Chapter Questions
Which of the following conditions does NOT describea firm in a monopolistically competitive market?a. It sells a product different from its competitors.b. It takes its price as given by market conditions.c. It maximizes profit both in the short run and in thelong run.d. It has the freedom to enter or exit in the long run.
Which of the following markets best fits the definitionof monopolistic competition?a. wheatb. tap waterc. crude oild. haircuts
A monopolistically competitive firm will increase itsproduction ifa. marginal revenue is greater than marginal cost.b. marginal revenue is greater than average total cost.c. price is greater than marginal cost.d. price is greater than average total cost.
New firms will enter a monopolistically competitivemarket ifa. marginal revenue is greater than marginal cost.b. marginal revenue is greater than average total cost.c. price is greater than marginal cost.d. price is greater than average total cost.
What is true of a monopolistically competitive marketin long-run equilibrium?a. Price is greater than marginal cost.b. Price is equal to marginal revenue.c. Firms make positive economic profits.d. Firms produce at the minimum of average total cost.
If advertising makes consumers more loyal to particu-lar brands, it could ________ the elasticity of demand
and ________ the markup of price over marginal cost.a. increase, increaseb. increase, decreasec. decrease, increased. decrease, decrease