Overview
Chapter 11
MONOPOLISTIC COMPETITION AND OLIGOPOLY
Multiple Choice
1. If a market has more than one seller, but fewer sellers than under perfect competition, it is referred to as
a. a monopoly
b. competitive
c. imperfect competition
d. an efficient market
e. optimal
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic STA: DISC: Monopolistic competition
TOP: The Concept of Imperfect Competition KEY: Bloom’s: Knowledge
2. Monopolistic competition exists when there is one large firm in an otherwise perfectly competitive market.
a. True
b. False
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic STA: DISC: Monopolistic competition
TOP: Monopolistic Competition KEY: Bloom’s: Knowledge
3. A major difference between monopolistic competition and perfect competition is the degree of product differentiation. Pure competition has none and differentiation always exists in monopolistic competition.
a. True
b. False
ANS: A PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic STA: DISC: Monopolistic competition
TOP: Monopolistic Competition KEY: Bloom’s: Knowledge
4. Monopolistically competitive firms are similar to perfectly competitive firms in the sense that both face horizontal demand curves for their product.
a. True
b. False
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic STA: DISC: Monopolistic competition
TOP: Monopolistic Competition KEY: Bloom’s: Knowledge
5. When there are many buyers and sellers, no significant barriers to entry, and a differentiated product, the market structure is called
a. an oligopoly
b. perfect competition
c. monopolistic competition
d. a monopoly
e. unbalanced monopoly
ANS: C PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic STA: DISC: Monopolistic competition
TOP: Monopolistic Competition KEY: Bloom’s: Knowledge
6. All of the following, except one, are characteristics of monopolistic competition. Which is the exception?
a. There is a large number of sellers.
b. Each seller faces a horizontal demand curve for its product.
c. There are no significant barriers to entry or exit.
d. Sellers produce differentiated products.
e. There is a large number of buyers.
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic STA: DISC: Monopolistic competition
TOP: Monopolistic Competition KEY: Bloom’s: Knowledge
7. All of the following, except one, are sources of product differentiation. Which is the exception?
a. product quality
b. location
c. price
d. consumer tastes
e. buyers’ perceptions
ANS: C PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic STA: DISC: Monopolistic competition
TOP: Monopolistic Competition KEY: Bloom’s: Knowledge
8. Each of the following, except one, is a characteristic of a monopolistically competitive market. Which is the exception?
a. differentiated products
b. no significant barriers to entry
c. many buyers
d. a standardized product
e. many sellers
ANS: D PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic STA: DISC: Monopolistic competition
TOP: Monopolistic Competition KEY: Bloom’s: Knowledge
9. An important difference between a perfectly competitive market and a monopolistically competitive market is that, in the latter,
a. there are more sellers of the good
b. there are only a few large sellers
c. there are no barriers to entry or exit
d. there is only one seller of the good
e. the product is not standardized
ANS: E PTS: 1 DIF: Difficulty: Easy
NAT: BUSPROG: Analytic STA: DISC: Monopolistic competition
TOP: Monopolistic Competition KEY: Bloom’s: Knowledge
10. A firm in a monopolistically competitive market is similar to a monopolist in the sense that it
a. must overcome significant barriers to entry
b. faces a downward-sloping demand curve
c. produces a large share of the market output
d. is dependent on the actions of other firms
e. produces the same product as its competitors do
ANS: B PTS: 1 DIF: Difficulty: Moderate
NAT: BUSPROG: Analytic STA: DISC: Monopolistic competition
TOP: Monopolistic Competition KEY: Bloom’s: Comprehension
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