Download Practice Mult. Choice

1. Firms in a monopolistically competitive industry produce:
a. homogeneous goods and services.
b. differentiated products.
c. competitive goods only.
d. consumption goods only.
2. A monopolistically competitive market is characterized by:
a. many small sellers selling a differentiated product.
b. a single seller of a product that has few suitable substitutes.
c. very strong barriers to entry.
d. mutual interdependence in pricing decisions.
3. A monopolistically competitive firm will:
a. maximize profits by producing where MR = MC.
b. not likely earn an economic profit in the long run.
c. shut down if price is less than average variable cost.
d. all of the above.
4. Which of the following statements best describes firms under monopolistic competition?
a. There is little price or quality competition.
b. The firms compete, using quality, location, advertising, and price.
c. Firms do not compete using advertising.
d. There is little competition between firms.
5. The theory of monopolistic competition predicts that in long-run equilibrium a monopolistically
competitive firm will:
a. produce at the level in which price equals long-run average cost.
b. operate at minimum long-run average cost.
c. overutilize its insufficient capacity.
d. none of the above.
6. Which of the following is true in long-run equilibrium for both perfect competition and
monopolistic competition?
a. Accounting profit is zero.
b. Marginal cost equals price.
c. Long-run average cost is at a minimum.
d. Economic profit is zero.
7. The entry of new firms into a monopolistic competitive industry will shift the:
a. market demand curve to the right.
b. market demand curve to the left.
c. existing firm’s demand curve to the right.
d. existing firm’s demand curve to the left.
e. market supply curve to the left.
8. An oligopoly is a market structure in which:
a. one firm has 100 percent of a market.
b. there are many small firms.
c. there are many firms with no control over price.
d. there are few firms selling either a homogeneous or differentiated product.
9. Mutual interdependence among firms in an oligopoly means that:
a. firms never practice price leadership.
b. firms never form a cartel.
c. it is difficult to know how firms will react to decisions of rivals.
d. no formal agreement is possible among firms.
10. What is the key feature shared by all oligopoly markets?
a. A large number of sellers.
b. Mutual interdependence.
c. Product differentiation.
d. Easy entry and exit.
11. If OPEC is an effective cartel,
a. price changes are dictated by changes in demand.
b. output changes are dictated by changes in demand.
c. members agree on output quotas.
d. all of the above.
12. Kevin owns a personal training gymnasium in Orlando. The above figure shows the demand and
cost curves for his firm, which competes in a monopolistically competitive market. Kevin will train
how many clients per day?
a. 4
b. 6
c. 10
d. between 2 and 4
e. None of the above answers is correct.
13. Kevin owns a personal training gymnasium in Orlando. The above figure shows the demand and
cost curves for his firm, which competes in a monopolistically competitive market. What price will
Kevin charge per session?
a. $100
b. $60
c. $40
d. $20
e. $80
Answers:
1. B
2. A
3. D
4. B
5. B
6. D
7. D
8. D
9. C
10. B
11. C
12. A
13. B