Unit 2.11 Market power - Monopolistic competition(HL)

What is monopolistic competition?

• A form of perfect competition

• A form of monopoly

• A form of oligopoly

• A form of imperfect competition

What is one of the assumptions of monopolistic competition?

• High barriers to entry

• Limited number of buyers and sellers

• Identical products

• Low concentration ratio

How do firms differentiate their products in monopolistic competition?

• By offering unique features

• By having high barriers to entry

• By selling identical products

• By having a limited number of buyers and sellers

What is the demand curve faced by firms in monopolistic competition?

• Perfectly elastic

• Perfectly inelastic

• Upward-sloping

• Downward-sloping

What happens to revenue curves in monopolistic competition due to the downward-sloping demand curve?

• They overlap

• They become vertical

• They become horizontal

• They separate

What is the profit-maximizing condition for firms in monopolistic competition?

• Marginal cost equals marginal revenue

• Average revenue equals total cost

• Marginal cost equals average cost

• Average cost equals average revenue

What is normal profit in monopolistic competition?

• When total revenue is zero

• When total revenue is less than total cost

• When total revenue is greater than total cost

• When total revenue equals total cost

What is abnormal profit in monopolistic competition?

• When total revenue is less than total cost

• When total revenue is zero

• When total revenue is greater than total cost

• When total revenue equals total cost

What is the effect of differentiated products on the demand curve in monopolistic competition?

• It becomes downward-sloping

• It becomes upward-sloping

• It becomes perfectly elastic

• It becomes perfectly inelastic

What is the impact of price changes on quantity demanded in monopolistic competition?

• Quantity demanded changes proportionately

• Quantity demanded becomes zero

• Quantity demanded remains constant

• Quantity demanded becomes infinite