Question

QUESTION 5

A monopolistically competitive firm will:

		maximize profits by producing where MR = MC.
		not likely earn an economic profit in the long run.
		shut down in the short run if price is less than average variable cost.
		all of the above.

QUESTION 6

A monopolistic competitive firm is inefficient because the firm:

		earns positive economic profit in the long run.
		is producing at an output corresponding to the condition that marginal cost equals price.
		is not maximizing its profit.
		produces an output where average total cost is not minimum.

QUESTION 12

Which of the following is FALSE about monopolistic competition?

		P=MC.
		MR=MC.
		Entry is relatively easy.
		In the shirt run, economic profit can be positive, negative, or zero.

QUESTION 11

Which of the following is a characteristic of the market structure in monopolistic competition?

		Many sellers, each small in size relative to the overall market.
		Few sellers.
		All sellers produce identical products.
		There is only one seller in the market without close substitutes.

QUESTION 10

Comparing perfect competition and monopolistic competition, which of the following is FALSE?

		Monopolistic competition results in deadweight loss, but perfect competition does not.
		Both monopolistic competition and perfect competition result in zero economic profit in the long run.
		Neither a monopolic competitive firm nor a perfectly competitive firm has any say about the price; namely, they are both price takers.
		There is product differentiation in monopolistic competition, but products are identical in a perfectly competitive market.

Answer 1

Question 5

All of the above.

Profit maximization in monopolistic competition is when MR= MC. The monopolistic competitive firms will only earn normal profit in the long run due to ease of entry and exit in the industry. The firms will not operate below the shutdown point, which is minimum AVC.

Question 6

Producing at an output which is not equal to the minimum AC. There is excess capacity in monpolistic competition.

Question 12

P= MC. In monopolistic competition MR= MC, not P. This is the profit maximization output.

Question 11

Many sellers each selling products that are slightly differentiated.

Question 10

Monopolistic competitive firm is a price maker, whereas, a perfectly competitive firm is a price taker.