ECO111 = CHAPTER 16

The market for novels is

• a.

  perfectly competitive.

• b.

  a monopoly.

• c.

  monopolistically competitive.

• d.

  an oligopoly.

A monopolistically competitive market has characteristics that are similar to

• a.

  a monopoly only.

• b.

  a competitive firm only.

• c.

  both a monopoly and a competitive firm.

• d.

  neither a monopoly nor a competitive firm.

The two types of imperfectly competitive markets are

• a.

  markets with differentiated products and monopoly.

• b.

  markets with differentiated products and oligopoly.

• c.

  oligopoly and monopoly.

• d.

  monopolistic competition and oligopoly.

An oligopoly is a market in which

• a.

  there are only a few sellers, each offering a product similar or identical to the products offered by other firms in the market.

• b.

  firms are price takers.

• c.

  the actions of one seller in the market have no impact on the other sellers' profits.

• d.

  there are many price-taking firms, each offering a product similar or identical to the products offered by other firms in the market.

Each firm in a monopolistically competitive firm faces a downward-sloping demand curve because

• a.

  there are many other sellers in the market.

• b.

  there are very few other sellers in the market.

• c.

  the firm's product is different from those offered by other firms in the market.

• d.

  that firm faces the threat of entry into the market by new firms.

For a monopolistically competitive firm, at the profit-maximizing quantity of output,

• a.

  price exceeds marginal cost.

• b.

  marginal revenue exceeds marginal cost.

• c.

  marginal cost exceeds average revenue.

• d.

  price equals marginal revenue.

In the short run, a firm in a monopolistically competitive market operates much like a

• a.

  firm in a perfectly competitive market.

• b.

  firm in an oligopoly.

• c.

  monopolist.

• d.

  monopsonist.

The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity at which

• a.

  marginal revenue is equal to marginal cost.

• b.

  average total cost is equal to marginal revenue.

• c.

  average total cost is equal to price.

• d.

  average revenue exceeds average total cost.

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

• a.

  P > MR and P = MC

• b.

  ATC = demand and MR = MC

• c.

  P < MC and demand = ATC

• d.

  P > ATC and demand > MR

In monopolistically competitive markets, positive economic profits

• a.

  suggest that some existing firms will exit the market.

• b.

  suggest that new firms will enter the market.

• c.

  are sustained through government-imposed barriers to entry.

• d.

  are never possible.