Micro Q10 Practice

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Firms may easily enter a monopolistically competitive market.

True

The demand curve facing Imelda's Shoe Boutique, a monopolistically competitive firm,

slopes downward because Imelda's sells a differentiated product

Monopolistic competition is different from perfect competition because monopolistic competitors produce

differentiated products

The monopolistic competitor in Exhibit 10-1 is in

short-run equilibrium because it is earning a positive economic profit

In Exhibit 10-1, the monopolistic competitor's total economic profit at the profit-maximizing level of output is

$750

Consider Exhibit 10-2. If the firm is charging price P for output q, then in order to minimize loss in the short run, the firm should

continue to produce because price is greater than average variable cost

Assume a monopolistically competitive firm is earning an economic profit. The marginal revenue from selling an additional unit is $30 and the marginal cost of producing that additional unit is $23. The firm should

reduce its price and increase its output level

In the long run, the economic profit of Hoot's Pump Chicken 'n' Ribs, a monopolistic competitor,

is eliminated because of new firms entering the industry

A rise in demand for restaurant meals is likely to cause which of the following in the short run?

economic profit for restaurants

If a monopolistically competitive firm is in long-run equilibrium and average cost equals $150, then the market price must be $150.

True

Although both perfectly competitive and monopolistically competitive firms earn normal profits in the long run, monopolistically competitive firms will not

operate where price equals marginal cost

Monopolistic competition is similar to

pure monopoly, in that firms face downward-sloping demand curves, and similar to perfect competition, in that long-run economic profit is zero

An oligopoly is characterized by

few firms, which have control over market price

It is harder to explain the behavior of firms in oligopoly than in other market structures because in oligopoly

firms base their decisions on what their rivals do

If a firm must produce a significant share of market output before low average costs can be achieved, the structure of this industry will tend to be

oligopoly

A brand name may contribute to oligopolists' economic profit by

acting as a barrier to entry

A cartel's marginal cost curve is the

horizontal sum of all the individual firms' marginal cost curves

A cartel is

a group of oligopolistic firms that engage in formal collusion

Tacit collusion occurs in industries that

contain price leaders

If oligopolists engaged in some sort of collusion, industry output would be __________ and the price would be __________ than under perfect competition.

smaller, higher

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