William Rainey Harper College
ECO 211

Review

Ch. 11 Monopolistic Competition

 

1.

Which of the following is not characteristic of monopolistic competition?

A.

relatively large numbers of sellers

B.

product differentiation

C.

production at minimum ATC in the long-run

D.

relatively easy entry to the industry



2.

A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from:

A.

a relatively large number of firms and the monopolistic element from product differentiation.

B.

product differentiation and the monopolistic element from high entry barriers.

C.

a perfectly elastic demand curve and the monopolistic element from low entry barriers.

D.

a highly inelastic demand curve and the monopolistic element from advertising and product promotion.



3.

The demand curve of a monopolistically competitive producer is:

A.

less elastic than that of either a pure monopolist or a purely competitive seller.

B.

less elastic than that of a pure monopolist, but more elastic than that of a purely competitive seller.

C.

more elastic than that of a pure monopolist, but less elastic than that of a purely competitive seller.

D.

more elastic than that of either a pure monopolist or a purely competitive seller.



4.



R-1 F25030

Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm's profit-maximizing price will be:

A.

$10.

B.

$13.

C.

$16.

D.

$19.



5.



R-1 F25030

Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. The profit-maximizing output for this firm will be:

A.

210.

B.

180.

C.

160.

D.

100.



6.



R-1 F25030

Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm will realize an economic:

A.

loss of $320.

B.

loss of $280.

C.

profit of $480.

D.

profit of $600.

E.

profit of $360.



7.



R-2 F25037

Refer to the above diagrams, which pertain to monopolistically competitive firms. Short-run equilibrium entailing economic loss is shown by:

A.

diagram a only.

B.

diagram b only.

C.

diagram c only.

D.

both diagrams a and c.



8.

R-3 F25045

In long-run equilibrium the firm shown in the diagram above will:

A.

earn a normal profit.

B.

go bankrupt.

C.

realize a loss.

D.

realize an economic profit.



9.

R-3 F25045

In long-run equilibrium, production for the firm shown in the diagram above is:

A.

greater than would occur under pure competition.

B.

less efficient than in a purely competitive market.

C.

more efficient than in a purely competitive market.

D.

optimally efficient.



10.

When a monopolistically competitive firm is in long-run equilibrium:

A.

P = MC = ATC.

B.

MR = MC and minimum ATC > P.

C.

MR > MC and P = minimum ATC.

D.

MR = MC and P > minimum ATC.



11.

In monopolistically competitive markets resources are:

A.

overallocated because long-run equilibrium occurs where price exceeds marginal cost.

B.

underallocated because long-run equilibrium occurs where price exceeds marginal cost.

C.

overallocated because long-run equilibrium occurs where marginal cost exceeds price.

D.

underallocated because long-run equilibrium occurs where marginal cost exceeds price.



12.

In long-run equilibrium a monopolistically competitive firm will:

A.

earn an economic profit.

B.

realize all economies of scale.

C.

equate price and marginal cost.

D.

have excess production capacity.




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