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Question 1.
The two types of imperfectly competitive markets are
a.
b.
c.
d.
markets with differentiated products and monopoly
markets with differentiated products and oligopoly.
monopolistic competition and oligopoly.
None of the above
Answer. c
Question 2.
Firms in industries that have competitors but do not face so much competition that
they are price takers are operating in either a/an
a.
b.
c.
d.
oligopoly or perfectly competitive market.
oligopoly or monopoly market.
oligopoly or monopolistically competitive market.
monopoly or monopolistically competitive market.
Answer. c
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Question 3.
A monopolistically competitive firm chooses its
a.
b.
c.
d.
price and quantity just as a monopoly does.
quantity but faces a horizontal demand curve just as a competitive firm does.
price but can sell any quantity at the market price just as an oligopoly does.
price and quantity based on the decisions of the other firms in the industry just
as an oligopoly does.
Answer. a
Question 4.
A monopolistically competitive fu-in faces the following demand schedule for its
product. In addition. the firm has total fixed costs equal to Rs10
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Price
Quantity
Rs15
1
Rs13
2
Rs11
3
Rs9
4
Rs7
5
Rs5
6
Rs3
7
If the firm has a constant marginal cost of Rs5 per unit, how many units should the
firm produce to maximize profit?
a.
b.
c.
d.
3 units
4 units
5 units
6 units
Answer. a
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Question 5.
Which of the following statements is not correct?
a. Monopolistic competition is similar to monopoly because in each market structure
the firm can charge a price above marginal costs.
b. Monopolistic competition is similar to perfect competition because both market
structures are characterized by free entry.
c. Monopolistic competition is similar to oligopoly because both market structures are
characterized by barriers to entry.
d. Monopolistic competition is similar to perfect competition because both market
structures are characterized by many sellers.
Answer. c
Question 6.
Which of the following statements regarding monopolistic competition is not correct?
a. In the long-run equilibrium, price equals average total cost.
b. In the long-run equilibrium, firms earn zero economic profit.
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c. In the long-run equilibrium, firms charge a price above marginal cost.
d. In the long-run equilibrium, firms produce a quantity in excess of their efficient
scale.
Answer. d
Question 7.
Consider a monopolistically competitive firm in a market in long-run equilibrium.
This film is likely earning a.
a positive economic profit since it is charging a price above marginal cost.
b. no economic profit since it is charging a price equal to its marginal cost.
c. a positive economic profit since it is charging a price above its average total cost.
d. no economic profit since it is charging a price equal to it average total cost.
Answer. d
Question 8.
Suppose that monopolistically competitive firms in a certain market are earning
positive profits. In the transition from this initial situation to a long-run equilibrium.
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a. the number of firms in the market decreases.
b. each existing firm experiences a decrease in demand for its product.
c. each existing firm experiences a rightward shift of its marginal revenue curve.
d. each existing firm experiences an upward shift in its average total cost curve.
Answer. b
Question 9.
Refer to the following figure. The firm in this figure is monopolistically competitive.
It illustrates
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a.
b.
c.
d.
the shut-down case.
a long-nun economic profit.
a short-run economic profit.
a short-run loss.
Answer. c
Question 10.
In QnNo.9. at the profit-maximizing. or loss-minimizing output leveL the firm has
total costs of approximately
a.
b.
c.
d.
$600.
$6,000.
$9,000.
$12,500.
Answer. c
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