Monopolistic Competition Reading Comprehension Assessment

What is the main characteristic that distinguishes monopolistic competition from perfect competition?

• The number of firms in the market

• Products are differentiated rather than identical

• Barriers to entry exist

• Firms can earn long-term economic profits

According to the text, approximately how many restaurants exist in the United States?

• Over 100,000

• Over 300,000

• Over 600,000

• Over 1,000,000

Who were the two economists who independently developed the theory of imperfect competition in 1933?

• Adam Smith and David Ricardo

• John Maynard Keynes and Milton Friedman

• Edward Chamberlin and Joan Robinson

• Alfred Marshall and Leon Walras

Which of the following is NOT mentioned as a way firms can differentiate their products?

• Physical aspects of the product

• Location from which it sells the product

• The number of employees in the company

• Intangible aspects of the product

The demand curve faced by a monopolistically competitive firm is:

• Perfectly elastic (horizontal)

• Perfectly inelastic (vertical)

• Downward-sloping but more elastic than a monopolist's

• The same as the market demand curve

In the Authentic Chinese Pizza example, at what quantity does marginal revenue equal marginal cost?

• 30 pizzas

• 40 pizzas

• 50 pizzas

• 60 pizzas

What price should Authentic Chinese Pizza charge for its profit-maximizing quantity?

• $14

• $16

• $18

• $20

According to the U.S. Golf Association standards, what is the maximum weight a legal golf ball can have?

• 1.620 ounces

• 1.680 inches

• 45.93 grams

• 42.67 millimeters

What happens to a monopolistically competitive firm's demand curve when new competitors enter the market?

• It shifts to the right

• It shifts to the left

• It becomes more steep

• It remains unchanged

In the long run, monopolistically competitive firms will earn:

• Positive economic profits

• Negative economic profits (losses)

• Zero economic profits

• Variable profits depending on the industry