Which of the following is true of firms in both monopolistic competition and perfect competition?
a. Firms face a horizontal demand curve.
b. Price exceeds marginal revenue.
c. Firms can enter and leave the industry with relative ease.
d. Price exceeds marginal cost.
e. Products are differentiated.
QUESTION 2Environmentalists, worried about sulfur dioxide in the air, pressure the government to require bus manufacturers to modify exhaust systems in buses. In this situation,
a. benefits of the proposed requirements are more widespread than costs
b. benefits and costs of the proposed requirements are equally widespread because producers of buses will pass cost increases on to bus companies who will increase fares
c. pressure for government regulation is unnecessary because those who use buses will stop riding buses if they don't have cleaner emissions
d. bus riders are more likely to lobby against the proposal than are bus producers
e. bus riders are more likely to lobby against the proposal than are bus workers
QUESTION 3Although both perfectly competitive and monopolistically competitive firms earn normal profits in the long run, monopolistically competitive firms will not
a. operate where price equals marginal cost
b. charge a higher price than firms in perfect competition
c. produce a smaller quantity than firms in perfect competition
d. produce where price equals average total cost
e. exit when demand falls below long-run average costs
QUESTION 4With special-interest legislation,
a. benefits are concentrated but costs are widespread
b. both benefits and costs are concentrated
c. benefits are widespread but costs are concentrated
d. both benefits and costs are widespread
e. there is no predictable relationship between costs and benefits
QUESTION 5A monopolistically competitive firm
a. earns no long-run economic profit and is therefore allocatively efficient
b. earns no long-run economic profit and therefore produces at the minimum point of its ATC curve
c. earns no long-run economic profit and is allocatively efficient even though it is not producing at the minimum point of its ATC curve
d. earns no long-run economic profit, is allocatively inefficient, and does not produce at the minimum point of its ATC curve
e. has a chance of making a long-run economic profit and is therefore allocatively inefficient
QUESTION 6General Motors benefits from tariffs on imported automobiles. Companies that use many automobiles, such as rental agencies, want to get them cheaply. In this case, the issue of tariff legislation involves
a. a simple majority because it promises concentrated costs and benefits
b. competing interests because it promises concentrated costs and benefits
c. a simple majority because it promises concentrated benefits and widespread costs
d. competing interests because it promises concentrated benefits and widespread costs
e. competing interests because it promises concentrated costs and widespread benefits
QUESTION 7In the long run, the output of a monopolistically competitive firm
a. exceeds that of an otherwise similar perfectly competitive firm
b. is less than that of an otherwise similar perfectly competitive firm
c. is at the point at which LRAC is minimized
d. equals that of an otherwise similar perfectly competitive firm
e. is less than that of an otherwise similar monopolist
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