ECON 2306 EXAM 3 QUESTIONS AND
ANSWERS 100% PASS 2026/2027
Characteristics of monopolistic competition (MC) - ANS -significant number of sellers
-differentiated product
-promotional activities
-easy entry and exit
monopolistic competition - ANS a market situation in which a large number of firms produce
similar but not identical product
MC demand graph - ANS -slopes downward bc not a perfect competition
-faces marginal revenue curve downward slope and below demand curve
-more elastic than monopoly but not perfectly elastic like perfect competition
product differentiation - ANS the distinguishing of product by brand name, color, other minor
attributes
examples of MC firms - ANS -restaurants
-convenient stores
2026/2027 ALLRIGHTS RESERVED 1
, profit maximization (MC) - ANS MC = MR
the long run of MC - ANS zero economic profits
-economic losses also disappear
-individual's demand curve will also touch ATC at a particular price that is profit maximization
for that firm
MC marginal rev graph - ANS downward sloping (market power)
MC comp graph profit - ANS When P is below ATC at Q*
MC graph breakeven - ANS when P is equal to ATC at Q*
MC loss - ANS When P is less than ATC at Q* but above AVC
MC shut down - ANS When P is less than AVC at Q*
MC outcomes - ANS MC breaks even in the Lr, MC produces a lower quantity and charges a
higher price than perfect competition, and MC does not operate at lowest ATC
MC positive results - ANS -not producing the exact same product
-increase choice
-differentiation in product
2026/2027 ALLRIGHTS RESERVED 2
ANSWERS 100% PASS 2026/2027
Characteristics of monopolistic competition (MC) - ANS -significant number of sellers
-differentiated product
-promotional activities
-easy entry and exit
monopolistic competition - ANS a market situation in which a large number of firms produce
similar but not identical product
MC demand graph - ANS -slopes downward bc not a perfect competition
-faces marginal revenue curve downward slope and below demand curve
-more elastic than monopoly but not perfectly elastic like perfect competition
product differentiation - ANS the distinguishing of product by brand name, color, other minor
attributes
examples of MC firms - ANS -restaurants
-convenient stores
2026/2027 ALLRIGHTS RESERVED 1
, profit maximization (MC) - ANS MC = MR
the long run of MC - ANS zero economic profits
-economic losses also disappear
-individual's demand curve will also touch ATC at a particular price that is profit maximization
for that firm
MC marginal rev graph - ANS downward sloping (market power)
MC comp graph profit - ANS When P is below ATC at Q*
MC graph breakeven - ANS when P is equal to ATC at Q*
MC loss - ANS When P is less than ATC at Q* but above AVC
MC shut down - ANS When P is less than AVC at Q*
MC outcomes - ANS MC breaks even in the Lr, MC produces a lower quantity and charges a
higher price than perfect competition, and MC does not operate at lowest ATC
MC positive results - ANS -not producing the exact same product
-increase choice
-differentiation in product
2026/2027 ALLRIGHTS RESERVED 2
