Quiz - Monopolistic Competition & Oligopoly

Monopolistic competition means _____

• a few firms producing standardised goods.

• many firms producing standardised goods.

• a few firms producing differentiated goods.

• many firms producing differentiated goods.

Monopolistic competition is a market structure characterized by _____

• a single buyer and several sellers.

• a product with no close substitutes.

• a downward-sloping demand curve.

• a small number of large firms.

In a monopolistic competitive market, there will be _____

• a single product and price.

• a product group and a range of prices.

• a product group and a single price.

• None of the above.

Ahmad is about to start-up a business in a monopolistic competitive market. He can expect to find entry into the market to be _____, the number of competitors to be _____ and the product he sells to be _____.

• easy, very large, non-differentiated

• easy, large; differentiated

• difficult; very large; differentiated

• easy: relatively few; non-differentiated

The demand curve for a firm in a monopolistic competitive market is _____

• perfectly elastic.

• perfectly inelastic.

• same as the industry demand curve.

• None of the above.

The marginal revenue for a firm under monopolistic competition is _____

• equal to price.

• less than average revenue.

• greater than price.

• equal to average revenue.

The monopolistic competition equilibrium is represented by the equation _____

• MR>MC

• MR<MC

• MR=MC

• MR = AR

The products produced in a monopolistic competition are complementary goods.

• True

• False

In the long run, a firm in a monopolistic competition market earns only normal profits. The firm will continuously _____, in order to earn supernormal profit.

• shut down

• exit the industry

• encourage new entrants

• develop new products which differ from rivals

When monopolistic competitive firms earn _____ profits, other firms _____ the industry in the long run.

• supernormal; exit

• subnormal; enter

• subnormal; exit

• normal; enter