ECON 2306 EXAM 3 QUESTIONS WITH CORRECT ANSWERS LATEST UPDATE 2025/2026
Characteristics of monopolistic competition (MC) - Answers -significant number of sellers
-differentiated product
-promotional activities
-easy entry and exit
monopolistic competition - Answers a market situation in which a large number of firms
produce similar but not identical product
MC demand graph - Answers -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 - Answers the distinguishing of product by brand name, color, other
minor attributes
examples of MC firms - Answers -restaurants
-convenient stores
profit maximization (MC) - Answers MC = MR
the long run of MC - Answers 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 - Answers downward sloping (market power)
MC comp graph profit - Answers When P is below ATC at Q*
MC graph breakeven - Answers when P is equal to ATC at Q*
MC loss - Answers When P is less than ATC at Q* but above AVC
MC shut down - Answers When P is less than AVC at Q*
MC outcomes - Answers 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 - Answers -not producing the exact same product
Characteristics of monopolistic competition (MC) - Answers -significant number of sellers
-differentiated product
-promotional activities
-easy entry and exit
monopolistic competition - Answers a market situation in which a large number of firms
produce similar but not identical product
MC demand graph - Answers -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 - Answers the distinguishing of product by brand name, color, other
minor attributes
examples of MC firms - Answers -restaurants
-convenient stores
profit maximization (MC) - Answers MC = MR
the long run of MC - Answers 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 - Answers downward sloping (market power)
MC comp graph profit - Answers When P is below ATC at Q*
MC graph breakeven - Answers when P is equal to ATC at Q*
MC loss - Answers When P is less than ATC at Q* but above AVC
MC shut down - Answers When P is less than AVC at Q*
MC outcomes - Answers 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 - Answers -not producing the exact same product
