Under monopolistic competition entry to the industry is:
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More difficult than under pure competition but not nearly as difficult as under pure monopoly
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Monopolistic competition resembles pure competition because:
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barriers to entry are neither weak or nonexistent.
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List characteristics of monopolistic competition?
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The use of trademarks and brand names
Product differentiation
A relatively large number of sellers
Relatively easy entry to the industry
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Nonprice competition refers to:
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Advertising, product promotion, and changes in the real or perceived characteristics of a product.
Product development, advertising, and product packaging.
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The book publishing, furniture, and clothing industries are each illustrations of:
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Monopolistic competition
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If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes:
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the industry would more closely approximate pure competition
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Economic analysis of monopolistically competitive industry is more complicated than that of pure competition because:
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of product differentiation and consequent product promotion activities.
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A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from:
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product differentiation
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A significant difference between a monopolistically competitive firm and a purely competitive firm is that the:
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former sells similar, although not identical, products.
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A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from:
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a relatively large number of firms and the monopolistic element from product differentiation.
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Monopolistically competitive and purely competitive industries are similar in that:
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there are few, if any, barriers to entry.
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The monopolistic competition model predicts that:
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firms will engage in nonprice competition.
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Which company most closely approximates a monopolistic competitor?
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Subway Sandwiches
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A monopolistically competitive firm has a:
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highly elastic demand curve
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The monopolistically competitive seller's demand curve will become more elastic the:
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larger the number of competitiors
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The larger the number of firms and the smaller the degree of product differentiation the:
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More elastic is the monopolistically competitive firm's demand curve
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The demand curve of a monopolistically competitive producer is:
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more elastic than that of a pure monopolist, but less elastic than that of a pure competitor.
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A monopolistically competitive firm's marginal revenue curve:
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is downsloping and lies below the demand curve.
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In comparing the demand curve of a pure monopolist with that of a monopolistically competitive firm, we would expect the monopolistic competitor to have a:
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generally more elastic demand curve.
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The price elasticity of monopolistically competitive firm's demand curve varies:
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directly with the number of competitors, but inversely with the degree of product differentiation.
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In short-run equilibrium, a monopolistically competitive firm set its price:
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above marginal cost.
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In long-run equilibrium, a monopolistically competitive firm sets its price:
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above marginal cost
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In short-run equilibrium, the price charged by the monopolistically competitive firm:
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may be either equal to ATC, less than ATC, or more than ATC
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In long-run equilibrium, the price changed by the monopolistically competitive firm:
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will be equal to ATC
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Monopolistically competitive firms:
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may realize either profits or losses in the short run, but realize normal profits in the long run.
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The monopolistically competitive seller maximizes profit by producing at the point where:
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Marginal revenue equals marginal cost.
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In long-run equilibrium a monopolistically competitive firm's price will:
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exceed MC, but equal ATC
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Which of the following is correct for a monopolistically competitive firm in long-run equilibrium?
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P exceeds minimum ATC
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In long-run equilibrium a monopolistically competitive firm will:
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have excess production capacity.
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Excess capacity refers to the:
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amount by which actual production falls short of the minimum ATC output.
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In the short run a monopolistically competitive firm's economic profit:
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may be positive, zero, or negative.
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When a monopolistically competitive firm is in long-run equilibrium:
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marginal revenue equals marginal cost and price equals average total cost.
MR=MC & P> minimum ATC
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In the long run,new firms will enter a monopolistically competitive industry:
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until economic profits are zero.
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If some firms leave a monopolistically competitive industry, the demand curves of the remaining firms will:
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shift to the right
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Other things equal, if more firms enter a monopolistically competitive industry:
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the demand cures facing existing firms would shift to the left.
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Which of the following statement is correct?
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In the long run purely competitive firms and monopolistically competitive firms earn zero economic profits, while pure monopolies may or may not earn economic profits.
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For a monopolistically competitive firm in long-run equilibrium:
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Price will equal average total cost
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In long-run equilibrium both purely competitive and monopolistically competitive firms will:
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equate marginal cost and marginal revenue.
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In long-run equilibrium monopolistic competition entails:
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an underallocation of resources
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Which of the following statements concerning a monopolistically competitive industry is correct?
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If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms will shift to the right.
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In the long run a monopolistically competitive firm:
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produces where P=ATC
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Monopolistically competitive industries are inefficient because:
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monopolistically competitive industries are overpopulated with firms whose plants are underutilized.
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The economic inefficiencies of monopolistic competition may be offset by the fact that:
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consumers have a number of variations of the product from which to choose.
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Inefficiencies occur under monopolistic competition because:
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each firm's downsloping demand curve is tangent to the ATC curve in the long run.
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A significant benefit of monopolistic competition compared with pure competition is:
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greater product variety.
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Product variety is likely to be greater in:
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monopolistic competition that in pure competition.
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Which of the following is correct?
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The greater the degree o product variation, the greater is the excess capacity problem.
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In monopolistically competitive markets resources are:
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underallocated because long-run equilibrium occurs where price exceeds marginal cost.
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In long-run equilibrium a monopolistically competitive producer achieves:
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neither productive efficiency nor allocative efficiency.
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The less elastic a monopolistic competitor's long-run demand curve, the:
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greater its excess capacity.
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The more elastic monopolistic competitor's long-run demand curve, the:
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lower its average total cost at its equilibrium level of output.
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In which of these continuums of degrees of competition (highest to lowest) is oligopoly properly placed?
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Pure competition, monopolistic competition, oligopoly, pure monopoly
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The term oligopoly indicates:
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A few firms producing either a differentiated or homogeneous product.
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In an oligopolistic market:
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Products may be standardized or differentiated.
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Oligopolistic industries are characterized by:
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a few dominant firms and substantial entry barriers.
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The automobile, household appliance, and automobile tire industries are all illustrations of:
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differentiated oligopoly
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Which of the following companies most closely approximates a differentiated oligopolist in a highly concentrated industry?
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Ford Motor Company
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Which of the following companies most closely approximates a homogenous oligopolist in a highly concentrated industry?
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Pittsburgh Plate Glass
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The mutual interdependence that characterized oligopoly arises because:
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a small number of firms produce a large proportion of industry output
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Barriers to entry in oligopolistic industries may consist of:
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Ownership of essential resources.
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The copper, aluminum, cement, and industrial alcohol industries are examples of:
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Homogeneous oligopoly
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Which of the following is the best example of oligopoly?
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automobile manufacturing
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If there are significant economies of scale in an industry, then:
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a firm that is large may e able to produce at a lower unit cost that can a small firm
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In which of the following market models do demand and marginal revenue diverge?
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Pure monopoly, oligopoly, and monopolistic competition
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Oligopoly is difficult to analyze primarily because:
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The price and output decisions of any one firm depend on the reactions of its rivals
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Oligopoly is more difficult to analyze than other market models because:
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of mutual interdependence and the fact that oligopoly outcomes are less certain than in other market models.
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Which of the following is an illustration of differentiated oligopoly?
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the soft drink industry
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which of the following industries is an illustration of homogeneous oligopoly?
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aluminum
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Differentiated oligopoly exists where a small number of firms are:
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producing goods that differ in terms of quality and design.
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Homogeneous oligopoly exists where a small number of firms are:
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producing virtually identical products.
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Oligopolistic industries:
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may produce either standardized or differentiated products.
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Which of the following is a unique feature of oligopoly?
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mutual interdependence
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Prices are likely to be least flexible:
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in oligopoly
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Mutual interdependence means that each oligopolistic firm:
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must consider the reactions of its rivals when it determines its price policy.
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Clear-cut mutual interdependence with respect to the price-output policies exists in:
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Oligopoly
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Concentration ratios measure the:
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percentage of total sales accounted for by the four largest firms in the industry.
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If the four-film concentration ratio for industry X is 80:
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The four largest firms account for 80 percent of total sales
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An industry having a four-firm concentration ratio of 85%:
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is an oligopoly
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As a general rule, oligopoly exists when the four-firm concentration ratio:
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is 40 percent or more
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Aluminum competes with copper in the market for power transmission lines. This illustrates:
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Interindustry competition.
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The Herfindahl index for a pure monopolist is:
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10,000
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Industries X and Y both have four-firm concentration ratios of 65 percent, but the Herfindahl index for X is 1,500 while that for Y is 2,000. These data suggest:
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greater market power in Y than X.
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