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    Monopolistic competition questions

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    Due to the existence of a large number of similar, but not identical, substitutes in most communities, the market for chiropractors is best considered
    a. an oligopoly
    b. perfect competition
    c. monopolistic competition
    d. a monopoly

    my answer is d

    The demand curve for a firm under monopolistic competition is
    a. U-shaped
    b. upward sloping
    c. downward sloping
    d. vertical

    mmm it is A

    A firm in monopolistic competition maximizes its profit by producing at the level at which
    a. MC = ATC
    b. MC = AR
    c. MC = MR
    d. MC = P

    D is my answer

    If a firm under monopolistic competition is producing a quantity that generates MC > MR, then the marginal decision rule tells us that profit
    a. can be increased by increasing production
    b. can be increased by decreasing production
    c. can be increased by decreasing the price
    d. is maximized only if MC = P

    my answer is A

    Product differentiation under monopolistic competition means that each firm
    a. charges slightly different prices
    b. has a pure monopoly
    c. maximizes profit where MC = P
    d. faces a horizontal demand curve

    my answer is C

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    Solution Preview

    The key to the first question are the words "large number." A monopoly is by definition only one seller. The market for chiropractors would be most like monopolistic competition.

    Demand curves are generally horizontal, meaning that the firm is a price taker, or downward sloping, meaning that a price drop will cause an increase in demand. I can't think ...

    Solution Summary

    Multiple choice market structure questions