Ch12 - CHAPTER 12 Monopolistic Competition and Oligopoly...

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CHAPTER 12 Monopolistic Competition and Oligopoly MULTIPLE CHOICE Section 12.1 easy 1. For which of the following market structures is it assumed that there are barriers to entry? a. perfect competition b. monopolistic competition c. monopoly d. all of the above e. (b) and (c) only easy 2. Use the following two statements about monopolistic competition to answer this question. I. In the long run, the price of the good will equal the minimum of the average cost. II. In the short run, firms may earn a profit. a. I and II are true. b. I is true, and II is false. c. I is false, and II is true. d. I and II are false. easy 3. A market with few entry barriers and with many firms that sell differentiated products is a. purely competitive. b. a monopoly. c. monopolistically competitive. d. oligopolistic. easy 4. The most important factor in determining the long-run profit potential in monopolistic competition is a. free entry and exit. b. the elasticity of the market demand curve. c. the elasticity of the firm's demand curve. d. the reaction of rival firms to a change in price. easy 5. Which of the following is NOT regarded as a source of inefficiency in monopolistic competition? a. the fact that price exceeds marginal cost. b. excess capacity. c. product diversity. d. the fact that long-run average cost is not minimized. e. all of the above. easy 6. Monopolistically competitive firms have monopoly power because they a. face downward sloping demand curves. b. are great in number. c. have freedom of entry. d. are free to advertise. 174
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CHAPTER 12 TEST BANK MONOPOLISTIC COMPETITION AND OLIGOPOLY SIXTH EDITION easy 7. A monopolistically competitive firm in short run equilibrium: a. will make negative profit (lose money). b. will make zero profit (break-even). c. will make positive profit. d. any of the above are possible. easy 8. A monopolistically competitive firm in long run equilibrium: a. will make negative profit. b. will make zero profit. c. will make positive profit. d. any of the above are possible. easy 9. What happens to an incumbent firm's demand curve in monopolistic competition as new firms enter? a. It shifts right. b. It shifts left. c. It becomes horizontal. d. New entrants will not affect an incumbent firm's demand curve. easy 10. Which of the following is true of the output level produced by a firm in long run equilibrium in a monopolistically competitive industry? a. It produces at minimum average cost. b. It does not produce at minimum average cost, and average cost is increasing. c. It does not produce at minimum average cost, and average cost is decreasing. d. Either (b) or (c) could be true. easy 11. Which of the following is true in long run equilibrium for a firm in a monopolistic competitive industry? a.
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Ch12 - CHAPTER 12 Monopolistic Competition and Oligopoly...

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