Question 1

In monopolistic competition:&#10;A) There are a few firms.&#10;B) There are many firms.&#10;C) There are two firms.&#10;D) There is one firm.

Accepted Answer

In monopolistic competition, there are many firms that compete against each other, but each offers slightly different products or services, allowing them to have some degree of market power.

Question 2

In monopolistic competition:&#10;A) Products are homogeneous.&#10;B) Products are differentiated.&#10;C) There are barriers to entry.&#10;D) Demand is upward sloping.

Accepted Answer

In monopolistic competition, products are differentiated, which means that each firm offers a product that is slightly different from the products of competing firms. This differentiation can be based on quality, branding, or other factors.

Question 3

In the short run firms in monopolistic competition:&#10;A) Can only make normal profits.&#10;B) Face upward sloping demand curves.&#10;C) Produce where marginal revenue equals average fixed costs.&#10;D) Can make abnormal profits or losses.

Accepted Answer

In the short run, firms in monopolistic competition can make abnormal profits or losses due to differentiated products and market power, allowing them to set prices above or below average costs.

Question 4

If a firm is making abnormal profits in the short run in monopolistic competition:&#10;A) Some firms will leave the industry.&#10;B) Some firms will enter the industry increasing costs and increasing demand.&#10;C) Some firms will enter the industry shifting demand for the established firms' products to the left.&#10;D) Some firms will enter the industry reducing the total supply in the market.

Accepted Answer

In monopolistic competition, abnormal profits attract new firms to enter the industry, which increases competition and shifts the demand curve for existing firms to the left, reducing their market share and profits.

Question 5

In the long run firms in monopolistic competition:&#10;A) Always make abnormal profits.&#10;B) Are always allocatively efficient.&#10;C) Are always productively efficient.&#10;D) Aim to profit maximize.

Accepted Answer

In the long run, firms in monopolistic competition aim to maximize profits, similar to firms in other market structures. However, due to the presence of many competitors and product differentiation, they might not always achieve abnormal profits or efficiency (allocative or productive) in the long run.

Question 6

Which is not one of Porter's five forces?&#10;A) Entry threat&#10;B) Buyer power&#10;C) Supplier power&#10;D) Innovation

Accepted Answer

Innovation is not one of Porter's five forces. The five forces model includes entry threat, buyer power, supplier power, threat of substitute products or services, and competitive rivalry within an industry.

Question 7

Firms are more likely to make higher profits if:&#10;A) The entry threat is high.&#10;B) Buyer power is high.&#10;C) Supplier power is high.&#10;D) Rivalry is low.

Accepted Answer

Firms are more likely to make higher profits when rivalry among existing competitors is low, as this reduces price competition and allows firms to maintain higher margins. High entry threats, high buyer power, and high supplier power all put pressure on a firm's ability to set prices and control costs, typically reducing profitability.

Question 8

Firms in monopolistic competition are productively and allocatively inefficient.

Accepted Answer

In monopolistic competition, firms are productively inefficient because they do not produce at the lowest point on their average cost curve, and they are allocatively inefficient because the price they charge is higher than the marginal cost of production, leading to a misallocation of resources.

Question 9

There is no entry and exit of firms in the long run in monopolistic competition.

Accepted Answer

In monopolistic competition, firms can enter and exit the market freely in the long run, which is a key characteristic distinguishing it from monopoly markets where barriers to entry are significant.

Question 10

Profit-maximizing firms in monopolistic competition produce where marginal revenue equals marginal ____.

Accepted Answer

The answer of Profit-maximizing firms in monopolistic competition produce where...

Question 11

Which of the following is associated with a monopolistically competitive market structure?&#10;A) Mobile phones&#10;B) Supermarket&#10;C) Petrol Station&#10;D) Cafes

Accepted Answer

The answer of Which of the following is associated with...

Question 12

In a monopolistically competitive market, abnormal profit will:&#10;A) Increase the number of suppliers and increase demand for each firm.&#10;B) Increase the number of suppliers and decrease demand for each firm.&#10;C) Decrease the number of suppliers and increase demand for each firm.&#10;D) Decrease the number of suppliers and decrease demand for each firm.

Accepted Answer

The answer of In a monopolistically competitive market, abnormal profit...

Question 13

The marketing mix consists of:&#10;A) Performance, Quality, Location, Placement&#10;B) Price, Quality, Presentation, Promotion&#10;C) Profit, Placement, Prestige, Performance&#10;D) Price, Product, Place, Promotion

Accepted Answer

The answer of The marketing mix consists of:&#10;A) Performance, Quality,...

Question 14

Brand loyalty is used in order to try and:&#10;A) Make customers more sensitive to price.&#10;B) Make customers less sensitive to price.&#10;C) Make customers more price elastic.&#10;D) None of the above.

Accepted Answer

The answer of Brand loyalty is used in order to...

Deck 15: Monopolistic Competition and Non-Price Competition