Question

When the price and output decisions of one firm include the possible price and output reactions of the firm's rivals, the market is

   a. monopolistically competitive characterized by non-price competition.  
   b. perfectly competitive characterized by collusion.  
   c. a monopoly characterized by differentiated products.  
   d. an oligopoly characterized by mutual interdependence.  

The theory of monopolistic competition predicts that in long-run equilibrium a monopolistically competitive firm will:

   a. operate at minimum long-run average cost.  
   b. produce the output level at which price equals long-run marginal cost.  
   c. produce the output level at which price equals long-run average cost.  
   d. overutilize its insufficient capacity.

The monopolistic competition market structure is characterized by:

   a. many firms and differentiated products.  
   b. many firms and a homogeneous product.  
   c. few firms and similar products.  
   d. few firms and a homogeneous product.

Because an oligopoly is characterized by

   a. many small sellers, each firm must differentiate its product.  
   b. a few sellers selling a differentiated product, each seller makes its price and output decisions independently.  
   c. few large sellers, each seller has some influence over the market price.  
   d. a single seller of a product that has few suitable substitutes, the seller is a price maker.  

When a perfectly competitive firm or a monopolistically competitive firm is making zero economic profit,

   a. some firms will want to enter.  
   b. market demand shifts to the left.  
   c. some firms will want to leave.  
   d. no firms will want to enter or exit.

Answer 1

1. Option B is correct.  

2. Option C is correct.

3. Option A is correct.

4. Option B is correct.

5. Option D is correct.