1.) Which of the following is not a characteristic of a? monopoly? A.) A product
ID: 1164425 • Letter: 1
Question
1.) Which of the following is not a characteristic of a? monopoly?
A.) A product with no close substitutes.
B.) Free entry and exit
C.) A single firm in the market.
D.) Barriers to entry
2.) For a monopolistic? competitor, short-run profits will tend to? ________ in the long run and? short-run losses will tend to?________ in the long run.
A.) grow; shrink
B.) grow; grow
C.) disappear; disappear
D.) remain steady; remain steady
3.) The more it costs to enter a monopolistically competitive? market, the more a firm currently in that market must worry about losing business.
A.) True
B.) False
4.)
5.)
Explanation / Answer
1. B.) Free entry and exit
Monopolistic competition refers to a market situation in which there are large number of buyers and sellers. The sellers sell closely related or differentiated products but not identical product. The products are close substitutes of each other. Product differentiation is the most important feature of monopolistic competition. Each firm under monopolistic competition enjoys the monopoly over the brand of the commodity and thus the firm has the control over the price of the commodity.
2. C.) disappear; disappear
In long run, monopolistically firms earn zero profit whether they earn positive profit in the short run or occurs losses. This is because of free entry and exit of firms in the market.
3. False
Monopolistically firm is able to earn profit because of product differentiation.
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