Chapter 24 - Monopolistic Competition

1		Statement I. Most firms in the U.S. are monopolistic competitors. Statement II. Most monopolistic competitors sell a differentiated product.
			A)	Statement I is true and statement II is false.
			B)	Statement II is true and statement I is false.
			C)	Both statements are true.
			D)	Both statements are false.
2		Which is the most accurate statement?
			A)	Product differentiation has gone much too far in the United States.
			B)	Most goods and services sold in the U.S. are identical.
			C)	Most monopolistic competitors control all or most of an essential resource.
			D)	A haircutting salon, a mom n'pop grocery, and a candy store would be examples of monopolistic competitors.
3		The monopolistic competitor can lose money
			A)	in the short run.
			B)	in the long run.
			C)	in both the short run and the long run.
			D)	in neither the short run nor the long run.
4		In the long run the monopolistic competitor
			A)	loses money.
			B)	makes a profit.
			C)	breaks even.
5		Statement I. The monopolistic competitor competes mainly on the basis of price. Statement II. The trend toward customization is taking production differentiation one step further.
			A)	Statement I is true and statement II is false.
			B)	Statement II is true and statement I is false.
			C)	Both statements are true.
			D)	Both statements are false.
6		Price discrimination
			A)	is illegal.
			B)	cannot take place unless the seller can distinguish between two or more distinct markets.
			C)	is commonly practiced by sellers of goods, but not by sellers of services.
			D)	is practiced much more by large firms than by small firms.
7		Statement I. When certain customers get poor service, this practice may be intentional. Statement II. Price discrimination occurs when a seller charges two or more prices for the same good or service.
			A)	Statement I is true and statement II is false.
			B)	Statement II is true and statement I is false.
			C)	Both statements are true.
			D)	Both statements are false.
8		Price discrimination has been commonly practiced by each of the following except
			A)	doctors.
			B)	airlines.
			C)	movie theaters.
			D)	video rental stores.
9		Under perfect price discrimination there would be
			A)	more sellers.
			B)	elimination of consumer surplus.
			C)	product standardization.
			D)	more buyers.
10		Statement I. Monopolistic competitors usually sell identical products. Statement II. Monopolistic competitors are often very large firms.
			A)	Statement I is true and statement II is false.
			B)	Statement II is true and statement I is false.
			C)	Both statements are true.
			D)	Both statements are false.
11		In the long run the monopolistic competitor charges a _______ price than the perfect competitor and has a _______ output than the perfect competitor.
			A)	lower, smaller
			B)	higher, larger
			C)	higher, smaller
			D)	lower, larger
12		Statement I. In the long run the monopolistic competitor breaks even. Statement II. In the long run the monopolistic competitor operates at the minimum point of her ATC curve.
			A)	Statement I is true and statement II is false.
			B)	Statement II is true and statement I is false.
			C)	Both statements are true.
			D)	Both statements are false.
13		If a monopolistic competitor is producing at an output for which the marginal revenue is $20 and the marginal cost is $15, the firm should
			A)	decrease the level of output.
			B)	keep the level of output constant.
			C)	increase the level of output.
14		Which is the most accurate statement?
			A)	For virtually all consumers, the only consideration in buying a good or service of a given quality is price.
			B)	Excess capacity may allow for a greater diversity of products than available under other forms of competition.
			C)	The monopolistically competitive firm allocates resources in a more efficient way than the perfect competitor.
			D)	Monopolistic competition is being more and more rare in the American economy.
15		Which statement is false?
			A)	Price discrimination can be a disguised subsidy to the poor.
			B)	Price discrimination enables the seller to increase his profits.
			C)	Price discrimination is usually against poor people who can't afford to shop around.
			D)	Price discrimination can't take place if the seller can't distinguish at least 2 groups of buyers.