Monopolistic Competition

What are the extreme ends of the range of market structures?

• Oligopoly and Monopoly
• Perfect competition and Monopoly
• Perfect competition and Oligopoly
• Monopolistic competition and Oligopoly

Why is competition considered imperfect in most industries?

• Because there is only one firm in each industry.
• Because firms sell identical products.
• Because firms sell non-identical products.
• Because there are no barriers to entry.

Who developed the model of monopolistic competition?

• Edward Chamberlain
• Joan Robinson
• Both Edward Chamberlain and Joan Robinson
• Adam Smith

What is a key assumption of monopolistic competition?

• Large number of buyers and sellers
• No barriers to entry or exit
• Firms maximizing profits in the short run
• Firms produce differentiated or non-homogeneous goods

Which industries might be examples of monopolistic competition?

• Automotive and technology
• Hotels, furniture, and restaurants
• Pharmaceuticals and healthcare
• Agriculture and mining

Why does Leo's bakery, operating in a monopolistic competition market, have market power?

• Because it bakes identical cakes as Oliver's bakery.

• Because it is a price taker in the market.

• Because it bakes non-homogeneous cakes that are different from Isabelle's bakery.

• Because it has a monopoly on cake supply.

Thomas owns a small coffee shop in a town where there are many other coffee shops, each with their own unique blends and flavors. What is the likely characteristic of the demand curve for Thomas's coffee shop, which is in monopolistic competition?

• Perfectly elastic

• Downward sloping and elastic

• Upward sloping

• Constant

In the short-run equilibrium of a monopolistically competitive firm, what condition will it satisfy to maximise profit?

• AC = MC
• MC = MR
• AR = AC
• P = AR

In long-run equilibrium in monopolistic competition, what happens if a firm is making supernormal profit in the short-run?

• More firms enter the industry, reducing demand.
• Firms leave the industry, increasing demand.
• Nothing changes; abnormal profits continue.
• Firms leave the industry, reducing demand.

What conditions must be met in long-run equilibrium in monopolistic competition?

• AC = MC and AR = AC
• AC = AR and MC = MR

• MC = MR and AR = MR
• AC = AR and P = MR