Micro_lecture_9

What characterizes monopolistic competition?

• Few firms selling identical products

• Many firms selling differentiated products

• One firm dominating the market

• Perfectly elastic demand curve

In monopolistic competition, products are:

• Identical

• Homogeneous

• Differentiated

• Perfect substitutes

Which of the following is NOT a method of product differentiation?

• Unique physical features

• Location of sales

• Intangible promises

• Using perfect substitutes

What happens when a monopolistic competitor raises its price?

• All customers stop buying

• No customers stop buying

• Some customers switch to competitors

• The demand curve becomes perfectly elastic

Who independently developed the theory of imperfect competition?

• Adam Smith and David Ricardo

• Edward Chamberlin and Joan Robinson

• Alfred Marshall and John Keynes

• Paul Samuelson and Milton Friedman

What is the long-run outcome for monopolistic competition?

• Positive economic profits

• Negative economic profits

• Zero economic profits

• Monopoly-like profits

Why is monopolistic competition not productively efficient?

• It produces at a higher cost than necessary

• It charges less than marginal cost

• It has too few firms

• Its demand curve is perfectly elastic

What is one benefit of monopolistic competition?

• Higher prices for all goods

• A larger variety of products

• Zero competition

• Minimal advertising

How does advertising impact monopolistic competition?

• It always reduces profits

• It makes demand curves steeper or shifts them right

• It replaces product differentiation

• It creates perfect substitutes

What is a key characteristic of oligopoly?

• Large number of small firms

• Independent pricing decisions

• Few firms dominating the market

• Perfect competition