Micro Economics Chapter 25 Test Review
For the monopolistic competitor, which of the following is INCORRECT?
If the firm in a monopolistically competitive industry were making economic losses, new firms will enter the industry.
Considering the relevant market structures, which is an INCORRECT statement?
In any market situation, the number of firms is not very important.
The monopolistically competitive firm maximizes profit by producing to the point at which
MC = MR.
Which of the following is TRUE for a monopolistically competitive firm?
MR < P
The number of firms in a monopolistically competitive industry means that
firms will not cooperate to set a pure monopoly price.
A monopolistic competitor is like a monopolist in the short run in that when economic profits are
greater than zero, price exceeds marginal cost.
It has been argued that in the long run monopolistic competition is inefficient because
here are too many firms, each with excess capacity, producing too little output.
The demand curve for a monopolistically competitive firm is
less elastic than the demand curve of the perfectly competitive firm.
Compared with a monopolist, the demand curve faced by a monopolistically competitive firm is
more elastic.
Compared with a firm in a perfectly competitive market, the demand curve faced by a monopolistically competitive firm is
more inelastic.
Which will be TRUE for a monopolistic competitor experiencing short-run losses?
P < ATC
In a long-run monopolistically competitive equilibrium
P = ATC, and ATC is not at its minimum value.
In the long run, the monopolistically competitive firm's demand curve will
become tangent to the ATC curve somewhere to the left of its minimum point.
A monopolistic competitor is in long-run equilibrium when
economic profits are equal to zero and the average total cost curve is tangent to the demand curve.
For the monopolistically competitive firm, in both the short run and the long run
price will exceed marginal cost.
A monopolistically competitive firm maximizes profits when it
produces the quantity at which marginal cost equals marginal revenue and uses the demand curve to determine the market price.
In general, the demand for the product of a monopolistic competitor is
relatively elastic.
If firms in a monopolistically competitive industry experience short-run losses
some firms exit the industry, causing the demand curves for the remaining firms to shift to the right until they earn a normal profit.
The major similarity between monopolistic competition and perfect competition is
that both assume many buyers and sellers.
Monopolistic competition and perfect competition are similar in that each market structure is characterized by
the absence of long-run economic profits.
It has been argued that a monopolistically competitive industry involves "waste" because
the firms do not produce at the minimum of the average total cost curve and price is above marginal cost.
The greater the product differentiation between monopolistically competitive firms
the greater the price elasticity of demand.
In the long run, a perfectly competitive market produces at ________, whereas the monopolistic competitive firm does not.
the output at which the lowest average total cost of production is reached
The demand for the product of a monopolistically competitive firm is highly elastic when
there are a lot of close substitutes.
In the long run, both monopolistically competitive and perfectly competitive firms attain
zero economic profits.
