Econ 211 Practice Exam Test.

Econ 211 Practice Exam Test. The demand curve faced by a monopolistically competitive firm... a)is more elastic than the demand curve faced by the purely competitive firm b)is more elastic than the monopolist's demand curve c)is less elastic than the monopolist's demand curve d)will shift outward as new firms enter the industry - CORRECT ANSWER B Product differentiation in monopolistic competition involves a trade-off between... a)short-run profits and long-run efficiency b)consumer choice and productive efficiency c)productive efficiency and allocative efficiency d)monopoly power and ease of entry - CORRECT ANSWER B Which of the following is not a characteristic of long-run equilibrium under monopolistic competition? a)price equals minimum average total cost b)price is equal to average total cost c)price exceeds marginal cost d)marginal cost equals marginal revenue - CORRECT ANSWER A The restaurant, legal assistance, and clothing industries are each illustrations of... a)pure monopoly b)monopolistic competition c)homogeneous oligopoly d)countervailing power - CORRECT ANSWER B True or False "Excess capacity" exists in monopolistic competition but not in pure competition - CORRECT ANSWER True Demand and marginal revenue curves are downward-sloping for monopolistically competition firms because... a)product differentiation allows each firm some degree of monopoly power b)there are a few large firms in the industry and they each act as a monopolist c)mutual interdependence among all firms in the industry leads to collusion d)each firm has to take the market price as given - CORRECT ANSWER A Which set of characteristics below best describes the basic features of monopolistic competition? a)easy entry, many firms, and differentiated products b)easy entry, many firms, and standardized products c)barriers to entry, few firms, and differentiated products d)easy entry, few firms, and standardized products - CORRECT ANSWER A A firm in an oligopoly is similar to a monopoly in that... a)both firms do not face competition from others b)both firms do not need to advertise c)both firms face very inelastic demand for their products d)both firms could have significant market power and control over price - CORRECT ANSWER D Obstacles to collusion among oligopolists include the following except... a)potential new entrants into the market b)"gentlemen's agreements" among the firms c)demand and costs differences among firms d)long-lastings economic recession and poor industry performance - CORRECT ANSWER B