Econ 221 MC Quiz 10b WS04



1.
The downward-sloping demand curve of a monopolistic competitor:
A.
reflects product differentiation.
B.
becomes horizontal in the long run.
C.
indicates collusion among the members of the product group.
D.
ensures that the firm will produce at minimum average cost in the long run.


2.
Which of these products comes closest to being sold in a perfectly competitive market?
A.
wheat
B.
frozen pizzas
C.
electric power
D.
mainframe computers
E.
gasoline in a small town


3.
A monopolistically competitive industry is like a perfectly competitive industry in that:
A.
each industry produces a standardized product.
B.
nonprice competition is a feature in both industries.
C.
neither industry has significant barriers to entry.
D.
firms in both industries face a horizontal demand curve.


4.
If a firm finds that its marginal cost exceeds its marginal revenue, the maximum profit rule requires the firm to:
A.
increase its output in both perfect and imperfect competition.
B.
decrease its output in both perfect and imperfect competition.
C.
decrease its output in imperfect, but not necessarily in perfect competition.
D.
increase its output in perfect, but not necessarily in imperfect, competition.


5.
The short-run equilibrium under monopolistic competition resembles the equilibrium under _______, in that price _______ marginal cost.
A.
monopoly, equals
B.
monopoly, exceeds
C.
monopoly, is below
D.
perfect competition, equals
E.
perfect competition, exceeds


6.
A typical feature of many oligopolies is:
A.
a noticeable lack of nonprice competition.
B.
a tendency toward destructive competition.
C.
MC = P pricing.
D.
a "live and let live" attitude.
E.
a socially optimal allocation of resources.


7.
In the long run, the most helpful action that a monopolistically competitive firm can take to maintain its economic profit is to
A.
continue its efforts to differentiate its product.
B.
raise its price.
C.
lower its price.
D.
do nothing, because it will inevitably experience a decline in profits.


8.
Demand and marginal revenue curves are downward sloping for monopolistically competitive firms because:
A.
there is free entry and exit.
B.
product differentiation allows each firm some degree of monopoly power.
C.
there are a few large firms in the industry and they each act as a monopolist.
D.
mutual interdependence among all firms in the industry leads to collusion.


9.
The entry of new firms into an industry that is monopolistically competitive is:
A.
prevented by government.
B.
fairly easy in many instances.
C.
prevented by patent controls.
D.
prevented by complex technological know-how.
E.
generally easier than the entry of new firms into an industry that is perfectly competitive.


10.
The demand curve, which assumes that competitors will follow price decreases but not price increases, is called
A.
an industry demand curve.
B.
an inelastic demand curve.
C.
a kinked demand curve.
D.
a competitive demand curve.


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