Question

40. Which of the following is a typical example of monopolistic competition?

a.a chain restaurant

b.an apple orchard

c.a wheat farm

d.an electricity company

41.What are the three basic characteristics of monopolistic competition?

a.product differentiation; many sellers; free entry

b.product differentiation; few sellers; difficult entry

c.identical product; few sellers; difficult entry

d.identical product; few sellers; free entry

42.If total revenue is less than total costs at q*, the firm is ______.

a.making zero economic profits

b.making economic profits

c.earning a normal rate of return

d.making economic losses

43.The lack of production between q* and the minimum of ATC is called:

a.producer surplus

b.product differentiation

c.homogeneous products

d.excess capacity

44.Why do firms advertise?

a.to create a more elastic demand curve

b.to eliminate zero profits

c.to create a more inelastic demand curve

d.to stabilize profits

45. Which of the following examples would most likely use advertising?

a.A firm sells an identical product to other sellers.

b.A firm sells a product that has many substitutes.

c.A firm sells a product with low differentiation.

d.A firm sells a product with few substitutes.

Answer 1

Answer 40) A chain restaurant is a typical example of monopolistic competition because there are large number of players in the market.

Hence option A is the correct answer.

41) Three basic characteristics of monopolistic competition are product differentiation; many sellers; free entry.

Hence option A is the correct answer.

44) Firms advertise to create a more inelastic demand curve so that for their product demand doesn't change easily even when the price fluctuates.

Hence option C is the correct answer.

45)A firm sells a product that has low differentiation would likely to advertise because with advertising it would make their product more attractive.

Hence option C is the correct answer.