Question

10. Besides getting to the proper MC=MR point, what else is important to firms engaged in

monopolistic competition?

            A) Making their demand curve as inelastic as possible.

            B) Being able to effectively market their product or service to gain loyal repeat customers.

            C) Finding desirable non-price strategies like giving .05 cents of every dollar to help feed poor children that makes customers feel good about doing business with the firm.

            D) All these are important to the firm in monopolistic competition because all of the mentioned strategies play a role in increasing profits and enhancing MC=MR.

11. If the marginal cost curves fall in an oligopoly market structure due to improved

technology, then our economic model tells us that the firms will automatically lower their

prices in order to maximize more profits.   

            A) This statement is true.

            B) This statement is false.

            C) We do not have enough information to conclude if this is true or false.

            D) MR=MC has no practical applications and is just a theory.

12. If 12 firms controlled 70 percent or more of the market share, then our economics

textbook told us that this would be classified as monopolistic competition. Any time there

are over 10 firms in any industry, then you no longer have an oligopoly.

            A) Yes this is true. Having more than 10 firms will no longer qualify as an oligopoly.

            B) No – the above statement is false. There is no rule that says that once you have more than 10 firms, that they must be classified as something else other than an oligopoly.    

            C) Our microeconomic theory says that a firm can be both an oligopoly and be part of monopolistic competition all at the same time. This is not a big deal.

            D) All statement listed above are incorrect.

13. If the U.S. government was the sole buyer in a marketplace for a product or service

produced by the private sector, then what would the government be classifies as?    

            A) A monopoly

            B) A monopsony

            C) A mono   

            D) None of the above.   

Answer 1

10.A monopolistic Ally competitive firm have some degree of influence over price and that is because of product differentiation.This market engages in price as well as non price competition to woo the consumers and earn profits.

Answer-D

11.Prices are very rigid in an oligopolistic structure.A change in variable cost,which further changes MC does not have any effect on the price.

Answer-B

12.Oligopoly is defined as a few number of firms,generally 2-10 controlling the majority of the market.,but there is no hard and fast rule regarding the number of firms.It can be a little more than 10.

Answer-B.

13.If there is only one buyer of a good,then the market is defined as monopsony.

Answer-B