similar to a firm in a perfectly competitive market. 
C)  faces a perfectly elastic demand curve. 
D)  is very similar to a monopolist.

Why does a firm in monopolistic competition face a downward-sloping demand curve?

Firms gain control over price in monopolistic competition by differentiating their products.

As new firms enter an industry,the existing firms will decrease their output.

Assume that there is only one firm producing electric toothbrushes and the firm's demand curve is the same as the market demand curve.If a second firm that also produces electric toothbrushes enters the market,the profit of the first firm decreases because

What happens in the long run if firms in a monopolistically competitive industry are earning positive economic profits? Explain.

If there is free entry in a market,then in the long-run economic profit will be above average.

Under a monopolistically competitive market structure,firms will continue to enter the market until the economic profit is eliminated.

Under monopolistic competition,the typical firm maximizes profit at the point where marginal revenue equals marginal cost.

When a profit-maximizing firm in monopolistic competition is in long-run equilibrium,

Assume that the Indian restaurant industry is monopolistically competitive in London.Garam Masala,an Indian restaurant near Piccadilly Circus,lowers its prices by 10%,but all the other Indian restaurants in London keep their prices unchanged.Which of the following is most likely to occur?

List four ways in which product differentiation can be achieved.

Which of the following statements is true?

-In the long run,the monopolistically competitive firm in Figure 11.3 would produce units and charge per unit.

When a profit-maximizing firm in monopolistic competition is producing its long-run equilibrium quantity,

As new firms enter an industry,the demand curve facing each existing firm will shift to the right.

There are patents and regulations that can prevent firms from entering a monopolistically competitive market.

In monopolistic competition,the presence of free entry suggests that

Monopolistically competitive firms can use advertising

In the short run,a firm in monopolistic competition operates much like a

As a result of product differentiation,a firm in a monopolistically competitive market

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand,supply,and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters

Exam 11: Market Entry and Monopolistic Competition

Why does a firm in monopolistic competition face a downward-sloping demand curve?

Firms gain control over price in monopolistic competition by differentiating their products.

As new firms enter an industry,the existing firms will decrease their output.

Assume that there is only one firm producing electric toothbrushes and the firm's demand curve is the same as the market demand curve.If a second firm that also produces electric toothbrushes enters the market,the profit of the first firm decreases because

What happens in the long run if firms in a monopolistically competitive industry are earning positive economic profits? Explain.

If there is free entry in a market,then in the long-run economic profit will be above average.

Under a monopolistically competitive market structure,firms will continue to enter the market until the economic profit is eliminated.

Under monopolistic competition,the typical firm maximizes profit at the point where marginal revenue equals marginal cost.

When a profit-maximizing firm in monopolistic competition is in long-run equilibrium,

Assume that the Indian restaurant industry is monopolistically competitive in London.Garam Masala,an Indian restaurant near Piccadilly Circus,lowers its prices by 10%,but all the other Indian restaurants in London keep their prices unchanged.Which of the following is most likely to occur?

List four ways in which product differentiation can be achieved.

Which of the following statements is true?

-In the long run,the monopolistically competitive firm in Figure 11.3 would produce ________ units and charge ________ per unit.

When a profit-maximizing firm in monopolistic competition is producing its long-run equilibrium quantity,

As new firms enter an industry,the demand curve facing each existing firm will shift to the right.

There are patents and regulations that can prevent firms from entering a monopolistically competitive market.

In monopolistic competition,the presence of free entry suggests that

Monopolistically competitive firms can use advertising

In the short run,a firm in monopolistic competition operates much like a

As a result of product differentiation,a firm in a monopolistically competitive market

Introduction: What Is Economics

The Key Principles of Economics

Exchange and Markets

Demand,supply,and Market Equilibrium

Elasticity: a Measure of Responsiveness

Market Efficiency and Government Intervention

Consumer Choice: Utility Theory and Insights From Neuroscience

Production Technology and Cost

Perfect Competition

Monopoly and Price Discrimination

Oligopoly and Strategic Behavior

Controlling Market Power: Antitrust and Regulation

Imperfect Information: Adverse Selection and Moral Hazard

Public Goods and Public Choice

External Costs and Environmental Policy

The Labor Market and the Distribution of Income

International Trade and Public Policy

Filters

-In the long run,the monopolistically competitive firm in Figure 11.3 would produce units and charge per unit.