Chapter 14 - 1 monopolistic competition What are the...

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1. What are the characteristics of monopolistic competition ? Your Answer: Many firms, differentiated product, and barriers to entry. Correct Answer: Many firms, differentiated product, and no barriers to entry. Incorrect. There are no barriers to entry. 2. Product differentiation and advertising are characteristics more commonly found in what type of market structure? Your Answer: Monopolistic competition. Correct. Nonprice competition in the form of product differentiation and advertising are key characteristics of monopolistic competition. 3. The fact that firms cannot influence market price by virtue of their size is the feature that differentiates monopolistic competition from: Your Answer: Perfect competition and monopoly. Correct Answer: Oligopoly and monopoly. Incorrect. The feature that distinguishes monopolistic competition from monopoly and oligopoly is that firms that are monopolistic competitors cannot influence market price by virtue of their size. 4. The fact that good substitutes are available is the feature that differentiates monopolistic competition from: Your Answer: All of the other market structures. Correct Answer: Monopoly.
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Incorrect. The feature that distinguishes monopolistic competition from pure monopoly is that good substitutes are available in a monopolistically competitive industry. 5. Which of the following is the preferred strategy of the monopolistic competitor to achieve market power? Your Answer: Cost. Try to minimize the cost of production. Correct Answer: Product differentiation. Try to produce a unique product or establish a good reputation. Incorrect. The tendency to minimize cost is not a characteristic of monopolistic competition. 6. The term monopolistic competition applies to each firm in the sense that: Your Answer: Each firm is competitive because it is a price taker. Correct Answer: Each firm is competitive because it produces a good for which there are close substitutes. Incorrect. Monopolistically competitive firms have some degree of control over price; thus, they are price makers. 7. Product differentiation and advertising have its supporters and its critics. The supporters of advertising argue that: Your Answer: All of the above. Correct. All of the above are arguments in favor of product differentiation and advertising. Product differentiation is about innovation, and product innovation raises the standard of living. Advertising helps people make informed, rational choices. 8. Advertising has its supporters and its critics. The critics of advertising argue that: Your Answer:
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Advertising leads to unproductive warfare, creates a barrier to entry, and by its very nature, imposes a cost on society. Correct Answer: All of the above. Incorrect. This answer is correct, however, other choices are also correct.
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