Monopolistic competition

Which of the following markets is least likely to be described as monopolistic competition?

• Plumbers

• Private schools

• Car manufacturing

• Electricians

Which of the following assumptions makes monopolistic competition different to perfect competition

• Differentiated products

• Large number of small firms

• Large number buyers

• No barriers to entry or exit

Using the following data, which of the following is the firm’s marginal revenue when the price falls from $10 to $5?

• $150

• -$5

• -$150

• $5

Using the diagram, which of the following is true?

• The firm is making a loss

• New firms will enter the market

• The firm is not profit maximising

• If the firm increases output total cost will fall

Which of the following is untrue if firms in monopolistic competition are making losses?

• ATC > AR

• Firms will leave the market

• Firms are profit maximising

• By reducing output firms can reduce their losses

Which of the following is true when a firm in monopolistic competition is making normal profit?

• It is productively and allocatively efficient

• It is neither productively nor allocatively efficient

• It is productively efficient but not allocatively efficient

• It is allocatively efficient but not productively efficient

Which of the following is least likely to be true in a monopolistically competitive market?

• Abnormal profit cannot be sustained in the long run

• A firm profit maximises when marginal cost equals marginal revenue when marginal cost is rising

• Firms are price makers

• Marginal revenue is equal to average revenue