Micro Quiz Chapter 15
What is the effect in the market as more firms enter a monopolistically competitive industry?
The demand curve faced by each firm shifts in and to the left.
Which of the following is true of monopolistic competition but is not true of perfect competition?
Each firm distinguishes its product from that of its competitors.
Which of the following describes accurately the long run in perfect competition but is not true of the long run in monopolistic competition?
The firm produces where ATC is minimized.
Which of the following is true of monopoly but is not true of monopolistic competition?
The firm will earn positive economic profits in the long run.
Which of the following is true of perfect competition but is not true of monopolistic competition?
The firm will produce at a point where price equals marginal cost.
What accounts for the fact that profit is zero in the long-run equilibrium in monopolistic competition?
There are no barriers to the entry of new firms.
Why don't monopolistic competitors collude to form a monopoly?
There are too many firms to allow for successful collusion.
A monopolistically competitive firm faces:
a highly elastic demand curve.
The product diversity resulting from monopolistic competition comes at the expense of having:
efficiency in the long run
Monopolistic competitors engage in product differentiation to:
enhance their market power.
Suppose that a monopolistically competitive firm is currently producing at the point where marginal revenue equals marginal cost and is not covering the variable cost of producing the last unit. In this situation, economic theory would predict that the firm will:
exit the industry.
Since a monopolistic competitor produces a product with many close substitutes, but none exactly like it. As a result, the firm:
has some degree of market power.
The goal of a monopolistically competitive firm is to:
maximize profit.
In long-run equilibrium, a monopolistically competitive firm is producing at a point on its average total cost curve where:
price equals average total cost.
The market for oil-change can be described as a market in which monopolistic competition prevails. This means that collusion among garages that change oil is ____________ and firms engage in _________ behavior.
rare; uncooperative
Which of the following would be an example of a monopolistically competitive industry with differentiation by style or type?
running shoes
Monopolistically competitive firms spend money on celebrity endorsements to:
send a signal that they are successful companies.
Monopolistically competitive firms can earning positive economic profits in the short run, but in the long run:
they will make zero economic profits.
To the extent that brand names developed in monopolistic competition provide a benefit to the consumer, it is:
through their assurance that the firm will provide a quality product in order to preserve repeated transactions.
For any given firm in a monopolistically competitive market, the long-run economic profit tends to be __________ and firms operate to the ____________ of the minimum point on the average total cost curve.
zero; left
