Deck 14: The Economics of Monopolistic Competition and Monopoly

Question 1

The demand curve faced by the a monopolistically competitive firm is very elastic if the degree of product differentiation is

A)Very low
B)Very high
C)Zero
D)Moderate

Answer 1

Very high

Question 2

Which one of the following is not a feature of monopolistic competition

A)Homogeneous products
B)Differentiated products
C)Selling cost
D)No uniform prices

Answer 2

Homogeneous products

Question 3

The book "The theory of Monopolistic Competition" is written by

A)Alfred Marshal
B)E H Chamberlin
C)Joan Robinson
D)J M Keynes

Answer 3

E H Chamberlin

Question 4

The book "The Economics of Imperfect Competition" is written by

A)Alfred Marshal
B)E H Chamberlin
C)Joan Robinson
D)J M Keynes

Question 5

It is assumed that the cost curves of all the firms in the monopolistic competition are

A)Different due to product differentiation
B)Never considered in equilibrium
C)Never formulated
D)Same in spite of product differentiation

Question 6

Free entry into monopolistically competitive market ensures that all firms will produce at the lowest point of LAC

A)Always
B)Sometimes
C)Never
D)Cannot say

Question 7

Under monopolistic competition, the long run equilibrium of the firm is established at the

A)Minimum point of LAC
B)Point where LAC is still falling
C)Point where LAC is rising
D)Minimum point of LMC

Question 8

In short run a firms in monopolistic competition

A)Always earns profit
B)Incurs loss
C)Earns normal profit only
D)May earn normal profit, abnormal profit or incur losses

Question 9

In long run all the firms in the monopolistic competition

A)Always earns profit
B)Incurs loss
C)Earns normal profit only
D)May earn normal profit, abnormal profit or incur losses

Question 10

The short run equilibrium level of output of the monopolistic competitor is given by

A)Price = MC
B)Price= AC
C)MC=MR
D)P=MR

Question 11

When a group of monopolistic competition attains the equilibrium, the firms in the group

A)Charge different prices, but produce identical outputs
B)Produce different output, but charge the same price
C)Charge different price and produce different output
D)None of the above

Question 12

The elasticity of average revenue curve of the monopolistic competitor, depends on

A)The extent of product differentiation
B)The number of firms
C)Number of buyers
D)Both A & B

Question 13

When demand curve is elastic, MR is

A)1
B)0
C)Positive
D)Negative

Question 14

The best or optimum level of output for the pure monopolist

A)MR=MC
B)P=MC
C)P=AC
D)Highest P

Question 15

Which type of competition leads to maximum exploitation of consumer

A)Perfect competition
B)Monopoly
C)Monopolistic competition
D)Oligopoly

Question 16

In the short run, the monopolist

A)Breaks even
B)Incurs loss
C)Makes profit
D)Any of the above

Question 17

The demand for the product of a monopoly firm is

A)Inelastic
B)Elastic
C)Unitary elastic
D)Perfectly inelastic

Question 18

If the monopolist incurs loss in the short run, then in the long run

A)The monopolist go out of business
B)The monopolist will stay in the business
C)The monopolist break even
D)Any of the above

Question 19

Which of the form of monopoly regulation is the most advantages to the consumer

A)Price control
B)Lump sum tax
C)Per unit tax
D)All of the above

Question 20

The monopolist who is in

A)Short run equilibrium will also be in long run equilibrium
B)Long run equilibrium will also be in short run equilibrium
C)Long run equilibrium may or may not be in short run equilibrium
D)None of the above

Question 21

In long run the monopolist can earn abnormal profit because of

A)Blocked entry
B)High selling price
C)Low cost
D)Economies of scale

Question 22

Price discrimination under monopoly is of

A)One
B)Two
C)Three
D)Four

Question 23

The market in which there is a single seller is called

A)Oligopoly
B)Monopsony
C)Monopoly
D)Nine of the above

Question 24

Monopsony refers to

A)Single seller
B)A few sellers
C)Single buyer
D)A few buyers

Question 25

Discriminating monopoly is possible if two markets have

A)Differing elasticity of demand
B)Differing average cost
C)Same elasticity
D)Different average cost