Monopolistic competition is inefficient because:

Monopolistic competition is inefficient because:
 a. firms earn positive economic profits.
  b. the firms' marginal costs and marginal revenues are not equal.
  c. firms have excess capacity in the long run.
  d. entry is difficult.

QUESTION 2

At the unique point of consumer equilibrium, the:
 a. distance between indifference curves is maximum.
  b. distance between the budget line and the indifference curve is maximum.
  c. marginal utility ratio of the two goods is equal.
  d. marginal rate of substitution (MRS) equals the slope of the budget line.

QUESTION 3

A monopolistic competitive firm is inefficient because the firm:
 a. is not maximizing its profit.
  b. is producing at an output where average total cost is not minimum.
  c. earns positive economic profit in the long run.
  d. none of these.

QUESTION 4

Only at the point of consumer equilibrium does the marginal rate of substitution (MRS) equal the:
 a. slope of the budget line.
  b. slope of the indifference curve.
  c. price ratio.
  d. all of these.

QUESTION 5

Which of the following statements best describes firms under monopolistic competition?
 a. Profits will be positive in the long run.
  b. Price always equals average variable cost.
  c. In the long run, positive economic profit will be eliminated.
  d. Marginal revenue equals minimum average total cost in the short run.

QUESTION 6

Consumer equilibrium occurs where the budget line is tangent to the:
 a. lowest possible indifference curve.
  b. highest possible indifference curve.
  c. utility maximizing indifference curve.
  d. utility equalization indifference curve.

QUESTION 7

In the long run, a monopolistic competitive firm will operate at a price which:
 a. is higher than minimum long-run average cost.
  b. equals minimum long-run average cost.
  c. equals marginal cost.
  d. none of these.