Mic Tut 9

The market for novels is

• perfectly competitive.

• a monopoly.

• monopolistically competitive.

• an oligopoly.

Which of the following is an example of a monopolistically competitive industry?

• computer operating systems

• tennis balls

• movies

• cable television

Monopolistically competitive markets differ from perfectly competitive markets due to
(i) the number of sellers.

(ii) the barriers to entry.

(iii) the product differentiation among the sellers.

• (i) only

• (iii) only

• (i) and (iii) only

• (ii) and (iii) only

A firm in a monopolistically competitive market faces a

• downward-sloping demand curve because the firm's product is different from those offered by other firms.

• downward-sloping demand curve because there are only a few firms in the market.

• horizontal demand curve because there are many firms in the market.

• horizontal demand curve because firms can enter the market without restriction.

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

• P = AR

• MR = MC

• P > MC

• All of the above are correct.

A monopolistically competitive firm is currently earning a positive economic profit. If other firms enter the market, we would expect that the added competition will cause this firm to adjust its output such that it

• will operate closer to its efficient scale.

• will operate further from its efficient scale.

• will no longer be at its efficient scale.

• might move either closer to or further from its efficient scale.

In the long run,

• monopolistically competitive firms earn a higher profit than perfectly competitive firms because monopolistically competitive firms have some monopoly power.

• monopolistically competitive firms produce a higher output than perfectly competitive firms because competition drives the perfectly competitive firm's output down.

• both monopolistically competitive and perfectly competitive firms produce where P = MC.

• both monopolistically competitive and perfectly competitive firms produce where P = ATC.

Under which of the following market structures would consumers likely pay the highest price for a product?

• perfect competition

• monopolistic competition

• oligopoly

• monopoly

Under which of the following market structures would consumers likely receive the most product variety?

• perfect competition

• monopolistic competition

• oligopoly

• monopoly

Which of the following statements is correct?

• In the long run, both perfectly competitive firms and monopolistically competitive firms operate with excess capacity.

• A firm operates with excess capacity when, in the long run, its level of output is below the efficient scale.

• For any firm, efficient scale is the level of output at which the average-total-cost curve is tangent to the demand curve.

• All of the above are correct.