Question 1

​Assume a monopolistically competitive firm encounters a decrease in average variable cost at all output levels.We would expect:
A)​The price to fall and output to rise
B)​The price to fall and output to fall
C)​The price to rise and output to rise
D)​The price to rise and output to fall

Accepted Answer

A decrease in average variable cost would lead to an increase in the firm's profit margin. In a monopolistically competitive market, firms have some degree of market power and can influence the price they charge. With a higher profit margin, the firm could potentially lower its price and still make a profit. This could lead to an increase in demand and output, as consumers respond to the lower price. Therefore, we would expect the price to fall and output to rise.

Question 2

Monopolistic competition is a type of
A)oligopoly.
B)market structure.
C)price discrimination.
D)advertising strategy.

Accepted Answer

Monopolistic competition is a type of market structure where there are multiple firms producing differentiated products that are close substitutes for each other. Each firm has some degree of market power due to its unique product features, branding, or advertising, but faces competition from the other firms in the market. This market structure is characterized by non-price competition, with firms investing in advertising or innovation to differentiate their products and attract customers. Therefore, monopolistic competition is a type of market structure. It is not an oligopoly, price discrimination, or advertising strategy, although these concepts may be relevant to understanding the behavior of firms in monopolistically competitive markets.

Question 3

​In which of the following market structures can a firm earn an economic profit in the short run?
A)​Perfect competition
B)​Monopolistic competition
C)​Monopoly
D)​All of these market structures can earn an economic profit in the short run

Accepted Answer

The answer of ​In which of the following market structures...

Question 4

​Which of the following goods is most likely to be associated with monopolistic competition?
A)​Gasoline
B)​Milk
C)​Cookies
D)​Wheat

Accepted Answer

Cookies are a differentiated product, meaning there are many brands and types available, but they are not perfect substitutes for each other. This is a characteristic of monopolistic competition. Gasoline, milk, and wheat are all relatively homogeneous products that are typically sold in a perfectly competitive market or an oligopoly.

Question 5

Which of the following is a characteristic of monopolistic competition?
A)ownership of a key resource by a single firm
B)free entry
C)identical product
D)patents

Accepted Answer

Monopolistic competition is characterized by free entry, which means there are no barriers preventing new firms from entering the market. This results in a large number of small firms producing differentiated products in a fragmented market. A is a characteristic of a pure monopoly, C is a characteristic of perfect competition, and D is a characteristic of a monopolistic competitor with a patent.

Question 6

The market for novels is
A)perfectly competitive.
B)a monopoly.
C)monopolistically competitive.
D)an oligopoly.

Accepted Answer

The market for novels is monopolistically competitive because there are many different firms producing slightly differentiated products (i.e. different authors, genres, styles) and there is some element of brand loyalty among consumers. However, there are also some barriers to entry, such as the need for established relationships with publishers or a certain level of prestige, which prevent it from being perfectly competitive. It is certainly not a monopoly or an oligopoly as there are many different authors and publishers.

Question 7

​Which of the following goods is most likely to be associated with monopolistic competition?
A)​Gasoline
B)​Milk
C)​Cookies
D)​Wheat

Accepted Answer

Cookies are most likely to be associated with monopolistic competition because there are many different brands and types of cookies available, and each brand can differentiate itself through things like flavor, packaging, and advertising. This means that each brand has some degree of pricing power, but there is still competition from other brands offering similar products. Gasoline, milk, and wheat are all typically associated with more competitive industries, such as perfect competition or oligopoly.

Question 8

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.

Accepted Answer

A monopolistically competitive market has aspects from both a monopoly and a competitive firm. It has a larger number of sellers than a monopoly but sells products that are not identical, making it different from a perfectly competitive firm. Additionally, firms in a monopolistically competitive market have some control over the price they charge due to product differentiation.

Question 9

​Which of the following is true about a monopolistically competitive firm?
A)​It can earn an economic profit in the short run, but not the long run.
B)​It can earn an economic profit in the short run and the long run
C)​It can earn an economic profit in the long run, but not the short run
D)​It cannot earn an economic profit in either the short or long run

Accepted Answer

A monopolistically competitive firm can earn an economic profit in the short run due to its ability to set prices above its marginal cost. However, in the long run, due to low barriers to entry, other firms can enter the market and compete away the economic profit, resulting in zero economic profit in the long run.

Quiz 16: Monopolistic Competition

​Assume a monopolistically competitive firm encounters a decrease in average variable cost at all output levels.We would expect:

Monopolistic competition is a type of

​In which of the following market structures can a firm earn an economic profit in the short run?

​Which of the following goods is most likely to be associated with monopolistic competition?

Which of the following is a characteristic of monopolistic competition?

The market for novels is

​Which of the following goods is most likely to be associated with monopolistic competition?

A monopolistically competitive market has characteristics that are similar to

​Which of the following is true about a monopolistically competitive firm?

Assume a monopolistically competitive firm encounters a decrease in average variable cost at all output levels.We would expect:

In which of the following market structures can a firm earn an economic profit in the short run?

Which of the following goods is most likely to be associated with monopolistic competition?

Which of the following goods is most likely to be associated with monopolistic competition?

Which of the following is true about a monopolistically competitive firm?