1. The demand curve for a monopolistic competitive firm will be: Select one: a.

Question

1.

The demand curve for a monopolistic competitive firm will be:

Select one:

a. Flatter than the demand curve for a perfectly competitive firm

b. Steeper than the demand curve for a monopoly

c. Flatter than the demand curve for a monopoly

d. The same slope as the demand curve for a perfectly competitive firm

2.

When firms are engaging in oligopolistic competition:

Select one:

a. Each pays attention only to its own demand curve

b. Each tries to produce the same output as it would under perfect competition

c. Each pays attention to its consumers as well as its rivals

d. The market outcome is less efficient than it would be under strict monopoly

3.

Monopolistic competitive firms are similar to perfectly competitive firms in that:

Select one:

a. both types of firms face barriers to entry

b. both types of firms have zero profits in the long run

c. both types of firms sell differentiated products

d. both types of firms face a downward sloping demand curve

Explanation / Answer

1) Option C This is because a monopolistic competitive firm faces competition from rivals while monopoly has no competition. Consumers have a choice in monopolistic competitive market which makes demand relatively flat

2) Option C. Oligopolies work in cohesion with other firms in the market so that their production decisions and pricing strategies are interdependent

3) Option B. Long run profits are zero due to weak barriers to entry. This reduces any profit or loss in the short run down to zero in the long run.

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