Question

1. A distinguishing characteristic of monopolistically competitive market is

	A.	price discrimination
	B.	differentiated products
	C.	having long-run economic profits
	D.	having short-run economic losses

2. The Nash equilibrium in a duopoly market would result in

	A.	An equilibrium price higher than the "monopoly price" but a lower equilibrium quantity compared to the " monopoly quantity"
	B.	An equilibrium price higher than a competitive price but a lower equilibrium quantity compared to a monopoly quantity
	C.	an equilibrium quantity higher than a monopolistic quantity but lower than a competitive quantity
	D.	an equilibrium price higher than a monopoly price but lower than a competitive price

3. In the kinked demand curve model, it is assumed that the demand faced by an oligopoly is

	A.	less elastic when it lowers its price but more elastic when it raises its price.
	B.	less elastic when it raises its price but more elastic when it lowers the price.
	C.	less elastic when it lowers its price but unit elastic when it raises its price
	D.	more elastic when it lowers the price but perfectly inelastic when it raises its price

4. The distinguishing characteristic of an oligopolistic market is

	A.	maximizing its profit by setting its MR above its MC
	B.	setting its MR below its MC but higher than its price
	C.	making its decision with respect to its competitors' decisions or expected reaction to its decision
	D.	making its decision without regard what its competitors might do

5. To maximize its profit a monopolistically competitive firm sets

	A.	its price equal to its MR
	B.	its price equal to its MC
	C.	its MR to its MC
	D.	its MC to its AC where its AC is minimized

6. As new firms enter a monopolistically competitive market, the demand faced by each firm:

	A.	the demand faced by each competing firm becomes more inelastic.
	B.	the demand faced by each competing firm becomes less inelastic.
	C.	the demand faced by each competing firm becomes steeper
	D.	the demand faced by each competing firm becomes less elastic

Answer 1

1. A distinguishing characteristic of monopolistically competitive market is differentiated products (option B)

2. The Nash equilibrium in a duopoly market would result in an equilibrium quantity higher than a monopolistic quantity but lower than a competitive quantity (option C)

3.In the kinked demand curve model, it is assumed that the demand faced by an oligopoly is less elastic when it lowers its price but more elastic when it raises its price. (option A)

4. The distinguishing characteristic of an oligopolistic market is making its decision with respect to its competitors' decisions or expected reaction to its decision (option C)

5. To maximize its profit a monopolistically competitive firm sets its MR = MC (option C)

6. As new firms enter a monopolistically competitive market, the demand faced by each competing firm becomes less inelastic. (option B)