Name_____________________ Per___ Date turned in________
Posted on internet Friday 03_16
Econ: Chapter: 7 Section: 3 Date Due: 03_19_ Page(s) 166
Thru 169 Biography: pg.165 Bill Gates; Data Bank: 534,535
Graphs Fig.6.1;6.2;6.3;6.4; Global Connection: pg.152 Skills for
Life:page:155 Fast Fact pg.159 Case study Regulating Cable
Television pg.177
Chapter 7 Section 3 Monopolistic competition
Objectives: after studying this section you will be able to:
A. Describe characteristics and give examples of monopolistic competition.
B. Explain how firms compete without lowering prices.
C. Understand how firms in a monopolistically competitive market set output.
D. Describe characteristics and give examples of oligopoly
Main idea: monopolistic competition is similar to perfect competition, except that companies
sell slightly different goods. Oligopoly, which is closer to monopoly, describes a market with
only a few large producers.
Chapter 7 Section 3 Monopolistic competition
1. Name the two extremes of the range of market structures___________ and__________
2. Most markets fall into two additional categories, what do economists call these two
additional categories?__________-and___________
Monopolistic Competition
3. What is the name of the market structure in which many companies sell products that are
similar but not identical?____________-- ______________
4. Monopolistic competition is a modified version of perfect competition. T F
5. Products that sell in a monopolistic competitive market have products that are slightly
different from their competition. T F
6. Monopolistic competition involves commodities. T F
7. Goods that sell in a monopolistic competitive market can be substituted for one another. T F
8. Products in a competitively monopolistic market are identical. T F
9. Monopolistic competition is not a fact of everyday life. TF
10. You probably buy and visit from monopolistically competitive stores several times a week.
TF
11. Give examples, of three monopolistically competitive firms._______- _______and_______
Four Conditions of Monopolistic Competition
12. Monopolistic competition develops from how many conditions?__________
13. These four rules are very similar to what other market structure?_________ ___________
14. Monopolistically competitive markets are usually marked by economies of scale. TF
15. Monopolistically competitive firms have high startup costs. TF
16. Monopolistically competitive firms can start up quickly and enter the marketplace. TF
17. Producers or sellers in a monopolistically competitive market cannot keep out new
competitors. TF
18. There are many competing firms in a monopolistically competitive market. TF
19. In a competitively monopolistic market prices can rise but not too high. TF
20. In a monopolistically competitive market a producer can raise the price of its product
because it is slightly different from the competitions. TF
21. But unlike the monopolist, the monopolistically competitive seller cannot raise the price too
high. TF
22. What is the main difference between monopolistic competition and perfect competition?__
Nonprice Competition
23. If a seller cannot compete on price alone, what is the other alternative?__________
24. Name three simple ways to distinguish a product.__________ ___________ ______
25. A good cannot be differentiated by where it is sold. TF
26. You can differentiate your product by the level of service that you provide. TF
27. Advertising can create differences that are more a matter of perception rather than reality.
TF
Price, Output, and Profits
28. Prices under monopolistic competition will be lower than they would be the perfect
competition. TF
29. Name two factors that will prevent a seller in a monopolistic competitive market to raise
prices too much._____________and_____________
30. The demand curves of a firm in a monopolistically competitive market are usually inelastic.
TF
31. What would cause the demand curve of a firm in a monopolistically competitive market to
be ?_______________
32. Monopolistically competitive markets sell their product at prices that are higher than a
monopoly. TF
33. Output in a monopolistically competitive market is higher than output in a monopoly. TF
34. Output in a purely competitive market is more than output in a monopolistically
competitive market. TF
35. Salaries for owners are not covered in a monopolistically competitive market. TF
36. What two trends will work to take away excess profits in a monopolistically competitive
market?___________ ___________
37. Rivalries among firms will be one factor that will keep excess of profits in a monopolistically
competitive market. TF
38. Cheap imitations will induce customers, if prices become too high in a monopolistically
competitive market. TF
39. What factor prevents firms in monopolistically competitive markets to produce their goods
at the lowest possible average cost?_______________
40. Although monopolistically competitive markets do not use resources efficiently what do
they provide consumers with? ______________. You will