Question

[13] A seller in monopolistic competition would:

A) lose all of its buyers if it raised its price.

B) lose some, but not all, of its buyers if it raised its price.

C) never lower its price because it can sell as much as it wishes at the current price.

D) never lower its price because once the price is lowered it can never be raised again.

[14] In the long run, a firm in monopolistic competition will:

A) operate at a loss.

B) earn an economic profit.

C) just break even with a normal profit.

D) all of the above.

[15] Which of the following is NOT a characteristic of an oligopolistic market?

A) There are a few large sellers.

B) Entry into the market is difficult.

C) Products are either differentiated or identical.

D) Over the long run, firms are only able to earn normal profits.

[16] Mutual interdependence refers to the:

A) dependence of suppliers and distributors on one another.

B) need for sellers in any market to join together and make their common interests known to the government.

C) market situation where there are so few sellers that each must weigh the reactions of its rivals to its policies.

D) dependence of large firms on the government, and the dependence of the government on the products of large firms.

[17] In the past, when a particular small bank in the Midwest changed its prime interest rate, other banks in the United States changed their prime rates as well. This is an example of:

A) price leadership.

B) cost-plus pricing.

C) marginal cost pricing.

D) the kinked demand curve model.

[18] Which of the following is NOT a characteristic of a monopolistic market?

A) There is one seller in the market.

B) Excess profits can be earned over the long run.

C) Widespread product differentiation is found in the market.

D) An individual firm's demand curve is the market demand curve for the product

Answer 1

1. Monopolistic competitive market is a type of market where product differentiation is there.It has some power to raise its price.While doing so it loses some of its buyers but not all.Thus the answer is option b.
2. In the long run more and more firm will enter as a result of that the supernormal profit will no longer exist and the firm will incur normal profit that is break even.Answer is option c.
3. Over the long run firms are only to earn normal profit is not an characteristic of oligopoly market.
4. Mutual interdependence refers to the market situation where there are so few sellers that each must weigh the reactions of its rivals to its policies.it happens in oligopoly market as there are few sellers.Answer is option c.

5. In the past, when a particular small bank in the Midwest changed its prime interest rate, other banks in the United States changed their prime rates as well. This is an example of: price leadership.Answer is option A.

6. There is one seller in the market is not an characteristic of monopolistic market.