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In the long run, a monopolistically competitive firm produces the output at which price equals

average variable cost.

average fixed cost.

average total cost.

marginal revenue.

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Advertising by firms in monopolistic competition

is inefficient.

increases the marginal cost of production.

does not provide consumers with useful information.

is a waste of valuable resources because firms are forced by the entry of rival firms to be price takers.

generates the perception among consumers that product differentiation exists.

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Which of the following best explains why firms in monopolistic competition face a downward-sloping demand curve while perfectly competitive firms do not?

Firms in monopolistic competition are price takers.

Monopolistically competitive industries have only a few firms.

Monopolistically competitive firms face barriers to entry.

Only industries with free entry and exit have firms that face horizontal demand curves.

Firms in monopolistic competition sell differentiated goods.

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A firm in a monopolistically competitive market

has few competitors.

does not practice product differentiation.

faces a horizontal demand curve.

faces an upward-sloping demand curve.

faces a downward-sloping demand curve.

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Consider a monopolistically competitive industry which is in long-run equilibrium. Which of the following is true?

All firms charge a price equal to average total cost.

The demand, average total cost, and marginal cost curves all intersect at the same point.

All firms make an economic profit.

Firms have an incentive to enter the industry.

All firms charge a price equal to marginal cost.

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Which of the following goods is best described as being sold in a monopolistically competitive market?

the local newspaper

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A monopolistically competitive firm has excess capacity because in the

long run, average total cost exceeds minimum average total cost.

long run, it makes an economic profit.

short run, marginal revenue exceeds marginal cost.

short run, average total cost is less than average variable cost.

long run, average total cost is less than average variable cost.

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The key feature of monopolistic competition that distinguishes it from perfect competition is

perfectly inelastic demand.

perfectly elastic demand.

product differentiation.

barriers to entry.

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In a monopoly, the four-firm concentration ratio is

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Use the figure below to answer the following questions.

Figure 12.2.2

Consider the single-price monopoly illustrated in Figure 12.2.2. What is this monopoly's maximum economic profit?

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