Microeconomics, 7e (Pindyck/Rubinfeld)
Chapter 12 Monopolistic Competition and Oligopoly
1) For which of the following market structures is it assumed
... [Show More] that there are barriers to entry?
A) Perfect competition
B) Monopolistic competition
C) Monopoly
D) all of the above
E) B and C only
Answer: C
Diff: 1
Section: 12.1
2) Use the following two statements about monopolistic competition to answer this question.
I. In the long run, the price of the good will equal the minimum of the average cost.
II. In the short run, firms may earn a profit.
A) I and II are true.
B) I is true, and II is false.
C) I is false, and II is true.
D) I and II are false.
Answer: C
Diff: 1
Section: 12.1
3) A market with few entry barriers and with many firms that sell differentiated products is
A) purely competitive.
B) a monopoly.
C) monopolistically competitive.
D) oligopolistic.
Answer: C
Diff: 1
Section: 12.1
4) The most important factor in determining the long-run profit potential in monopolistic
competition is
A) free entry and exit.
B) the elasticity of the market demand curve.
C) the elasticity of the firm's demand curve.
D) the reaction of rival firms to a change in price.
Answer: A
Diff: 1
Section: 12.1
5) Which of the following is NOT regarded as a source of inefficiency in monopolistic
competition?
A) The fact that price exceeds marginal cost
B) Excess capacity
C) Product diversity
D) The fact that long-run average cost is not minimized
E) all of the above
Answer: C
Diff: 1
Section: 12.1
6) Monopolistically competitive firms have monopoly power because they
A) face downward sloping demand curves.
B) are great in number.
C) have freedom of entry.
D) are free to advertise.
Answer: A
Diff: 1
Section: 12.1
7) A monopolistically competitive firm in short-run equilibrium:
A) will make negative profit (lose money).
B) will make zero profit (break-even).
C) will make positive profit.
D) Any of the above are possible.
Answer: D
Diff: 1
Section: 12.1
8) A monopolistically competitive firm in long-run equilibrium:
A) will make negative profit.
B) will make zero profit.
C) will make positive profit.
D) Any of the above are possible.
Answer: B
Diff: 1
Section: 12.1
9) What happens to an incumbent firm's demand curv [Show Less]