following is NOT a characteristic of a monopolistically competitive market is a
ID: 1119356 • Letter: F
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following is NOT a characteristic of a monopolistically competitive market is a large number of independently acting small sellers. 13. Which of the N structure? A) There B) All sellers sell products that are differentiated. C) There are low barriers to entry of new firms. D) Each firm must react to actions of other firms 14. If the demand curve for a firm is downward - sloping, its marginal revenue curve A) will lie above the demand curve. B) will lie below the demand curve. C) is the same as the demand curve. D) is horizontal. 15. Because the monopolistically competitive firm faces a demand curve for its product, it A) downward sloping: cannot influence B) horizontal; can influence C) horizontal; cannot influence D) downward - sloping; can influence the price of its output. 16. In the short run, if the price is above average total cost in a monopolistically competitive market, the firm makes A) Losses and firms exit the market B) Profits and firms exit the market C) Losses and firms enter the market D) Profits and firms enter the market 17. Which of the following is true in long-run equilibrium for a firm in a monopolistic competitive industry? A) The demand curve is tangent to marginal cost curve. B) The demand curve is tangent to average cost curve C) The marginal cost curve is tangent to average cost curve D) Both B and C 18. When a monopolistically competitive firm lowers it price one bad thing happens to the firm. What is this "one bad thing" called? A) the output effect B) the income effect C) the substitution effect D) the price effectExplanation / Answer
4 question answer with explanation:
13 d. each firm must react to actions of other firms
Explanation: Since the number of firms in a monopolistically competitive market an action of one firm will not affect much the other firms.
14. b) will lie below the demand curve
Explanation: marginal revenue curve will lie below the demand curve if demand curve of a firm is downward sloping.
15. d) downward-sloping: can influence
Explanation:Monopolistic competition refers to a market situation in which there are large number of buyers and sellers. The sellers sell closely related or differentiated products but not identical product. The products are close substitutes of each other. Product differentiation is the most important feature of monopolistic competition. Each firm under monopolistic competition enjoys the monopoly over the brand of the commodity and thus the firm has the control over the price of the commodity. Under monopolistic competition, MR < AR and AR and MR curve slope downwards and MR curve lies below AR curve. But these curves are more elastic. Example: Firms producing different brands of shampoos like Sunsilk, Pantene, Head & Shoulders, Dove etc. Monopolistic competition combines the features of monopoly and perfect competition.
18. d) the price effect
Suppose a firm cuts its price by $.50 one bad thing happens: It receives $.50 less for each unit that it could have sold at a higher price, this is called the PRICE EFFECT.
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