Monopolistic Competition Quiz

Which of the following best describes monopolistic competition?

• One seller, unique product

• Few sellers, identical products

• Many sellers, identical products

• Many sellers, differentiated products

In monopolistic competition, firms sell:

• Perfect substitutes

• Homogeneous goods

• Differentiated products

• Public goods

A major feature of monopolistic competition is:

• High barriers to entry

• Government price setting

• Product differentiation

• Price-taking behavior

In the short run, a monopolistically competitive firm behaves like:

• A perfectly competitive firm

• A monopoly

• A price taker

• A government-regulated firm

In the long run, the monopolistically competitive firm earns:

• Positive economic profit

• Zero economic profit

• Negative economic profit

• Constant marginal cost

Why does economic profit fall to zero in the long run?

• Government taxation

• Rising marginal costs

• Entry of new firms

• Falling consumer demand

The demand curve for a monopolistically competitive firm is:

• Horizontal

• Vertical

• Perfectly elastic

• Downward sloping

The long-run equilibrium for a monopolistically competitive firm occurs when:

• Price = marginal cost

• Marginal revenue = marginal cost

• Price = average variable cost

• Price = marginal revenue

Which of the following industries is most likely monopolistically competitive?

• Wheat farming

• Smartphone apps

• Electricity distribution

• Oil refining

Which of the following is not a characteristic of monopolistic competition?

• Many sellers

• Free entry and exit

• Identical products

• Some market power