Deck 13: Monopolistic Competition

Question 1

Monopolistic competition is characterized by a

A) few dominant firms and low entry barriers.
B) large number of firms and substantial entry barriers.
C) large number of firms and low entry barriers.
D) few dominant firms and substantial entry barriers.

Answer 1

large number of firms and low entry barriers.

Question 2

In which of these continuums of degrees of competition (highest to lowest) is monopolistic competition properly placed?

A) pure competition, oligopoly, pure monopoly, monopolistic competition
B) oligopoly, pure competition, monopolistic competition, pure monopoly
C) monopolistic competition, pure competition, pure monopoly, oligopoly
D) pure competition, monopolistic competition, oligopoly, pure monopoly

Answer 2

pure competition, monopolistic competition, oligopoly, pure monopoly

Question 3

Monopolistically competitive and purely competitive industries are similar in that

A) both are assured of short-run economic profits.
B) both produce differentiated products.
C) the demand curves facing individual firms are perfectly elastic in both industries.
D) there are few, if any, barriers to entry.

Answer 3

there are few, if any, barriers to entry.

Question 4

A monopolistically competitive industry combines elements of both competition and monopoly. The competition element results from

A) the likelihood of collusion.
B) product differentiation.
C) low entry barriers.
D) mutual interdependence in decision making.

Question 5

Under monopolistic competition, entry to the industry is

A) completely free of barriers.
B) more difficult than under pure competition but not nearly as difficult as under pure monopoly.
C) more difficult than under pure monopoly.
D) blocked.

Question 6

Concentration ratios measure the

A) geographic location of the largest corporations in each industry.
B) degree to which product price exceeds marginal cost in various industries.
C) percentage of total industry sales accounted for by the largest firms in the industry.
D) number of firms in an industry.

Question 7

A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from

A) a relatively large number of firms, and the monopolistic element from product differentiation.
B) product differentiation, and the monopolistic element from high entry barriers.
C) a perfectly elastic demand curve, and the monopolistic element from low entry barriers.
D) a highly inelastic demand curve, and the monopolistic element from advertising and product promotion.

Question 8

Monopolistic competition means

A) a market situation where competition is based entirely on product differentiation and advertising.
B) a large number of firms producing a standardized or homogeneous product.
C) many firms producing differentiated products.
D) a few firms producing a standardized or homogeneous product.

Question 9

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.

Question 10

A significant difference between a monopolistically competitive firm and a purely competitive firm is that the

A) former has fewer barriers to entry into the industry.
B) latter recognizes that price must be reduced to sell more output.
C) latter’s demand curve is perfectly elastic.
D) latter differentiates its product.

Question 11

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a monopolistic competitor?

A) Subway Sandwiches
B) Pittsburgh Plate Glass
C) Ford Motor Company
D) Microsoft

Question 12

Monopolistic competition resembles pure competition because

A) both industries emphasize nonprice competition.
B) in both instances firms will operate at the minimum point on their long-run average total cost curves.
C) both industries entail the production of differentiated products.
D) barriers to entry are either weak or nonexistent.

Question 13

A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from

A) the likelihood of collusion.
B) high entry barriers.
C) product differentiation.
D) mutual interdependence in decision making.

Question 14

In which of the following market models do demand and marginal revenue diverge?

A) pure monopoly, oligopoly, and monopolistic competition
B) pure monopoly, oligopoly, and pure competition
C) pure monopoly only
D) oligopoly only

Question 15

A significant difference between a monopolistically competitive firm and a purely competitive firm is that the

A) former does not seek to maximize profits.
B) latter recognizes that price must be reduced to sell more output.
C) former sells similar, although not identical, products.
D) former's demand curve is perfectly inelastic.

Question 16

The restaurant, legal assistance, and clothing industries are each illustrations of

A) countervailing power.
B) homogeneous oligopoly.
C) monopolistic competition.
D) pure monopoly.

Question 17

Which of the following is not a basic characteristic of monopolistic competition?

A) the use of trademarks and brand names
B) recognized mutual interdependence
C) product differentiation
D) a relatively large number of sellers

Question 18

The monopolistic competition model assumes that

A) allocative efficiency will be achieved.
B) productive efficiency will be achieved.
C) firms will engage in nonprice competition.
D) firms will realize economic profits in the long run.

Question 19

Economic analysis of a monopolistically competitive industry is more complicated than that of pure competition because

A) of product differentiation and consequent product promotion activities.
B) monopolistically competitive firms cannot realize an economic profit in the long run.
C) the number of firms in the industry is larger.
D) monopolistically competitive producers use strategic pricing strategies to combat rivals.

Question 20

Nonprice competition refers to

A) competition between products of different industries, for example, competition between aluminum and steel in the manufacture of automobile parts.
B) price increases by a firm that are ignored by its rivals.
C) advertising, product promotion, and changes in the real or perceived characteristics of a product.
D) reductions in production costs that are not reflected in price reductions.

Question 21

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.

Question 22

If you sum the squares of the market shares of each firm in an industry (as measured by percent of industry sales), you are calculating the

A) four-firm concentration ratio.
B) Herfindahl index.
C) degree of collusion.
D) Lerner index.

Question 23

Industries X and Y both have four-firm concentration ratios of 32 percent, but the Herfindahl index for X is 256, while that for Y is 264. These data suggest

A) greater market power in X than in Y.
B) greater market power in Y than in X.
C) that X is more technologically progressive than Y.
D) that price competition is stronger in Y than in X.

Question 24

The Herfindahl index

A) tells us the degree to which monopolistically competitive firms are differentiating their products.
B) is another name for the four-firm concentration ratio.
C) tells us whether oligopolistic firms are engaging in collusion.
D) gives much greater weight to larger firms than to smaller firms in an industry.

Question 25

The monopolistically competitive seller's demand curve will become more elastic the

A) more significant the barriers to entering the industry.
B) greater the degree of product differentiation.
C) larger the number of competitors.
D) smaller the number of competitors.

Question 26

The four-firm sales concentration ratio for an industry measures the

A) geographic concentration of firms.
B) extent to which the four largest firms dominate the production of a good.
C) percentage of the industry's capital facilities owned by the four largest firms.
D) degree of X-inefficiency in the industry.

Question 27

An industry having a four-firm concentration ratio of 30 percent

A) approximates pure competition.
B) is an oligopoly.
C) is a pure monopoly.
D) is monopolistically competitive.

Question 28

If the four-firm concentration ratio for industry X is 80,

A) the four largest firms account for 80 percent of total sales.
B) each of the four largest firms accounts for 20 percent of total sales.
C) the four largest firms account for 20 percent of total sales.
D) the industry is monopolistically competitive.

Question 29

A monopolistically competitive firm's marginal revenue curve

A) is downsloping and coincides with the demand curve.
B) coincides with the demand curve and is parallel to the horizontal axis.
C) is downsloping and lies below the demand curve.
D) does not exist because the firm is a "price maker."

Question 30

The Herfindahl index for a pure monopolist is

A) 100.
B) 10,000.
C) 100,000.
D) 10.

Question 31

In the long run, a profit-maximizing monopolistically competitive firm sets it price

A) above marginal cost.
B) below marginal cost.
C) equal to marginal revenue.
D) equal to marginal cost.

Question 32

In the short run, a profit-maximizing monopolistically competitive firm sets it price

A) equal to marginal revenue.
B) equal to marginal cost.
C) above marginal cost.
D) below marginal cost.

Question 33

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.

Question 34

If an industry evolves from oligopoly to monopolistic competition, we would expect

A) the four-firm concentration ratio to increase.
B) the four-firm concentration ratio to decrease.
C) the four-firm concentration ratio to remain the same.
D) barriers to entry to strengthen.

Question 35

The price elasticity of a monopolistically competitive firm's demand curve varies

A) inversely with the number of competitors and the degree of product differentiation.
B) directly with the number of competitors and the degree of product differentiation.
C) directly with the number of competitors but inversely with the degree of product differentiation.
D) inversely with the number of competitors but directly with the degree of product differentiation.

Question 36

If the four-firm concentration ratio in an oligopolistic industry is 100 percent and each firm has an equal percentage of sales, the Herfindahl index is

A) 10,000.
B) 2,500.
C) 3,750.
D) 1,000.

Question 37

A monopolistically competitive firm has a

A) highly elastic demand curve.
B) highly inelastic demand curve.
C) perfectly inelastic demand curve.
D) perfectly elastic demand curve.

Question 38

Assume the top six firms comprising an industry have market shares of 10, 8, 8, 5, 5, and 4 percent. The remaining 20 firms each have market shares of 2 percent. The Herfindahl index for this industry is

A) 294.
B) 31.
C) 374.
D) 253.

Question 39

The larger the number of firms and the smaller the degree of product differentiation, the

A) greater the divergence between the demand and the marginal revenue curves of the monopolistically competitive firm.
B) larger will be the monopolistically competitive firm's fixed costs.
C) less elastic is the monopolistically competitive firm's demand curve.
D) more elastic is the monopolistically competitive firm's demand curve.

Question 40

Suppose that total sales in an industry in a particular year are $800 million and sales by the top four sellers are $50 million, $40 million, $30 million, and $30 million, respectively. We can conclude that

A) this industry is an oligopoly.
B) this industry is monopolistically competitive.
C) the concentration ratio is 25 percent.
D) firms in this industry likely collude with each other.

Question 41

In long-run equilibrium, monopolistic competition entails

A) an efficient allocation of resources.
B) an overallocation of resources due to inadequate capacity.
C) an underallocation of resources due to excess capacity.
D) production at the minimum attainable average total cost.

Question 42

Monopolistically competitive firms

A) realize normal profits in the short run but losses in the long run.
B) incur persistent losses in both the short run and long run.
C) may realize either profits or losses in the short run but realize normal profits in the long run.
D) persistently realize economic profits in both the short run and long run.

Question 43

Which of the following statements is correct?

A) Purely competitive firms, monopolistically competitive firms, and pure monopolies all earn zero economic profits in the long run.
B) Purely competitive firms, monopolistically competitive firms, and pure monopolies all earn positive economic profits in the long run.
C) In the long run, purely competitive firms and monopolistically competitive firms earn zero economic profits, while pure monopolies may or may not earn economic profits.
D) Monopolistically competitive firms earn zero economic profits in both the short run and the long run.

Question 44

In long-run equilibrium, both purely competitive and monopolistically competitive firms will

A) produce at minimum average total cost.
B) earn economic profits.
C) achieve allocative efficiency.
D) equate marginal cost and marginal revenue.

Question 45

Answer the question on the basis of the following demand and cost data for a specific firm. $\quad$$\quad$$\quad$$\quad$$\text { Demand Data }$ $\quad$$\quad$$\quad$ $\text { Cost Data }$
$\begin{array}{|c|c|c|c|c|}\hline(1) &(2)&(3)&&\text { Total } \\\text { Price }&\text { Price }&\text { Quanti }&\text { Outpu }&\text { Cost } \\&&\text { ty }& \text { t }\\\hline 11.0 & \$ 10.0 & 6 & 6 & \$ 61 \\0 & 0 & & & \\\hline 9.99 & 8.85 & 7 & 7 & 62 \\\hline 9.00 & 8.00 & 8 & 8 & 64 \\\hline 8.00 & 7.00 & 9 & 9 & 67 \\\hline 7.10 & 6.10 & 10 & 10 & 72 \\\hline 6.00 & 5.00 & 11 & 11 & 79 \\\hline 5.15 & 4.15 & 12 & 12 & 86 \\\hline\end{array}$ If columns (1) and (3) of the demand data shown are this firm's demand schedule, the profit-maximizing level of output will be

A) 12 units.
B) 8 units.
C) 10 units.
D) 9 units.

Question 46

Excess capacity refers to the

A) amount by which actual production falls short of the minimum ATC output.
B) fact that entry barriers artificially reduce the number of firms in an industry.
C) differential between price and marginal costs that characterizes monopolistically competitive firms.
D) fact that most monopolistically competitive firms encounter diseconomies of scale.

Question 47

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from

A) rising marginal costs.
B) a perfectly elastic product demand curve.
C) relatively easy entry.
D) product differentiation and development.

Question 48

In the long run, the price charged by a monopolistically competitive firm seeking to maximize profit will

A) be less than both MC and ATC.
B) exceed ATC but equal MC.
C) exceed MC but equal ATC.
D) exceed both MC and ATC.

Question 49

In the long run, the price charged by the 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) will be equal to ATC.

Question 50

Other things equal, if more firms enter a monopolistically competitive industry,

A) the demand curves facing existing firms would shift to the right.
B) the demand curves facing existing firms would shift to the left.
C) the demand curves facing existing firms would become less elastic.
D) losses would necessarily occur.

Question 51

When a monopolistically competitive firm is in long-run equilibrium,

A) production takes place where ATC is minimized.
B) marginal revenue equals marginal cost and price equals average total cost.
C) normal profit is zero and price equals marginal cost.
D) economic profit is zero and price equals marginal cost.

Question 52

For a monopolistically competitive firm in long-run equilibrium,

A) price will equal marginal cost.
B) price will equal average total cost.
C) marginal revenue will exceed marginal cost.
D) price will equal the minimum average total cost.

Question 53

Which of the following statements concerning a monopolistically competitive industry is correct?

A) If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms will shift to the right.
B) If there are short-run economic profits, firms will enter the industry and the demand curves of existing firms will shift to the right.
C) If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms will shift to the left.
D) If there are short-run economic profits, firms will leave the industry and the demand curves of the remaining firms will shift to the right.

Question 54

Answer the question on the basis of the following demand and cost data for a specific firm. $\quad$$\quad$$\quad$$\quad$$\text { Demand Data }$ $\quad$$\quad$$\quad$ $\text { Cost Data }$
$\begin{array}{|c|c|c|c|c|}\hline(1) &(2)&(3)&&\text { Total } \\\text { Price }&\text { Price }&\text { Quanti }&\text { Outpu }&\text { Cost } \\&&\text { ty }& \text { t }\\\hline 11.0 & \$ 10.0 & 6 & 6 & \$ 61 \\0 & 0 & & & \\\hline 9.99 & 8.85 & 7 & 7 & 62 \\\hline 9.00 & 8.00 & 8 & 8 & 64 \\\hline 8.00 & 7.00 & 9 & 9 & 67 \\\hline 7.10 & 6.10 & 10 & 10 & 72 \\\hline 6.00 & 5.00 & 11 & 11 & 79 \\\hline 5.15 & 4.15 & 12 & 12 & 86 \\\hline\end{array}$ If columns (1) and (3) of the demand data shown are this firm's demand schedule, the profit-maximizing price will be

A) $9.
B) $7.
C) $11.
D) $6.

Question 55

If some firms leave a monopolistically competitive industry, the demand curves of the remaining firms will

A) be unaffected.
B) shift to the left.
C) become more elastic.
D) shift to the right.

Question 56

In the long run, economic theory predicts that a monopolistically competitive firm will

A) earn an economic profit.
B) realize all economies of scale.
C) equate price and marginal cost.
D) have excess production capacity.

Question 57

The monopolistically competitive seller maximizes profit by producing at the point where

A) total revenue is at a maximum.
B) average costs are at a minimum.
C) marginal revenue equals marginal cost.
D) price equals marginal revenue.

Question 58

When a monopolistically competitive firm is in long-run equilibrium,

A) P = MC = ATC.
B) MR = MC and minimum ATC > P.
C) MR > MC and P = minimum ATC.
D) MR = MC and P > minimum ATC.

Question 59

Which of the following is not characteristic of long-run equilibrium under monopolistic competition?

A) Price equals minimum average total cost.
B) Marginal cost equals marginal revenue.
C) Price is equal to average total cost.
D) Price exceeds marginal cost.

Question 60

Which of the following is correct for a monopolistically competitive firm in long-run equilibrium?

A) MC = ATC.
B) MC exceeds MR.
C) P exceeds minimum ATC.
D) P = MC.

Question 61

Answer the question on the basis of the following demand and cost data for a specific firm. Suppose that entry into this industry changes this firm's demand schedule from columns (1) and (3) to columns (2) and (3). We can conclude that this industry is

A) a pure monopoly.
B) purely competitive.
C) a constant cost industry.
D) monopolistically competitive.

Question 62

The less elastic a monopolistic competitor's long-run demand curve, the

A) less its excess capacity.
B) higher its price relative to that of a pure competitor having the same cost curves.
C) higher its long-run profits.
D) lower its average total cost at its equilibrium level of output.

Question 63

The more elastic a monopolistic competitor's long-run demand curve, the

A) greater its excess capacity.
B) higher its price relative to that of a pure competitor having the same cost curves.
C) lower its long-run economic profit.
D) lower its average total cost at its profit-maximizing level of output.

Question 64

The economic inefficiencies of monopolistic competition may be offset by the fact that

A) advertising expenditures shift the average cost curve upward.
B) available capacity is fully utilized.
C) resources are optimally allocated to the production of the product.
D) consumers have increased product variety.

Question 65

In monopolistically competitive markets, resources are

A) overallocated because long-run equilibrium occurs where price exceeds marginal cost.
B) underallocated because long-run equilibrium occurs where price exceeds marginal cost.
C) overallocated because long-run equilibrium occurs where marginal cost exceeds price.
D) underallocated because long-run equilibrium occurs where marginal cost exceeds price.

Question 66

Which of the following is correct?

A) The excess capacity problem diminishes as the monopolistically competitive firm's demand curve becomes less elastic.
B) The excess capacity problem means that monopolistically competitive firms typically produce at some point on the rising segment of their average total cost curve.
C) The greater the degree of product variation, the lesser is the excess capacity problem.
D) The greater the degree of product variation, the greater is the excess capacity problem.

Question 67

Monopolistically competitive industries are inefficient because

A) they realize diseconomies of scale.
B) advertising costs retard technological advance and product development.
C) they are overpopulated with firms whose plants are underutilized.
D) monopolistically competitive sellers engage in misleading advertising.

Question 68

Which of the following statements is correct?

A) There is a trade-off between product variety and allocative efficiency.
B) Product variety and allocative efficiency are complementary; increasing one enhances the other.
C) There is no relationship between product variation and allocative efficiency.
D) Greater excess capacity reduces firms’ ability to differentiate products.

Question 69

An important similarity between a monopolistically competitive firm and a purely competitive firm is that

A) both face perfectly elastic demand schedules.
B) economic profit tends toward zero for both.
C) both realize productive efficiency.
D) both realize allocative efficiency.

Question 70

Dequam likes product variety, while Natasha is most concerned about paying the lowest price possible for a good. This suggests that

A) Dequam cares more about allocative efficiency, while Natasha cares more about productive efficiency.
B) Dequam cares more about productive efficiency, while Natasha cares more about allocative efficiency.
C) Dequam prefers monopolistically competitive industries, while Natasha prefers purely competitive industries.
D) Dequam prefers purely competitive industries, while Natasha prefers monopolistically competitive industries.

Question 71

An important similarity between a monopolistically competitive firm and a pure monopolist is that both

A) realize an economic profit in the long run.
B) achieve allocative efficiency.
C) face demand curves that are less than perfectly elastic.
D) achieve productive efficiency.

Question 72

Answer the question on the basis of the following demand and cost data for a specific firm. $\quad$$\quad$$\quad$$\quad$$\text { Demand Data }$ $\quad$$\quad$$\quad$ $\text { Cost Data }$
$\begin{array}{|c|c|c|c|c|}\hline(1) &(2)&(3)&&\text { Total } \\\text { Price }&\text { Price }&\text { Quanti }&\text { Outpu }&\text { Cost } \\&&\text { ty }& \text { t }\\\hline 11.0 & \$ 10.0 & 6 & 6 & \$ 61 \\\hline 9.99 & 8.85 & 7 & 7 & 62 \\\hline 9.00 & 8.00 & 8 & 8 & 64 \\\hline 8.00 & 7.00 & 9 & 9 & 67 \\\hline 7.10 & 6.10 & 10 & 10 & 72 \\\hline 6.00 & 5.00 & 11 & 11 & 79 \\\hline 5.15 & 4.15 & 12 & 12 & 86 \\\hline\end{array}$ Suppose that entry into the industry changes this firm's demand schedule from columns (1) and (3) to columns (2) and (3). Economic profit will

A) fall by $10.
B) fall to $6.
C) increase by $10.
D) decline to zero.

Question 73

Product variety is likely to be greater in

A) monopolistic competition than in pure competition.
B) pure competition than in monopolistic competition.
C) homogeneous oligopoly than in monopolistic competition.
D) homogeneous oligopoly than in differentiated oligopoly.

Question 74

In the long run, a monopolistically competitive firm

A) earns an economic profit.
B) produces where P = ATC.
C) produces where MR exceeds MC.
D) achieves allocative efficiency.

Question 75

Keely says that he’s glad that his morning coffee is sold in a monopolistically competitive market rather than a purely competitive market. If this is true for most things Keely buys, it suggests that he

A) is most concerned about paying the lowest price possible.
B) cares most about allocative efficiency.
C) is willing to pay extra for product variety.
D) is a creature of habit who always buys the same type of a particular good.

Question 76

Answer the question on the basis of the following demand and cost data for a specific firm. $\quad$$\quad$$\quad$$\quad$$\text { Demand Data }$ $\quad$$\quad$$\quad$ $\text { Cost Data }$
$\begin{array}{|c|c|c|c|c|}\hline(1) &(2)&(3)&&\text { Total } \\\text { Price }&\text { Price }&\text { Quanti }&\text { Outpu }&\text { Cost } \\&&\text { ty }& \text { t }\\\hline 11.0 & \$ 10.0 & 6 & 6 & \$ 61 \\0 & 0 & & & \\\hline 9.99 & 8.85 & 7 & 7 & 62 \\\hline 9.00 & 8.00 & 8 & 8 & 64 \\\hline 8.00 & 7.00 & 9 & 9 & 67 \\\hline 7.10 & 6.10 & 10 & 10 & 72 \\\hline 6.00 & 5.00 & 11 & 11 & 79 \\\hline 5.15 & 4.15 & 12 & 12 & 86 \\\hline\end{array}$ If columns (1) and (3) of the demand data shown are this firm's demand schedule, economic profit will be

A) $10.
B) $19.
C) $6.
D) $8.

Question 77

A significant benefit of monopolistic competition compared with pure competition is

A) less likelihood of X-inefficiency.
B) improved resource allocation.
C) greater product variety.
D) stronger incentives to achieve economies of scale.

Question 78

Answer the question on the basis of the following demand and cost data for a specific firm. $\quad$$\quad$$\quad$$\quad$$\text { Demand Data }$ $\quad$$\quad$$\quad$ $\text { Cost Data }$
$\begin{array}{|c|c|c|c|c|}\hline(1) &(2)&(3)&&\text { Total } \\\text { Price }&\text { Price }&\text { Quanti }&\text { Outpu }&\text { Cost } \\&&\text { ty }& \text { t }\\\hline 11.0 & \$ 10.0 & 6 & 6 & \$ 61 \\0 & 0 & & & \\\hline 9.99 & 8.85 & 7 & 7 & 62 \\\hline 9.00 & 8.00 & 8 & 8 & 64 \\\hline 8.00 & 7.00 & 9 & 9 & 67 \\\hline 7.10 & 6.10 & 10 & 10 & 72 \\\hline 6.00 & 5.00 & 11 & 11 & 79 \\\hline 5.15 & 4.15 & 12 & 12 & 86 \\\hline\end{array}$ With the demand schedule shown by columns (2) and (3), in long-run equilibrium

A) price will equal average total cost.
B) total cost will exceed total revenue.
C) marginal cost will exceed price.
D) price will equal marginal revenue.

Question 79

In long-run equilibrium, a monopolistically competitive producer achieves

A) neither productive efficiency nor allocative efficiency.
B) both productive efficiency and allocative efficiency.
C) productive efficiency but not allocative efficiency.
D) allocative efficiency but not productive efficiency.

Question 80

The less elastic a monopolistic competitor's long-run demand curve, the

A) greater its excess capacity.
B) lower its price relative to that of a pure competitor having the same cost curves.
C) higher its long-run economic profit.
D) lower its average total cost at its equilibrium level of output.