Quiz on Monopolistic Competition

What is monopolistic competition?

• A market structure combining elements of monopoly and competitive markets

• A market without any competition

• A market with a single seller

• A market with perfect competition

What allows firms in monopolistic competition to set prices?

• Perfectly elastic demand

• Elastic demand curve

• No demand curve

• Inelastic demand curve

What leads to normal profits in the long term in monopolistic competition?

• Lack of product differentiation

• High barriers to entry

• Government intervention

• Freedom of entry

Which of the following is a feature of monopolistic competitive industry?

• Many firms

• Single firm

• No freedom of entry and exit

• Identical products

What kind of profits do firms make in the long run in monopolistic competition?

• Decreasing profits

• No profits

• Supernormal profits

• Normal profits

What type of efficiency do firms in monopolistic competition lack?

• Allocative and productive inefficiency

• X-efficiency

• Operational efficiency

• Dynamic efficiency

What happens to the demand curve in the long run in monopolistic competition?

• Remains unchanged

• Shifts to the right

• Becomes perfectly elastic

• Shifts to the left

What is an example of monopolistic competition?

• Railroad services

• Water supply

• Electricity companies

• Restaurants

What is a limitation of the model of monopolistic competition?

• Overlap with oligopoly

• Perfect information

• No product differentiation

• No barriers to entry or exit

How is monopolistic competition different from monopoly?

• No barriers to entry in monopolistic competition

• Monopoly has differentiated products

• Monopolistic competition has a single seller

• Monopoly has perfect information