LOS a: Describe the characteristics of monopolistic competition and an oligopoly.

Which of the following is most likely to be considered a characteristic of monopolistic competition?

A) Differentiated products.

B) Inelastic demand curves.

C) High barriers to entry and exit.

Which of the following most accurately describes why firms under monopolistic competition face elastic demand for their products?

A) The availability of many close substitutes.

B) Allocative efficiency.

C) High barriers to entry.

Which of the following is least likely to be considered a feature that is common to both monopolistic competition and perfect competition?

A) Low or no barriers to entry.

B) Zero economic profits in the long run.

C) Extensive advertising to differentiate products.

An oligopoly is charcterized by all of the following EXCEPT:

A) large economies of scale.

B) significant barriers to entry.

C) a large number of sellers.

Monopolistic competition differs from pure monopoly in that:

A) monopolistic competitors are price takers and monopolists are not.

B) monopolistic competitors have low barriers to entry and monopolists do not.

C) monopolists maximize profits and monopolistic competitors do not.

Which one of the following structures is characterized by free entry and exit, a differentiated product, and price searcher behavior?

A) Oligopoly.

B) Pure competition.

C) Monopolistic competition.

Which one of the following is NOT a characteristic of monopolistic competition?

A) Low barriers to entry and exit.

B) A single seller.

C) Differentiated products.

Characteristics of monopolistic competition include all of the following EXCEPT:

A) large numbers of independent sellers.

B) differentiated products.

C) high barriers to entry.

An oligopolistic firm:

A) will consider the potential response of its rivals when making business decisions.

B) is likely to be formed when the minimum-cost output is only a small portion of the market output.

C) will seldom use product quality as a competitive weapon.

An oligopolistic industry does NOT have:

A) high barriers to entry.

B) many sellers.

C) large economies of scale.

Which of the following is NOT a characteristic of an oligopoly?

A) Products can either be similar or differentiated.

B) There are few sellers.

C) Relatively small economies of scale.

A) decrease, and Wudden Floss will sell nothing.

B) increase, and the quantity sold by Wudden Floss will decrease.

C) decrease, and so will the quantity sold by Wudden Floss.

Which of the following is most likely to be considered a characteristic of an oligopolistic industry?

A) Few barriers to entry.

B) Many sellers.

C) A great deal of interdependence among firms.

Consider the following statements:

Statement 1: “When oligopoly firms cheat on price fixing agreements, the resulting price and output quantity approaches that of perfect competition.”

Statement 2: “Monopolistic competition is inefficient because a large deadweight loss from advertising and marketing costs is a characteristic of this form of competition.”

With respect to these statements:

A) only one is correct.

B) both are correct.

C) both are incorrect.

Statement 1: “The kinked demand curve model of oligopoly assumes that a decrease in price will not be followed by other firms in the industry, but a price increase will.”

Statement 2: “Firms in monopolistic competition have high advertising expenses because they want to create the perception that their product is different from their competitors’ products when the competing products are actually quite similar.”

With respect to these statements:

A) both are correct.

B) only one is correct.

C) both are incorrect.

If a market features differentiated products but has low barriers to entry, in long-run equilibrium the firms in the market will earn:

A) substantial economic losses.

B) substantial economic profits.

C) zero economic profits.

Assume that a firm in an oligopoly market believes the demand curve for its product is more elastic above a specific price than below this price. This belief is most closely associated with which of the following models?

A) Kinked demand model.

B) Dominant firm model.

C) Variable elasticity model.

Firms in perfectly competitive markets and firms operating in a market characterized by monopolistic competition have several things in common. Which of the following is least likely one of them? Both:

A) face perfectly elastic demand curves.

B) operate in markets that have low or no barriers to entry.

C) maximize economic profit.

Which of the following regarding monopolistic competition is most accurate?

A) Zero barriers to entry and exit exist.

B) Each firm produces a differentiated product.

C) There are very few independent sellers.

The demand curves faced by monopolistic competitors is:

A) elastic due to the availability of many close substitutes.

B) not sensitive to price due to absence of close substitutes.

C) inelastic due to the availability of many complementary goods.

Monopolistic competition differs from pure monopoly in that:

A) barriers to entry are high under monopoly, but low under monopolistic competition.

B) monopolists maximize profit; monopolistic competitors do not.

C) monopolistic competitors are price takers, monopolists are not.

Under which type of market structure are the production and pricing alternatives of a firm most affected by the decisions of its competitors?

A) Oligopoly.

B) Monopolistic competition.

C) Perfect competition.

Characteristics of an oligopoly least likely include:

A) interdependence among competitors.

B) significant barriers to entry.

C) identical products.

The type of economic market that features a large number of competitors offering differentiated products is best characterized as:

A) perfect competition.

B) oligopoly.

C) monopolistic competition.