Monopolistic Competition!

Which of the following statements correctly identifies a difference between perfect competition and monopolistic competition? 

• In perfect competition there are no barriers to entry, but there are strong barriers in monopolistic competition. 
• In perfect competition there are many firms, but in monopolistic competition there are only a few firms. 
• In perfect competition the firms all sell products that are exactly the same, but in monopolistic competition each firm sells a slightly differentiated product. 
• In perfect competition there are few consumers, but in monopolistic competition there are many consumers. 

Monopolistically competitive firms are considered inefficient in allocating society’s resources for which of the following reasons? 

• In long-run equilibrium, the marginal benefit exceeds the price charged by the firms. 
• In long-run equilibrium, the price is greater than the marginal cost. 
• In long-run equilibrium, average total costs are minimized.
• In long-run equilibrium, the firm is earning economic profits. 

Which of the following market structures results in allocative efficiency? 

• Monopoly
• Monopolistic Competition
• Perfect Competition
• Oligopoly

Which of the following is true of a monopolistically competitive firm in long-run equilibrium? 

• Price equals marginal cost and average total cost. 
• Price equals average total cost but is greater than marginal cost. 
• Price equals marginal cost and is greater than average total cost. 
• The firm earns positive economic profits by producing at minimum average cost. 

The demand curve for a monopolistically competitive firm is downward sloping because: 

• the products produced by different firms are not identical
  
• there are a large number of firms
  
• the product is produced by using scarce resources
  
• it is easy for firms to enter or exit the market 

The graph shows a monopolistically competitive firm:

• making a profit in the short-run
• incurring a loss in the short-run
• making a profit in the long-run
• breaking even in the long-run

In the long-run, the ATC will be tangent to the demand curve at:

• Q1
• Q2
• Q3
• none of the above

Which of the following is true of a monopolistically competitive firm in long-run equilibrium? 

• The firm produces the allocatively efficient level of output. 
• The firm produces an output level that minimizes average total cost. 
• The firm produces in the inelastic range of its demand curve. 
• The firm is allocatively inefficient, because it produces an output level at which price is greater than marginal cost. 

Let P = price, MR = marginal revenue,
MC = marginal cost, and ATC = average total cost. In monopolistic competition, which of the following most accurately describes the long-run equilibrium conditions for a firm? 

• P>ATC, MR=MC, and P>MC 
• P=ATC, MR=MC, and P=MC 
• P=ATC, MR=MC, and P>MC 
• P=ATC, MR>MC, and P>MC 

A monopolistically competitive firm advertises in order to:

• shift the demand curve for its product to the left 
• make its product more similar to its competitors’ 
• reduce the industry’ s barriers to entry 
• make the demand for its product less price elastic