1. The typical monopolistically competitive industry resembles:
a. monopoly because the typical firm has a downward sloping demand curve.
b. monopoly because it is very difficult for new firms to enter the industry.
c. perfect competition because in the long run, it produces that level of output associated with the minimum point of its LAC curve.
d. perfect competition because the typical firm determines its optimal level of output where P = MR = MC.
e. perfect competition because the industry produces a standardized product.
2. The typical firm in a monopolistically competitive industry resembles perfectly competitive firms in that firms in both industries:
a. earn no excess or economic profit in the long run.
b. face a downward-sloping demand curve for their products.
c. produce standardized products.
d. in the long run, operate at the minimum points on their respective average total cost curves.
e. Face no freedom of entry into and exit from the industry.
3. One of the primary similarities between perfectly competitive markets and monopolistic competition is that:
a. it is relatively easy for firms to enter or leave the market.
b. each type of market produces standardized products.
c. the demand curve faced by each type of market is horizontal.
d. nonprice competition occurs in both markets.
e. in a long-run equilibrium, both firms operate at the minimum point on their respective LAC curves.
4. Which one of the following defines the short-run equilibrium for the monopolistically competitive firm that is making a profit?
a. P = MC.
b. MR = MC and P > ATC.
c. MR > MC and P > ATC.
d. P = MC = MR > ATC.
5. One of the differences between a perfectly competitive firm and a monopolistically competitive firm in a long-run equilibrium is that:
a. under perfect competition, excess profits are zero in the long run, but the monopolistically competitive firm can earn positive excess profits.
b. LAC = LMC under perfect competition but not under monopolistic competition.
c. LMC = MR under perfect competition but not under monopolistic competition.
d. SAC = LAC under perfect competition but not under monopolistic competition.
6. The demand for a factor of production is derived from the:
a. cost of the goods sold on the market.
b. supply of the factors of production.
c. demand for the goods produced by the factor of production.
d. supply of the goods produced by the factors of production.