10 questions
Which of these is NOT a characteristic of a monopolistically competitive firm?
There are many sellers
Firms sell differentiated products
There is free entry and exit
Prices are set by the buyer
Which of these is the profit maximization equation of the monopolistically competitive firm in the short run?
MR = MC
MR = P
MR < MC
MR < P
Which of these is the equation for economic profit?
Variable cost + Fixed cost
Marginal revenue - Marginal cost
Accounting profit + Opportunity cost
Revenue - Total costs
When new firms enter the monopolistically competitive market, which of the following obtains a positive externality?
Competitors
Customers
Government
Suppliers
Which of these CANNOT be used by the firm to signal their product's quality?
Brand Name
Costing
Advertising
Packaging
Which of these is the production quantity that minimizes the average total costs of the firm?
Efficient scale of the firm
Minimum cost requirement
Cost saving production
Effective production rate
Which of these describes the price of monopolistic competition?
It is above marginal revenue
It is above marginal cost
It is below marginal revenue
It is below marginal cost
Which of these is NOT a possible effect of advertising?
Promotes brand loyalty
Incentive to maintain quality
Lowers prices
Stops product development
How do increasing profits affect monopolistically competitive firms in the long run?
Firms will exit the market
Firms will develop fewer products
Firms will enter the market
Firms will increase costs
To earn a profit in the short run, how should the monopolistically competitive firm set its price?
equal to marginal costs
equal to average costs
above marginal costs
above average costs