1.Although its name can sometimes cause confusion for students, the market structure we call "monopolistic competition" is so named because it has some features of monopoly and some features of competition. In which way is a monopolistically competitive market like a monopoly? a.In both types of markets, profits are zero in the long run. b.In both types of markets, the level of production is below the socially efficient level. c.In both types of markets, products are identical. d.In both types of markets, there is free entry and exit.

2. Although its name can sometimes cause confusion for students, the market structure we call "monopolistic competition" is so named because it has some features of monopoly and some features of competition. In which way is a monopolistically competitive market like a competitive market?

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3.If the market is monopolistically competitive, then what can be said about prices, output, and profits in this market, relative to a perfectly competitive market? Use the long run to answer.

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4. In a monopolistically competitive market in the long run, price (P) is ________________ average cost (AC) and, price (P) is ________________ marginal cost (MC).

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5.Fill in the blanks in the following sentence. In a monopolistically competitive market in the long run, marginal cost is __________ average cost, and marginal revenue is __________ marginal cost. a.greater than, greater than b.greater than, equal to c.less than, equal to d.less than, greater than

6.As you read in the chapter, the requirements for an industry to be considered monopolistically competitive are that there are many firms and that those firms are producing unique, or differentiated, products. One industry in which we find differentiated products is the recording industry. Not only are there many genres of music (iTunes lists almost 50), but within each genre there are countless artists as well. Over the past few decades, technology has reduced the fixed costs of recording and the marginal costs of distributing music. In 1979, for example, the average studio bill for an album was more than $30,000 ($170,000 in today's dollars). Nowadays, with digital recording technology, an artist or band can record an entire album for a few thousand dollars and the albums can then be distributed at low cost as MP3s on the Internet, with no record store involved What do you expect to happen to the number of recording artists in the music industry because of the