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Chapter 16 Monopolistic Competition
MULTIPLE CHOICE
1. Which of the following is a characteristic of monopolistic competition?
a.
ownership of a key resource by a single firm
b.
free entry
c.
identical product
d.
patents
2. The market for novels is
a.
perfectly competitive.
b.
a monopoly.
c.
monopolistically competitive.
d.
an oligopoly.
3. Monopolistic competition is a type of
a.
oligopoly.
b.
market structure.
c.
price discrimination.
d.
advertising strategy.
4. A monopolistically competitive market has characteristics that are similar to
a.
a monopoly only.
b.
a competitive firm only.
c.
both a monopoly and a competitive firm.
d.
neither a monopoly nor a competitive firm.
BETWEEN MONOPOLY AND PERFECT COMPETITION
1. A typical firm in the US economy would be classified as
a.
perfectly competitive.
b.
imperfectly competitive.
c.
a duopolist.
d.
an oligopolist.
2 ❖ Chapter 16 /Monopolistic Competition
2. The typical firm in the US economy
a.
has some degree of market power.
b.
sells its product for a price that is equal to the marginal cost of producing the last unit.
c.
is perfectly competitive.
d.
is a monopoly.
3. Which of the following pairs illustrates the two extreme examples of market structures?
a.
competition and oligopoly
b.
competition and monopoly
c.
monopoly and monopolistic competition
d.
oligopoly and monopolistic competition
4. The general term for market structures that fall somewhere between monopoly and perfect competition is
a.
incomplete markets.
b.
imperfectly competitive markets.
c.
oligopoly markets.
d.
monopolistically competitive markets.
5. The two types of imperfectly competitive markets are
a.
markets with differentiated products and monopoly.
b.
markets with differentiated products and oligopoly.
c.
oligopoly and monopoly.
d.
monopolistic competition and oligopoly.
6. The two types of imperfectly competitive markets are
a.
monopoly and monopolistic competition.
b.
monopoly and oligopoly.
c.
monopolistic competition and oligopoly.
d.
monopolistic competition and cartels.
7. Which of the following statements is not correct?
a.
Monopolistic competition is similar to monopoly because in each market structure the firm can
charge a price above marginal costs.
b.
Monopolistic competition is similar to perfect competition because both market structures are
characterized by free entry.
c.
Monopolistic competition is similar to oligopoly because both market structures are characterized
by barriers to entry.
d.
Monopolistic competition is similar to perfect competition because both market structures are
characterized by many sellers.
Chapter 16 /Monopolistic Competition ❖ 3
8. Which of the following statements is not correct?
a.
Monopolistic competition is different from monopoly because monopolistic competition is
characterized by free entry, whereas monopoly is characterized by barriers to entry.
b.
Both monopolistic competition and oligopoly fall in between the more extreme market structures of
competition and monopoly.
c.
Monopolistic competition is different from oligopoly because each seller in monopolistic
competition is small relative to the market, whereas each seller can affect the actions of other
sellers in an oligopoly.
d.
Both monopolistic competition and perfect competition are characterized by product differentiation.
9. In a market that is characterized by imperfect competition,
a.
firms are price takers.
b.
there are always a large number of firms.
c.
there are at least a few firms that compete with one another.
d.
the actions of one firm in the market never have any impact on the other firms' profits.
10. Firms in industries that have competitors but do not face so much competition that they are price takers are
operating in either a(n)
a.
oligopoly or perfectly competitive market.
b.
oligopoly or monopoly market.
c.
oligopoly or monopolistically competitive market.
d.
monopoly or monopolistically competitive market.
11. Imperfectly competitive firms are characterized by
a.
horizontal demand curves.
b.
standardized products.
c.
a large number of small firms.
d.
price making ability.
12. An oligopoly
a.
has a concentration ratio of less than 50 percent.
b.
is a price taker.
c.
is a type of imperfectly competitive market.
d.
has many firms rather than just one firm or a few firms.
4 ❖ Chapter 16 /Monopolistic Competition
13. An oligopoly is a market in which
a.
there are only a few sellers, each offering a product similar or identical to the products offered by
other firms in the market.
b.
firms are price takers.
c.
the actions of one seller in the market have no impact on the other sellers' profits.
d.
there are many price-taking firms, each offering a product similar or identical to the products
offered by other firms in the market.
14. One characteristic of an oligopoly market structure is:
a.
firms in the industry are typically characterized by very diverse product lines.
b.
firms in the industry have some degree of market power.
c.
products typically sell at a price equal to their marginal cost of production.
d.
the actions of one seller have no impact on the profitability of other sellers.
15. A market structure with only a few sellers, each offering similar or identical products, is known as
a.
oligopoly.
b.
monopoly.
c.
monopolistic competition.
d.
perfect competition.
16. The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)
a.
perfectly competitive market.
b.
monopolistically competitive market.
c.
oligopoly.
d.
monopoly.
17. Crude oil is primarily supplied to the world market by a few Middle Eastern countries. Such a market is an
example of a(n)
(i)
imperfectly competitive market.
(ii)
monopoly market.
(iii)
oligopoly market.
a.
(i) and (ii) only
b.
(ii) and (iii) only
c.
(i) and (iii) only
d.
(iii) only
Chapter 16 /Monopolistic Competition ❖ 5
18. A concentration ratio
a.
measures the percentage of total output supplied by the four largest firms in the industry.
b.
reflects the level of competition in an industry.
c.
is related to the control that each firm has over price.
d.
All of the above are correct.
19. A concentration ratio
a.
measures the percentage of total sales of the top firm in the industry.
b.
reflects the level of competition in an industry.
c.
is inversely related to the price charged by the top firm in the industry.
d.
All of the above are correct.
20. The higher the concentration ratio, the
a.
more control an individual firm has to set prices.
b.
more competitive the industry.
c.
less competitive the industry.
d.
Both a and c are correct.
21. The lower the concentration ratio, the
a.
more control an individual firm has to set prices.
b.
more competitive the industry.
c.
less competitive the industry.
d.
Both a and c are correct.
22. Which of the following industries has the highest concentration ratio?
a.
wheat
b.
novels
c.
cigarettes
d.
dog food
6 ❖ Chapter 16 /Monopolistic Competition
Table 16-1
The following table shows the percentage of output supplied by the top eight firms in four different industries.
Firm
Industry W
Industry X
Industry Y
Industry Z
1
0.26
0.44
0.11
0.36
2
0.14
0.28
0.07
0.15
3
0.11
0.12
0.06
0.09
4
0.07
0.06
0.05
0.02
5
0.06
0.03
0.04
0.02
6
0.04
0.03
0.03
0.01
7
0.03
0.02
0.02
0.01
8
0.01
0.01
0.01
0.01
23. Refer to Table 16-1. What is the concentration ratio in Industry W?
a.
26%
b.
58%
c.
72%
d.
82%
24. Refer to Table 16-1. What is the concentration ratio in Industry X?
a.
6%
b.
44%
c.
90%
d.
99%
25. Refer to Table 16-1. What is the concentration ratio in Industry Y?
a.
29%
b.
39%
c.
44%
d.
58%
26. Refer to Table 16-1. What is the concentration ratio in Industry Z?
a.
36%
b.
51%
c.
62%
d.
67%
27. Refer to Table 16-1. Which industry has the highest concentration ratio?
a.
Industry W
b.
Industry X
c.
Industry Y
d.
Industry Z
Chapter 16 /Monopolistic Competition ❖ 7
28. Refer to Table 16-1. Which industry is the least competitive?
a.
Industry W
b.
Industry X
c.
Industry Y
d.
Industry Z
29. Refer to Table 16-1. Which industry has the lowest concentration ratio?
a.
Industry W
b.
Industry X
c.
Industry Y
d.
Industry Z
30. Refer to Table 16-1. Which industry is the most competitive?
a.
Industry W
b.
Industry X
c.
Industry Y
d.
Industry Z
Table 16-2
The following table shows the total output produced by the top six firms as well as the total industry output for
each industry.
Firm
Industry A
Industry B
Industry C
Industry D
1
13,250
8,750
1,750
15,000
2
10,975
7,500
1,725
14,000
3
8,175
6,400
1,700
13,000
4
4,275
5,000
1,675
12,000
5
1,250
4,250
1,650
11,000
6
875
4,000
1,625
10,000
Total
45,350
70,900
30,125
120,000
31. Refer to Table 16-2. What is the concentration ratio for Industry A?
a.
about 71%
b.
about 81%
c.
about 88%
d.
100%
32. Refer to Table 16-2. What is the concentration ratio for Industry B?
a.
about 12%
b.
about 32%
c.
about 39%
d.
about 51%
8 ❖ Chapter 16 /Monopolistic Competition
33. Refer to Table 16-2. What is the concentration ratio for Industry C?
a.
about 23%
b.
about 34%
c.
about 43%
d.
about 52%
34. Refer to Table 16-2. What is the concentration ratio for Industry D?
a.
about 13%
b.
about 35%
c.
about 45%
d.
about 63%
35. Refer to Table 16-2. Which industry has the highest concentration ratio?
a.
Industry A
b.
Industry B
c.
Industry C
d.
Industry D
36. Refer to Table 16-2. Which industry is the least competitive?
a.
Industry A
b.
Industry B
c.
Industry C
d.
Industry D
37. Refer to Table 16-2. Which industry has the lowest concentration ratio?
a.
Industry A
b.
Industry B
c.
Industry C
d.
Industry D
38. Refer to Table 16-2. Which industry is the most competitive?
a.
Industry A
b.
Industry B
c.
Industry C
d.
Industry D
Chapter 16 /Monopolistic Competition ❖ 9
Table 16-3
The following table shows the output produced by each of the top eight firms in four industries as well as the
total industry output for those industries.
Firm
Industry A
Industry B
Industry C
Industry D
1
50,000
18,000
37,000
40,000
2
47,000
17,750
36,500
39,000
3
43,000
17,250
35,500
37,000
4
38,000
16,500
34,000
34,000
5
32,000
15,500
32,000
30,000
6
25,000
14,250
29,500
25,000
7
17,000
12,750
26,500
19,000
8
8,000
11,000
23,000
12,000
Total
270,000
130,000
300,000
250,000
39. Refer to Table 16-3. What is the concentration ratio for Industry A?
a.
approximately 52%
b.
approximately 58%
c.
approximately 66%
d.
approximately 72%
40. Refer to Table 16-3. What is the concentration ratio for Industry B?
a.
approximately 46%
b.
approximately 54%
c.
approximately 57%
d.
approximately 61%
41. Refer to Table 16-3. What is the concentration ratio for Industry C?
a.
approximately 44%
b.
approximately 48%
c.
approximately 53%
d.
approximately 56%
42. Refer to Table 16-3. What is the concentration ratio for Industry D?
a.
approximately 48%
b.
approximately 54%
c.
approximately 60%
d.
approximately 66%
10 ❖ Chapter 16 /Monopolistic Competition
43. Refer to Table 16-3. Which industry has the highest concentration ratio?
a.
Industry A
b.
Industry B
c.
Industry C
d.
Industry D
44. Refer to Table 16-3. Which industry has the lowest concentration ratio?
a.
Industry A
b.
Industry B
c.
Industry C
d.
Industry D
45. Refer to Table 16-3. Based on the concentration ratio, which industry is the most competitive?
a.
Industry A
b.
Industry B
c.
Industry C
d.
Industry D
46. Refer to Table 16-3. Based on the concentration ratio, which industry is the least competitive?
a.
Industry A
b.
Industry B
c.
Industry C
d.
Industry D
47. One key difference between an oligopoly market and a competitive market is that oligopolistic firms
a.
are price takers while competitive firms are not.
b.
can affect the profit of other firms in the market by the choices they make while firms in
competitive markets do not affect each other by the choices they make.
c.
sell completely unrelated products while competitive firms do not.
d.
sell their product at a price equal to marginal cost while competitive firms do not.
48. 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.
Chapter 16 /Monopolistic Competition ❖ 11
49. Which of the following is an example of a monopolistically competitive industry?
a.
computer operating systems
b.
tennis balls
c.
movies
d.
cable television
50. Which of the following is an example of a monopolistically competitive industry?
a.
breakfast cereals
b.
cigarettes
c.
restaurants in New York City
d.
milk
51. Which of the following goods are likely to be sold in a monopolistically competitive market?
a.
sweaters
b.
cola
c.
corn
d.
postage stamps
52. Which of the following goods are not likely to be sold in monopolistically competitive markets?
a.
jeans
b.
books
c.
tap water
d.
clocks
53. 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.
54. Which of the following markets is not likely characterized by a monopolistically competitive market?
a.
piano lessons
b.
corn
c.
cookies
d.
clothing
12 ❖ Chapter 16 /Monopolistic Competition
55. 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.
56. 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.
57. 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.
58. 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
59. 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)
Chapter 16 /Monopolistic Competition ❖ 13
60. 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.
61. 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.
62. A monopolistically competitive market
a.
has some features of monopoly and some features of competition.
b.
has one large, dominant firm and many other smaller firms.
c.
is difficult to enter.
d.
occurs whenever firms earn zero economic profit.
63. 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
64. If firms in a particular market similar or sell 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
14 ❖ Chapter 16 /Monopolistic Competition
65. 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.
66. 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.
67. Which of the following statements is correct?
a.
Monopolistic competition is similar to monopoly because both market structures are characterized
by patents.
b.
Monopolistic competition is similar to perfect competition because both market structures are
characterized by each seller being small compared to the market.
c.
Monopolistic competition is similar to oligopoly because both market structures are characterized
by free entry.
d.
Monopolistic competition is similar to perfect competition because both market structures are
characterized by excess capacity.
68. 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)
69. 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.
Chapter 16 /Monopolistic Competition ❖ 15
70. 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
71. 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.
72. 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
73. 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.
74. 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.
75. 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.
16 ❖ Chapter 16 /Monopolistic Competition
76. 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
77. Which market structure would likely have the highest concentration ratio?
a.
Monopoly
b.
Oligopoly
c.
Monopolistic competition
d.
Perfect competition
78. 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.
79. 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.
80. 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.
Chapter 16 /Monopolistic Competition ❖ 17
COMPETITION WITH DIFFERENTIATED PRODUCTS
1. A downward-sloping demand curve
a.
is a feature of all monopolistically competitive firms.
b.
means that the firm in question will never experience a zero profit.
c.
causes marginal revenue to exceed price.
d.
prohibits firms from earning positive economic profits in the long run.
2. Each firm in a monopolistically competitive industry faces a downward-sloping demand curve because
a.
there are many other sellers in the market.
b.
there are very few other sellers in the market.
c.
the firm's product is different from those offered by other firms in the market.
d.
the firm faces the threat of entry into the market by new firms.
3. For a monopolistically competitive firm,
a.
marginal revenue and price are the same.
b.
average revenue and price are the same.
c.
at the profit-maximizing quantity of output, price equals marginal cost.
d.
at the profit-maximizing quantity of output, price equals the minimum of average total cost.
4. For a monopolistically competitive firm, at the profit-maximizing quantity of output,
a.
price exceeds marginal cost.
b.
marginal revenue exceeds marginal cost.
c.
marginal cost exceeds average revenue.
d.
price equals marginal revenue.
5. Product differentiation causes the seller of a good to face what type of demand curve?
a.
downward sloping
b.
vertical
c.
horizontal
d.
Any of the above could be correct since product differentiation does not affect the shape of the
demand curve.
6. A firm in a monopolistically competitive market faces a
a.
downward-sloping demand curve because the firm’s product is different from those offered by
other firms.
b.
downward-sloping demand curve because there are only a few firms in the market.
c.
horizontal demand curve because there are many firms in the market.
d.
horizontal demand curve because firms can enter the market without restriction.
18 ❖ Chapter 16 /Monopolistic Competition
7. In the short run, a firm in a monopolistically competitive market operates much like a
a.
firm in a perfectly competitive market.
b.
firm in an oligopoly.
c.
monopolist.
d.
monopsonist.
8. Each firm in a monopolistically competitive market
a.
earns both short-run and long-run profits.
b.
faces a downward-sloping demand curve.
c.
cannot earn economic profit in the short run.
d.
sets price equal to marginal cost.
9. In a monopolistically competitive industry, firms set price
a.
equal to marginal cost since each firm is a price taker.
b.
below marginal cost since each firm is a price taker.
c.
above marginal cost since each firm is a price setter.
d.
always a fraction of marginal cost since each firm is a price setter.
10. A profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competi-
tive market because the firm in the monopolistically competitive market
a.
is characterized by market-share maximization.
b.
has no barriers to entry.
c.
faces a downward-sloping demand curve for its product.
d.
faces a horizontal demand curve at the market clearing price.
11. A monopolistically competitive firm chooses
a.
the quantity of output to produce, but the market determines price.
b.
the price, but competition in the market determines the quantity.
c.
price, but output is determined by a cartel production quota.
d.
the quantity of output to produce and the price at which it will sell its output.
12. Product differentiation in monopolistically competitive markets ensures that, for profit-maximizing firms,
a.
marginal revenue will equal average total cost.
b.
price will exceed marginal cost.
c.
marginal cost will exceed average revenue.
d.
average variable cost will be declining.
Chapter 16 /Monopolistic Competition ❖ 19
13. In a monopolistically competitive industry, a firm’s demand curve also represent its
a.
marginal revenue.
b.
marginal cost.
c.
average revenue.
d.
profit.
14. A firm in a monopolistically competitive market is similar to a monopoly in the sense that
(i)
they both face downward-sloping demand curves.
(ii)
they both charge a price that exceeds marginal cost.
(iii)
free entry and exit determines the long-run equilibrium.
a.
(i) only
b.
(ii) only
c.
(i) and (ii) only
d.
(i), (ii), and (iii) only
15. A monopolistically competitive firm's choice of output level is virtually identical to the choice made by
a.
a perfectly competitive firm.
b.
a duopolist.
c.
a monopolist.
d.
an oligopolist.
16. To maximize its profit, a monopolistically competitive firm
a.
takes the price as given and chooses its quantity, just as a competitive firm does.
b.
takes the price as given and chooses its quantity, just as a colluding oligopolist does.
c.
chooses its quantity and price, just as a competitive firm does.
d.
chooses its quantity and price, just as a monopoly does.
17. Because monopolistically competitive firms produce differentiated products, each firm
a.
faces a demand curve that is horizontal.
b.
faces a demand curve that is vertical.
c.
has no control over product price.
d.
has some control over product price.
20 ❖ Chapter 16 /Monopolistic Competition
18. A monopolistically competitive firm chooses its
a.
price and quantity just as a monopoly does.
b.
quantity but faces a horizontal demand curve just as a competitive firm does.
c.
price but can sell any quantity at the market price just as an oligopoly does.
d.
price and quantity based on the decisions of the other firms in the industry just as an oligopoly
does.
19. When a monopolistically competitive firm raises its price,
a.
quantity demanded falls to zero.
b.
quantity demanded declines but not to zero.
c.
the market supply curve shifts outward.
d.
quantity demanded remains constant.
20. A monopolistically competitive firm chooses the quantity to produce where
a.
price equals marginal cost.
b.
demand equals marginal cost.
c.
marginal revenue equals marginal cost.
d.
Both a and c are correct.
21. The profit-maximizing rule for a firm in a monopolistically competitive market is to always select the quantity
at which
a.
marginal revenue is equal to marginal cost.
b.
average total cost is equal to marginal revenue.
c.
average total cost is equal to price.
d.
average revenue exceeds average total cost.
22. A profit-maximizing firm in a monopolistically competitive market is characterized by which of the follow-
ing?
a.
average revenue exceeds marginal revenue
b.
marginal revenue exceeds average revenue
c.
average revenue is equal to marginal revenue
d.
revenue is always maximized along with profit
23. A profit-maximizing firm in a monopolistically competitive market is characterized by which of the follow-
ing?
a.
average revenue exceeds marginal revenue
b.
marginal revenue equals marginal cost
c.
price exceeds marginal cost
d.
All of the above are correct.
