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Chapter 9Monopolistic Competition, Oligopoly, and Game Theory MULTIPLE CHOICE 1. Which of the following is not an assumption of the theory of monopolistic competition? a. There are high barriers to entry. b. There are many sellers and few buyers. c. Each firm in the industry produces and sells a homogeneous product. d. a and b e. all of the above ANS: E DIF: Easy 2. Which of the following is one of the assumptions upon which the theory of monopolistic competition is built? a. There are many sellers. b. There are few buyers. c. It is difficult to enter the industry. d. Each firm in the industry produces a homogeneous product. ANS: A DIF: Easy 3. In a monopolistically competitive industry, a. each firm in the industry produces a slightly differentiated product. b. there are barriers to entry. c. there are barriers to exit. d. there are few sellers. ANS: A DIF: Easy 4. In a monopolistically competitive market, which of the following factors probably does not give rise to product differentiation? a. packaging of the product b. brand names c. loyalty of customers to a particular producer d. quality difference e. the small number of sellers ANS: E DIF: Moderate 5. Which of the following industries is the best example of monopolistic competition? a. cotton b. electricity generation c. automobiles d. service stations ANS: D DIF: Moderate 6. The monopolistic competitor faces a __________ demand curve. a. horizontal b. vertical c. downward-sloping d. upward-sloping 20 ANS: C DIF: Easy 7. The monopolistic competitor faces a __________ demand curve and therefore is a price __________. a. downward-sloping; searcher. b. horizontal; taker. c. downward-sloping; taker. d. horizontal; searcher. ANS: A DIF: Easy 8. If a monopolistically competitive firm raises its price, then a. it should expect to lose all of its customers because there are many other sellers of the product.... View Full Document

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