Monopolistic 1

Which of the following is true about a monopolistically competitive firm?

• It can earn an economic profit in the short run, but not the long run.

• It can earn an economic profit in the short run and the long run.

• It can earn an economic profit in the long run, but not the short run.

• It cannot earn a economic profit in either the short or long run.

Which of the following statements is not correct?

• Monopolistic competition is different from monopoly because monopolistic competition is characterized by free entry, whereas monopoly is characterized by barriers to entry.

• Both monopolistic competition and oligopoly fall in between the more extreme market structures of competition and monopoly.

• Monopolistic competition is different from oligopoly because each seller in monopolistic competition is small relative to the market, whereas each seller can affect the actions of other sellers in an oligopoly.

• Both monopolistic competition and perfect competition are characterized by product differentiation.

A market structure with only a few sellers, each offering similar or identical products, is known as

• oligopoly.

• monopoly.

• monopolistic competition.

• perfect competition.

The breakfast cereal industry, with its concentration ratio of 80%, would best be described as

• a perfectly competitive market.

• a monopolistically competitive market.

• an oligopoly.

• a monopoly.

Which of the following is unique to a monopolistically competitive firm when compared to an oligopoly?

• The monopolistically competitive firm advertises

• The monopolistically competitive firm produces a quantity of output that falls short of the socially optimal level.

• Monopolistic competition features many buyers.

• Monopolistic competition features many sellers.

Which of the following statements is correct?

• Monopolistic competition is similar to monopoly because both market structures are characterized by firms being price makers rather than price takers.

• Monopolistic competition is similar to perfect competition because both market structures are characterized by differentiated products.

• Monopolistic competition is similar to oligopoly because both market structures are characterized by strategic interaction between firms in the market.

• Monopolistic competition is similar to perfect competition because both market structures are characterized by perfectly elastic demand curves facing each firm.

A similarity between monopoly and monopolistic competition is that in both market structures

• there are a small number of sellers.

• strategic interactions among sellers are not important.

• each firm faces a downward-sloping demand curve.

• firms can earn positive profit in the long run.

For a monopolistically competitive firm,

• marginal revenue and price are the same.

• at the profit-maximizing quantity of output, marginal revenue equals marginal cost.at the profit-maximizing quantity of output, price equals marginal cost.

• at the profit-maximizing quantity of output, price equals marginal cost.

• at the profit-maximizing quantity of output, price equals the minimum of average total cost.

In the short run, a firm in a monopolistically competitive market operates much like a

• firm in a perfectly competitive market.

• firm in an oligopoly.

• monopolist.

• nonprofit firm.

A monopolistically competitive firm chooses

• the quantity of output to produce, but all firms in the market agree upon a single price.

• the price, but competition in the market determines the quantity

• the price, but output is determined by a cartel production quota.

• the quantity of output to produce, but the price of its output is determined by demand.