practice problem set for chapter 11

Practice problem - econ 2100 practice problem set for chapter 11 Name Date 1 In monopolistic competition A firms advertise to increase demand for

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econ 2100 practice problem set for chapter 11 Name: __________________________ Date: _____________ 1. In monopolistic competition: A) firms advertise to increase demand for their product. B) entry of new firms shifts the demand curve for existing firms to the right. C) when some firms exit, the demand curve for the firms that remain in the industry shifts to the left. D) all of the above are true. Use the following to answer question 2: Figure: Comparing Long-Run Equilibriums 2. (Figure: Comparing Long-Run Equilibriums) In the accompanying figure, which of the following statements is true ? A) The major difference between panel (a) and panel (b) is that firms in the market structure shown in panel (a) cannot have excess profits in the long run, but the firms in the market structure shown in panel (b) can have excess profits in the long run. B) Panel (a) and panel (b) show markets that have few interdependent firms. C) Panel (a) and panel (b) show markets that produce identical products. D) Panel (a) and panel (b) show markets that have many firms. Page 1
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run, then in the long run: A) firms will enter the industry. B) the demand curves faced by existing firms will move leftwards. C) economic profits will be reduced to zero. D) all of the above are true. 4. In monopolistic competition, each firm: A) is a price-taker. B) has some ability to set the price of its differentiated good. C) will set price equal to marginal cost. D) none of the above 5. Long-run equilibrium in perfect competition and in monopolistic competition are similar because, in both, firms: A) produce at the minimum point of the average total cost curve. B) set price equal to marginal cost. C) make zero economic profits. D) have excess capacity. 6. Toby operates a small deli downtown. The deli industry is monopolistically competitive. In the long run, Toby will produce where: A) marginal revenue equals marginal cost. B) price equals minimum average total cost. C) price equals marginal cost. D) price equals marginal revenue. Page 2
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This note was uploaded on 03/16/2010 for the course ECON 2100 taught by Professor Klimenko during the Spring '08 term at Georgia Institute of Technology.

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Practice problem - econ 2100 practice problem set for chapter 11 Name Date 1 In monopolistic competition A firms advertise to increase demand for

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