Unit 5 Practice
Student: ___________________________________________________________________________
1. Which of the following is not characteristic of monopolistic competition?
A.relatively large numbers of sellers
B.production at minimum ATC in the long-run
C.product differentiation
D.relatively easy entry to the industry
2. If the number of firms in a monopolistically competitive industry increases and the degree of product
differentiation diminishes:
A.the likelihood of realizing economic profits in the long run would be enhanced.
B.individual firms would now be operating at outputs where their average total costs would be higher.
C.the industry would more closely approximate pure competition.
D.the likelihood of collusive pricing would increase.
3. The demand curve of a monopolistically competitive producer is:
A.less elastic than that of either a pure monopolist or a pure competitor.
B.less elastic than that of a pure monopolist, but more elastic than that of a pure competitor.
C.more elastic than that of a pure monopolist, but less elastic than that of a pure competitor.
D.more elastic than that of either a pure monopolist or a pure competitor.
4. In the short-run, the price charged by a monopolistically competitive firm attempting to maximize
profits:
A.must be less than ATC.
B.must be more than ATC.
C.may be either equal to ATC, less than ATC, or more than ATC.
D.must be equal to ATC.
1
, 5. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm's
profit-maximizing price will be:
A.$10.
B.$13.
C.$16.
D.$19.
6. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. The profit-
maximizing output for this firm will be:
A.210.
B.180.
C.160.
D.100.
7. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm
will realize an economic:
A.loss of $320.
B.loss of $480.
C.profit of $280.
D.profit of $600.
2
Student: ___________________________________________________________________________
1. Which of the following is not characteristic of monopolistic competition?
A.relatively large numbers of sellers
B.production at minimum ATC in the long-run
C.product differentiation
D.relatively easy entry to the industry
2. If the number of firms in a monopolistically competitive industry increases and the degree of product
differentiation diminishes:
A.the likelihood of realizing economic profits in the long run would be enhanced.
B.individual firms would now be operating at outputs where their average total costs would be higher.
C.the industry would more closely approximate pure competition.
D.the likelihood of collusive pricing would increase.
3. The demand curve of a monopolistically competitive producer is:
A.less elastic than that of either a pure monopolist or a pure competitor.
B.less elastic than that of a pure monopolist, but more elastic than that of a pure competitor.
C.more elastic than that of a pure monopolist, but less elastic than that of a pure competitor.
D.more elastic than that of either a pure monopolist or a pure competitor.
4. In the short-run, the price charged by a monopolistically competitive firm attempting to maximize
profits:
A.must be less than ATC.
B.must be more than ATC.
C.may be either equal to ATC, less than ATC, or more than ATC.
D.must be equal to ATC.
1
, 5. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm's
profit-maximizing price will be:
A.$10.
B.$13.
C.$16.
D.$19.
6. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. The profit-
maximizing output for this firm will be:
A.210.
B.180.
C.160.
D.100.
7. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm
will realize an economic:
A.loss of $320.
B.loss of $480.
C.profit of $280.
D.profit of $600.
2
