Understanding Monopolistic Competition in Economics

2. 17 Monopolistic Competition CLICKER QUESTIONS

3. Checkpoint 17.1 Checkpoint 17.2 Checkpoint 17.3 Question 1 Question 4 Question 8 Question 9 Question 2 Question 5 Question 6 Question 10 Question 3 Question 7

4. CHECKPOINT 17.1 Question 1 A firm in monopolistic competition has a ____ market share and ____ influence the price of its good or service. • large; can • large; cannot • small; can • small; cannot • large; might be able to

5. CHECKPOINT 17.1 Question 2 The absence of barriers to entry means that in the long run a firm in monopolistic competition ________. • makes an economic profit • either makes zero economic profit or incurs an economic loss • incurs an economic loss • makes either a positive or zero economic profit • makes zero economic profit

6. CHECKPOINT 17.1 Question 3 If the four-firm concentration ratio in a market is 28 percent, then the market is best characterized as _____. • monopoly • monopolistic competition • oligopoly • perfect competition • duopoly

7. CHECKPOINT 17.2 Question 4 The figure shows Louie’s Lunches, a lunch counter in competition with many other restaurants. Louie’s is in the ____ and is making ____. • short run; a positive economic profit • short run; zero economic profit • short run; an economic loss • long run; a positive economic profit • long run; zero economic profit

8. CHECKPOINT 17.2 Question 5 In the long run, a firm in monopolistic competition ________. • makes zero economic profit • produces the quantity at minimum average total cost • has a zero markup • might make either zero or positive economic profit • produces a quantity at which price equals average total cost

9. CHECKPOINT 17.2 Question 6 In the long run, a firm in monopolistic competition ____ excess capacity, and a firm in perfect competition ____ excess capacity. A. has; has B. has; does not have C. does not have; has D. does not have; does not have E. might have; might have

10. CHECKPOINT 17.2 Question 7 A firm in monopolistic competition maximizes profit by producing the quantity at which _______. • excess capacity is zero • price equals marginal cost • its markup is largest • marginal revenue equals marginal cost • price equals average total cost

11. CHECKPOINT 17.3 Question 8 A firm in monopolistic competition that introduces a new and differentiated product will temporarily have a ____ demand for its product and is able to charge ____. • less elastic, a lower price than before • less elastic, the same price as before • more elastic, a lower price than before • more elastic, a higher price than before • less elastic, a higher price than before

12. CHECKPOINT 17.3 Question 9 For a firm in monopolistic competition, selling costs _____. • increase costs and reduce the firm’s economic profit • always increase the demand for the firm’s good • can change the quantity produced and lower the firm’s average total cost • can lower the firm’s total cost • has no effect on the quantity sold

13. CHECKPOINT 17.3 Question 10 The efficiency of monopolistic competition _______. • is as clear-cut as the efficiency of perfect competition • depends on whether the gain from extra product variety offsets the selling costs and the extra cost that arises from excess capacity • arises from the excess capacity of firms • is eliminated in the long run • is similar to that of monopoly