Question

1. If a monopolistic competitive firm raises its price, then a.it should expect to lose all of its customers because there are many other sellers of the product b.this is a trick question because the firm does not have the ability to change its price c.it should expect to lose some but not all of its customers d.it will be able to increase its profits e.it can sell all it wants because it faces a horizontal demand curve

2. Compared to a monopolistic competitor a monopolist produces a good with ____ substitutes and so has a ____ elastic demand curve. A.fewer, more b.fewer, less c.more, more d.more, less

3. The demand curve facing a monopolistic competitive firm will be ____ than the demand curve facing a perfectly competitive firm because the price elasticity of demand for the monopolistic competitive firm’s product is ____ than that for the perfectly competitive firm. A.steeper, greater b.flatter, greater c.steeper, less d.flatter, less

4. The relationship between a monopolistic competitor’s marginal revenue curve and its demand curve is that the a.two curves coincide and are horizontal at the market price b.marginal revenue curve lies above the demand curve and the demand curve is horizontal at the market price c.marginal revenue curve lies below the demand curve and both are downward sloping d.two curves coincide and are downward sloping to the right e.marginal revenue curve lies above the demand curve and both are downward sloping

5. Why cant an economist say for certain that a monopolistic competitive firm will always earn zero economic profits in the long run? A.barriers to entry-exit b.the very large number of buyers indicates that there will always be demand for the firm’s product c.the firms in the industry do not produce identical products d.the firms practice price competition so at least some forms will always be charging a lower price than other firms and will sell more as a result e.the firms face a horizontal demand curve

6. If a perfectly competitive firm and a monopolistic competitor in long-run equilibrium face the same demand and cost curves, then the competitive firm will produce a a.greater output and charge a lower price than the monopolistic competitor. B.greater output but change the same price as the monopolistic competitor. C.greater output and charge a higher price than the monopolistic competitor. D.smaller output and charger a higher price than the monopolistic competitor. E.smaller output and charge a higher price than the monopolistic competitor.

7. Probably the most significant barrier to entry into an oligopolistic market is a.patent rights b.exclusive ownership of essential resources c.legal barriers d.economies of scale e.copyrights

8. A concentration ratio indicates the a.numberof firms in an industry b.number of large firms in an industry compared to the number of large firms in another related industry c.percentage of total sales accounted for by the (for example) four largest firms d.percentage of sellers in an industry relative to the number of buyers e.percentage of sellers in an industry protected by barriers to entry relative to the number of sellers that wish to enter

9. The percentage of sales accounted for by X number of firms in the industry is called the a.concentration ratio b.oligopoly rate c.interdependence rate d.market power index

10. The concentration ratio provides a measure of the extent to which an industry a.produces a useful product b.is dominated by a smaller number of firms c.is earning economic profit d.is earning accounting profits

11. In the real-world which of these industries is most clearly an oligopoly? A.wheat b.electricity generation c.cereal breakfast foods d.restaurants

Answer 1

1) If a monopolistic competitive firm raises its price, then

c.it should expect to lose some but not all of its customers.

2) Compared to a monopolistic competitor a monopolist produces a good with ____ substitutes and so has a ____ elastic demand curve.

b.fewer, less

3) The demand curve facing a monopolistic competitive firm will be ____ than the demand curve facing a perfectly competitive firm because the price elasticity of demand for the monopolistic competitive firm’s product is ____ than that for the perfectly competitive firm.

c.steeper, less

4) The relationship between a monopolistic competitor’s marginal revenue curve and its demand curve is that the

c.marginal revenue curve lies below the demand curve and both are downward sloping

5) Why cant an economist say for certain that a monopolistic competitive firm will always earn zero economic profits in the long run?

c) the firms in the industry do not produce identical products.

6) If a perfectly competitive firm and a monopolistic competitor in long-run equilibrium face the same demand and cost curves, then the competitive firm will produce

a a.greater output and charge a lower price than the monopolistic competitor.

7) Probably the most significant barrier to entry into an oligopolistic market is

d.economies of scale

8) A concentration ratio indicates

c.percentage of total sales accounted for by the (for example) four largest firms

9) The percentage of sales accounted for by X number of firms in the industry is called the

a.concentration ratio

10)The concentration ratio provides a measure of the extent to which an industry

b.is dominated by a smaller number of firms

11) In the real-world which of these industries is most clearly an oligopoly? b.electricity generation

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