04 Jun d. significant barriers to entry
Question
Exercise 6.2
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 1. (2 points)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
____ 2. (2 points)Frequently, in imperfectly competitive markets,
a.
there are as many sellers as in perfect competition
b.
the product is not standardized
c.
there is only one seller of the good or service
d.
price is higher than under a monopoly
e.
price is lower than under perfect competition
____ 3. (2 points)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
____ 4. (2 points)For the firm in monopolistically competitive
a.
competition is blocked by barriers to entry
b.
limit pricing can forestall competition indefinitely
c.
marginal revenue is less than the product’s price
d.
price discrimination is a key tool
e.
marginal revenue is equal to the product’s price
____ 5. (2 points)Consider the monopolistically competitive firm whose demand curve and cost structure are illustrated in Figure 10-1. Which of the following statements is correct in the short run?
a.
The firm will produce 100 units and suffer a loss of $400 per week.
b.
The firm will produce 100 units and suffer a loss of $300 per week.
c.
The firm will produce 100 units and suffer a loss of $1,000 per week.
d.
The firm will produce 100 units and suffer a loss of $100 per week.
e.
The firm will produce zero units and suffer a loss of $300 per week.
____ 6. (2 points)Consider the typical monopolistically competitive firm whose demand curve and cost structure is illustrated in Figure 10-5. Which of the following statements is correct in the long run?
a.
Some firms will exit this market, and the demand curves facing the remaining firms will shift rightward.
b.
Some firms will exit this market, and the demand curves facing the remaining firms will shift leftward.
c.
Firms will enter this market, and the demand curves facing the remaining firms will shift rightward.
d.
Firms will enter this market, and the demand curves facing the remaining firms will shift leftward.
e.
Firms will enter this market, but the demand curves facing the remaining firms will not change
____ 7. (2 points)In the long run, entry ensures that the typical monopolistically competitive firm will
a.
produce at minimum efficient scale
b.
earn an economic profit
c.
earn a normal profit
d.
price its output at marginal cost
e.
standardize its product
____ 8. (2 points)If the firm represented in Figure 10-7 is typical of other firms in the industry, then, as the long run approaches,
a.
some firms will exit, and the demand curves facing the remaining firms will shift to the left
b.
some firms will exit, and the demand curves facing the remaining firms will shift to the right
c.
some firms will enter, and the demand curves facing the remaining firms will shift to the left
d.
some firms will enter, and the demand curves facing the remaining firms will shift to the right
e.
the industry will eventually disappear
____ 9. (2 points)If the monopolistically competitive firm in Figure 10-8 is typical of its competitors, the industry will likely experience
a.
increasing returns to scale
b.
entry of new firms
c.
exit of existing firms
d.
no change in the long run
e.
exit of all firms
____ 10. (2 points)In monopolistic competition, product differentiation causes
a.
the firms to earn economic profits in the long run
b.
a horizontal demand curve for each firm’s output
c.
the firms to operate with excess capacity
d.
significant barriers to entry
e.
high concentration ratios
____ 11. (2 points)Any action, other than lowering its price, that a firm undertakes to increase the demand for its output is called
a.
limit pricing
b.
price enhancement
c.
illicit competition
d.
nonprice competition
e.
price intensive competition
____ 12. (2 points)Which of the following is an example of nonprice competition?
a.
giving coupons for 10 percent discounts to potential customers
b.
having a Memorial Day Sale
c.
lowering the price on several selected brands
d.
offering a product in three colors-blue, green, and red-in addition to the standard black
e.
increasing the price on all products
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