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Macroeconomics (BECN150) Chapter 11 Monopolistic

Sandra Watson
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Humber College

Macroeconomics (BECN150)

1. Monopolistic competition means:

A. a market situation where competition is based entirely on product differentiation and advertising.
B. a large number of firms producing a standardized or homogeneous product.
C. many firms producing differentiated products.
D. a few firms producing a standardized or homogeneous product.
2. Monopolistic competition is characterized by a:

A. few dominant firms and low entry barriers.
B. large number of firms and substantial entry barriers.
C. large number of firms and low entry barriers.
D. few dominant firms and substantial entry barriers.
3. Under monopolistic competition, entry to the industry is:

A. completely free of barriers.
B. more difficult than under pure competition but not nearly as difficult as under pure monopoly.
C. more difficult than under pure monopoly.
D. blocked.
4. Monopolistic competition resembles pure competition because:

A. both industries emphasize nonprice competition.
B. in both instances firms will operate at the minimum point on their long-run average total cost curves.
C. both industries entail the production of differentiated products.
D. barriers to entry are either weak or nonexistent.
5. Which of the following is not a basic characteristic of monopolistic competition?

A. The use of trademarks and brand names.
B. Recognized mutual interdependence.
C. Product differentiation.
D. A relatively large number of sellers.
6. Nonprice competition refers to:

competition between products of different industries, for example, competition between aluminum and
steel in the manufacture of automobile parts.
B. price increases by a firm that are ignored by its rivals.
C. advertising, product promotion, and changes in the real or perceived characteristics of a product.
D. reductions in production costs that are not reflected in price reductions.
7. The restaurant, legal assistance, and clothing industries are each illustrations of:

A. countervailing power.
B. homogeneous oligopoly.
C. monopolistic competition.
D. pure monopoly.
8. If the number of firms in a monopolistically competitive industry increases and the degree of product
differentiation diminishes:

A. the likelihood of realizing economic profits in the long run would be enhanced.
B. individual firms would now be operating at outputs where their average total costs would be higher.
C. the industry would more closely approximate pure competition.
D. the likelihood of collusive pricing would increase



Macroeconomics (BECN150) Chapter 11 Monopolistic

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