Monopolistic Competition

As the degree of product differentiation increases among the products sold in a monopolistically competitive industry, which of the following occurs? A) The cost of production falls. B) The amount of marketing expenditures decreases for each firm. C) The demand curve for each seller's product becomes more horizontal. D) Each seller's demand becomes more inelastic.

Each seller's demand becomes more inelastic.

What is the difference between perfect competition and monopolistic competition? A) Perfect competition has a large number of small firms while monopolistic competition does not. B) In perfect competition, firms produce identical goods, while in monopolistic competition, firms produce slightly different goods. C) Perfect competition has no barriers to entry, while monopolistic competition does. D) Perfect competition has barriers to entry while monopolistic competition does not.

In perfect competition, firms produce identical goods, while in monopolistic competition, firms produce slightly different goods.

In monopolistic competition, each firm's marginal revenue curve has A) a negative slope, and so does its demand curve. B) a slope equal to zero, but its demand curve has a negative slope. C) a slope equal to zero, and so does its demand curve. D) a negative slope, but its demand curve has zero slope.

a negative slope, and so does its demand curve.

Firms in monopolistic competition can achieve product differentiation by A) exploiting economies of scale in production. B) advertising special characteristics. C) expanding plant size. D) setting the price equal to average revenue.

advertising special characteristics.

For a firm in monopolistic competition, the marginal cost curve intersects the average total cost curve A) at no point. B) at the minimum average total cost. C) to the left of the minimum average total cost. D) to the right of the minimum average total cost.

at the minimum average total cost.

A price-taking firm A) cannot influence the price of the product it sells. B) talks to rival firms to determine the best price for all of them to charge. C) sets the product's price to whatever level the owner decides upon. D) asks the government to set the price of its product.

cannot influence the price of the product it sells.

Which of the following is an example of a monopolistically competitive industry? A) wheat farming B) colleges and universities C) the local electricity producer D) the domestic automobile producing industry

colleges and universities

A characteristic of monopolistic competition is that each firm A) faces perfectly elastic demand. B) faces a downward-sloping demand curve. C) has a perfectly inelastic supply. D) has a perfectly elastic supply.

faces a downward-sloping demand curve.

All of the following are examples of product differentiation in monopolistic competition EXCEPT A) new and improved packaging. B) lower price. C) acceptance of more credit cards than the competition. D) location of the retail store.

lower price.

Which of the following market types has a large number of firms that sell similar but slightly different products? A) perfect competition B) oligopoly C) monopolistic competition D) monopoly

monopolistic competition

An industry with a large number of firms, differentiated products, and free entry and exit is called A) oligopoly. B) monopoly. C) monopolistic competition. D) perfect competition.

monopolistic competition.

If firms in a monopolistically competitive industry are earning an economic profit, then A) some workers will leave the industry's labor force. B) new firms will enter the industry. C) some firms will leave the industry. D) some customers will exit the market.

new firms will enter the industry.

Given that Hardie Inc. is a monopolistically competitive firm, the other competitors in the market do which of the following? A) set their prices according to their respective demand curves. B) match their price decreases. C) agree on a common price. D) match their price increases.

set their prices according to their respective demand curves.

In monopolistic competition, the products of different sellers are assumed to be A) similar but slightly different. B) identical perfect substitutes. C) either identical or differentiated. D) unique without any close or perfect substitutes.

similar but slightly different.

A monopolistically competitive firm has ________ power to set the price of its product because ________. A) no; there are no barriers to entry B) some; there are barriers to entry C) some; of product differentiation D) no; of product differentiation

some; of product differentiation

In monopolistic competition, firms can earn an economic profit in A) the short run but not in the long run. B) the short run and in the long run. C) the long run but not in the short run. D) neither the long run nor the short run.

the short run but not in the long run.

In monopolistic competition, each firm supplies a small part of the market. This occurs because A) there are barriers to entry. B) firms produce differentiated products. C) there are no barriers to entry. D) there are a large number of firms.

there are a large number of firms.