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53. One way in which monopolistic competition differs from oligopoly is that
a.
there are no barriers to entry in oligopolies.
b.
in oligopoly markets there are only a few sellers.
c.
all firms in an oligopoly eventually earn zero economic profits.
d.
strategic interactions between firms are rare in oligopolies.
54. Which of the following is unique to a monopolistically competitive firm when compared to an oligopoly?
a.
The monopolistically competitive firm advertises.
b.
The monopolistically competitive firm produces a quantity of output that falls short of the socially optimal
level.
c.
Monopolistic competition features many buyers.
d.
Monopolistic competition features many sellers.
55. Which of the following is an example of a monopolistically competitive industry?
a.
computer operating systems
b.
wheat
c.
movies
d.
cable television
56. Which of the following is an example of a monopolistically competitive industry?
a.
electric lamp bulbs
b.
aircraft manufacturing
c.
corn
d.
sweaters
57. Which of the following goods are likely to be sold in a monopolistically competitive market?
a.
jeans
b.
breakfast cereal
c.
electricity distribution in Chicago
d.
postage stamps
58. Which of the following goods are not likely to be sold in monopolistically competitive markets?
a.
jeans
b.
books
c.
tap water
d.
clocks
59. Examples of monopolistically competitive markets include the markets for
a.
restaurants and furniture.
b.
wheat and corn.
c.
postage stamps and wooden pencils.
d.
All of the above are correct.
60. Which of the following markets is not likely characterized by a monopolistically competitive market?
a.
mobile telephone service
b.
auto mechanic service
c.
barbershops
d.
jewelry
61. A monopolistically competitive industry is characterized by
a.
many firms selling products that are similar but not identical.
b.
many firms selling identical products.
c.
a few firms selling products that are similar but not identical.
d.
a few firms selling highly different products.
62. A monopolistically competitive industry is characterized by
a.
many firms, differentiated products, and barriers to entry.
b.
many firms, differentiated products, and free entry.
c.
a few firms, identical products, and free entry.
d.
a few firms, differentiated products, and barriers to entry.
63. A market structure in which there are many firms selling products that are similar but not identical is known as
a.
oligopoly.
b.
monopoly.
c.
monopolistic competition.
d.
perfect competition.
64. Which of the following is not a characteristic of monopolistic competition?
a.
a large number of sellers
b.
firms are price takers
c.
free entry into the market
d.
a differentiated product
65. Monopolistic competition is characterized by which of the following attributes?
(i)
free entry
(ii)
product differentiation
(iii)
many sellers
a.
(i) and (iii) only
b.
(i) and (ii) only
c.
(ii) and (iii) only
d.
(i), (ii), and (iii)
66. A monopolistically competitive market
a.
is imperfectly competitive, and all imperfectly competitive markets are monopolistically competitive.
b.
is imperfectly competitive, but not all imperfectly competitive markets are monopolistically competitive.
c.
is imperfectly competitive, whereas an oligopolistic market is not imperfectly competitive.
d.
is not imperfectly competitive.
67. Free entry and exit means that the number of firms in the market adjusts until
a.
producers continuously enter the market freely.
b.
the market grows to a profitable level.
c.
economic profits are driven to zero.
d.
products are free.
68. In a monopolistically competitive market,
a.
there are only a few sellers.
b.
each firm takes the price of its product as given.
c.
firms can enter or exit the market without restrictions.
d.
each firm produces a product that is essentially identical to the products of other firms in the market.
69. A monopolistically competitive market is characterized by
a.
free entry, but not differentiated products.
b.
differentiated products, but not long run profits.
c.
long run profits, but not many firms.
d.
many firms, but not free entry.
70. Select the type of market that is described by the following attributes: many firms, differentiated products, and free
entry.
a.
natural monopoly
b.
perfectly competition
c.
monopolistic competition
d.
monopoly
71. If firms in a particular market sell similar or identical products, then the market is
(i)
perfectly competitive.
(ii)
monopolistically competitive.
(iii)
an oligopoly.
a.
(i) or (ii) only
b.
(ii) or (iii) only
c.
(i) or (iii) only
d.
(i) only
72. When an industry has many firms, the industry is
a.
an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the firms sell
identical products.
b.
an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical
products.
c.
monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive if the firms
sell identical products.
d.
perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive if the firms
sell identical products.
73. If there are many firms participating in a market, the market is either
a.
an oligopoly or monopolistically competitive.
b.
perfectly competitive or monopolistically competitive.
c.
an oligopoly or perfectly competitive.
d.
an oligopoly or a cartel.
74. Which of the following statements is correct?
a.
Monopolistic competition is similar to monopoly because both market structures are characterized by firms
being price makers rather than price takers.
b.
Monopolistic competition is similar to perfect competition because both market structures are characterized by
differentiated products.
c.
Monopolistic competition is similar to oligopoly because both market structures are characterized by strategic
interaction between firms in the market.
d.
Monopolistic competition is similar to perfect competition because both market structures are characterized by
perfectly elastic demand curves for firms.
75. In which of the following market structures is(are) there a large number of sellers?
(i)
monopolistic competition
(ii)
perfect competition
(iii)
oligopoly
a.
(i) and (ii) only
b.
(ii) and (iii) only
c.
(ii) only
d.
(i), (ii), and (iii)
76. Monopolistic competition differs from perfect competition because in monopolistically competitive markets
a.
there are barriers to entry.
b.
all firms can eventually earn economic profits.
c.
each of the sellers offers a somewhat different product.
d.
strategic interactions between firms are important.
77. Monopolistically competitive markets differ from perfectly competitive markets due to
(i)
the number of sellers.
(ii)
the barriers to entry.
(iii)
the product differentiation among the sellers.
a.
(i) only
b.
(iii) only
c.
(i) and (iii) only
d.
(ii) and (iii) only
78. In both perfect competition and monopolistic competition, each firm
a.
has some monopoly power.
b.
sells a product that is at least slightly different from those of other firms.
c.
faces a downward-sloping demand curve.
d.
has many competitors.
79. Which of the following conditions distinguishes monopolistic competition from perfect competition?
a.
the number of sellers in the market
b.
the freedom of entry and exit by firms in the market
c.
the size of firms in the market
d.
product differentiation
80. A similarity between monopoly and monopolistic competition is that in both market structures
a.
strategic interactions among sellers are important.
b.
there are a small number of sellers.
c.
sellers are price makers rather than price takers.
d.
there are only a few buyers but many sellers.
81. Which of the following statements is correct?
a.
Cigarettes are likely to be produced in a monopolistically competitive industry.
b.
Novels are likely to be produced in a monopoly industry.
c.
Movies are likely to be produced in a monopolistically competitive industry.
d.
Milk is likely to be produced in an oligopoly industry.
82. Which of the following statements is not correct?
a.
Novels are likely to be produced in a monopolistically competitive industry.
b.
Cable television is likely to be produced in a monopoly industry.
c.
Milk is likely to be produced in a monopolistically competitive industry.
d.
Cigarettes are likely to be produced in an oligopoly industry.
83. Of the following market structures, which are considered imperfectly competitive?
I.
Perfect competition
II.
Monopoly
III.
Monopolistic competition
IV.
Oligopoly
a.
III only
b.
II and III
c.
III and IV
d.
II, III, and IV
84. Which market structure would likely have the highest concentration ratio?
a.
Monopoly
b.
Oligopoly
c.
Monopolistic competition
d.
Perfect competition
85. Which of the following market structures is considered a differentiated products market?
a.
Perfect competition
b.
Monopolistic competition
c.
Monopoly
d.
Both a and b are differentiated products markets.
86. In perfect competition as well as in monopolistic competition,
a.
marginal revenue is equal to price for each firm.
b.
profit is positive in a long-run equilibrium for each firm.
c.
entry and exit by firms are restricted.
d.
there are many firms in a single market.
87. In monopolistic competition as well as in monopoly,
a.
price exceeds marginal revenue for each firm.
b.
profit is zero in a long-run equilibrium for each firm.
c.
entry and exit by firms are unrestricted.
d.
there are at most a few firms in each market.
88. Which of the following is most likely sold in a monopolistically competitive market?
a.
wheat
b.
cable TV programming
c.
a share of McDonald’s stock
d.
sunglasses
Figure 16-1
89. Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a
monopolistically competitive market?
a.
Panel A
b.
Panel B
c.
Panel C
d.
Panel D
90. Refer to Figure 16-1. Which of the graphs illustrates a relatively elastic, though not perfectly elastic, demand curve
consistent with a market that has many substitute products?
a.
Panel A
b.
Panel B
c.
Panel C
d.
Panel D
91. Refer to Figure 16-1. Which of the following sets of explanations best describes the differences between the graphs
above?
a.
Panel A: monopolistically competitive firm’s demand curve
Panel B: monopoly firm’s demand curve
Panel C: oligopoly firm’s demand curve
Panel D: perfectly competitive firm’s demand curve
b.
Panel A: oligopoly firm’s demand curve
Panel B: perfectly competitive firm’s demand curve
Panel C: monopolistically competitive firm’s demand curve
Panel D: supply curve
c.
Panel A: perfectly competitive firm’s demand curve
Panel B: monopolistically competitive firm’s demand curve
Panel C: monopoly firm’s demand curve
Panel D: supply curve
d.
Panel A: monopolistically competitive firm’s demand curve
Panel B: monopoly firm’s demand curve
Panel C: perfectly competitive firm’s demand curve
Panel D: supply curve
92. Which of the following goods is most likely to be associated with monopolistic competition?
a.
Gasoline
b.
Milk
c.
Cookies
d.
Wheat
93. As competitors enter a monopolistically competitive industry, the incumbent firms demand curves shift
a.
To the left and become less elastic
b.
To the right and becomes less elastic
c.
To the left and becomes more elastic
d.
To the right and becomes more elastic
94. Which of the following is the most distinguishing characteristic of a monopolistically competitive industry?
a.
Market barriers
b.
One firm controls the industry
c.
Product differentiation
d.
A small number of firms dominate the market
95. Which of the following market structures results in a deadweight loss in the long run?
a.
Perfect competition and monopolistic competition
b.
Monopolistic competition and monopoly
c.
Perfect competition and monopoly
d.
All of these market structures lead to a deadweight loss in the long run
96. In which of the following market structures can a firm earn an economic profit in the short run?
a.
Perfect competition
b.
Monopolistic competition
c.
Monopoly
d.
All of these market structures can earn an economic profit in the short run
97. Assume a monopolistically competitive firm encounters a decrease in average variable cost at all output levels.We
would expect:
a.
The price to fall and output to rise
b.
The price to fall and output to fall
c.
The price to rise and output to rise
d.
The price to rise and output to fall
