Monopolistic competition

Which one of the following statements is not a characteristic of monopolistic competition?

• Ease of entry into the industry

• Product differentiation

• A relatively large number of sellers

• A homogenous product

Monopolistic competition is a market structure in which few firms sell similar products

• True

• False

Which of the following industries is the best example of monopolistic competition?

• Wheat

• Restaurant

• Automobile

• Water service

In long-run equilibrium in a monopolistically competitive market, firms typically:

• earn a normal profit

• charge a price equal to marginal cost

• earn an above-normal profit

• charge a price equal to marginal revenue

Under monopolistic competition price discrimination can be made easily.

• True

• False

Under monopolistic competition, a firm faces a perfectly elastic demand curve.

• True

• False

Similar to firms in perfectly competitive markets, firms in monopolistically competitive markets can enter and exit the market without restriction so profits are driven to zero in the long run

• True

• False

What type of products will firms produce in monopolistic competition?

• Firms produce significantly differentiated products

• Firms produce slightly differentiated products

• Firms produce homogenous products with one modification

• Firms produce a variety of different products

How can products be differentiated?

• Brand name

• Colour

• Appearance

• Packaging design

• All of the above

Monopolistic competitors in long-run equilibrium will generally find that they are earning economic profits

• True

• False