1. Which of the following is a monopoly?
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A. pizza delivery |
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B. a local corn farmer |
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C. a grocery store |
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D. Kate Spade, fashion designer |
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E. the Tennessee Valley Authority, a large electricity producer that serves areas of five states |
2. Which of the following is a firm in a perfectly competitive market?
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A. a grocery store |
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B. Kate Spade, fashion designer |
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C. the Tennessee Valley Authority, a large electricity producer that serves areas of five states |
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D. pizza delivery |
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E. a local corn farmer |
3. Compare a perfectly competitive market with a monopolistically competitive market.
The markup the firm charges in a monopolistically competitive market is ___________ the markup charged by a firm in a perfectly competitive market.
The firm’s excess capacity in a monopolistically competitive market is ___________ the firm’s excess capacity in a firm in a perfectly competitive market.
The efficiency of a monopolistically competitive market is ___________ the efficiency of a perfectly competitive market.
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A. greater than; greater than; less than |
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B. greater than; less than; greater than |
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C. great than; less than; equal to |
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D. less than; less than; greater than |
4. In competitive markets, price is equal to marginal cost in the long run. In monopolistic competition, why is price greater than marginal cost in the long run?
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A. Price is driven to marginal cost in both competitive markets and markets that are monopolistically competitive. |
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B. Products are identical in perfectly competitive markets, so a firm must charge less than marginal cost in order to differentiate itself. This is not true in monopolistically competitive markets where firms can charge more than marginal cost. |
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C. Both markets can charge more than marginal cost in the long run because products are differentiated in both markets. |
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D. The demand curves for the two types of firms are different. Monopolistically competitive firms have market power, so they set a price higher than marginal cost. |
5. In the long run, how is price related to marginal cost is both perfect competition and in monopolistic competition?
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A. The long-run price is driven to marginal cost in both competitive markets and markets that are monopolistically competitive. |
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B. Both markets can charge more than marginal cost in the long run because products are differentiated in both markets. |
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C. Products are identical in perfectly competitive markets, so a firm must charge less than marginal cost in order to differentiate itself. This is not true in monopolistically competitive markets where firms can charge more than marginal cost. |
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D. Because monopolistically competitive firms have market power, they set a price higher than marginal cost, while competitive firms cannot. |
Look at the figure below.
6.
Which demand curve is consistent with a monopolistic competitor making zero economic profit in the long run?
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A. D3 |
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B. D2 |
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C. D1 |
7. Titleist’s advertising slogan is “The #1 ball in golf.” Consumers can also buy generic golf balls. The manufacturers of generic golf balls do not engage in any advertising. Assume that the average total cost of producing Titleist and generic golf balls is the same.
Which of the demand curves shows the long-run demand curve for Titleist?
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A. D1 |
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B. D2 |
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C. D3 |
8. Titleist’s has an advertising slogan is “The #1 ball in golf.” Consumers can also buy generic golf balls. The manufacturers of generic golf balls do not engage in any advertising. Assume that the average total cost of producing Titleist and generic golf balls is the same.
Which producer has a stronger incentive to maintain quality control in the production of golf balls?
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A. a manufacturer of generic golf balls |
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B. Titleist |
9. Which of the following is a monopolistic competitor? Select all that apply.
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A. the Tennessee Valley Authority, a large electricity producer that serves areas of five states |
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B. a local corn farmer |
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C. pizza delivery |
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D. Kate Spade, fashion designer |
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E. a grocery store |
