The slope of the indifference curve for goods X and Y is called the marginal:
a. product rate.
b. rate of transformation.
c. rate of substitution.
d. rate of utility.
QUESTION 2Which of the following is characteristic of a monopolistically competitive firm?
a. The firm faces an upward-sloping demand curve.
b. The firm faces an inelastic demand curve.
c. The firm faces a horizontal demand curve.
d. The firm produces a differentiated product.
QUESTION 3The absolute value of the slope of an indifference curve is called the:
a. marginal rate of transformation.
b. transitivity slope.
c. indifference rate of preference.
d. marginal rate of substitution.
QUESTION 4Which of the following is the best example of a firm operating in a monopolistically competitive market?
a. A Kansas wheat farmer.
b. TGI Fridays, a family restaurant.
c. U.S. Postal Service.
d. Boeing, an aircraft manufacturer
QUESTION 5The slope of an indifference curve is equal to the ratio of the ____ of the good on the horizontal axis to the ____ of the good on the vertical axis.
a. marginal product (MP); total value (TV)
b. marginal utility (MU); marginal utility (MU)
c. price (P); price (P)
d. total utility (TU); price (P)
QUESTION 6Which of the following most closely approximates the conditions of a monopolistically competitive market?
a. The market for Grade A eggs, which is characterized by a large number of firms producing a homogeneous product.
b. The restaurant industry, which is characterized by firms producing a differentiated product in a market with low entry barriers.
c. Local cable television service, where a licensed supplier competes with firms offering satellite service.
d. The market for jumbo aircraft, where one major domestic firm competes with one major foreign firm.
QUESTION 7The ____ is the absolute value of the slope of an indifference curve.
a. marginal rate of substitution
b. average rate of transitivity
c. relative rate of utility
d. marginal rate of transposition
QUESTION 8Which of the following is true about long-run equilibrium in a monopolistically competitive market?
a. Firms earn zero economic profit because price equals long-run average cost, but the equilibrium is not allocatively efficient because price exceeds the marginal cost of the last unit produced.
b. They may earn negative, zero, or positive economic profit because monopolistically competitive firms are price takers.
c. Each firm faces a perfectly elastic demand curve and earns zero economic profit because price equals long-run average cost, and are allocatively efficient because price equals marginal cost for the last unit sold.
d. None of the above are correct.
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