Monopolistically competitive firms sell goods that are a.close substitutes b.perfect su

 Monopolistically competitive firms sell goods that are

a.close substitutes

b.perfect substitutes

c.not substitutes

d.not differentiated products

e.complements

32.              Distinct from any other market structure, the firm in long-run perfect competition ends up
                            producing where

a.P = MR = MC = ATC, and AFC = 0

b.P > MR = MC = ATC, and AFC = 0

c.P

d.P = MR = MC = ATC, where ATC = (AFC + AVC)

e.P > MR and ATC > MC, where MC = (AFC + AVC)

33.              If there is an economic profit in monopolistic competition, there is

a.an incentive for new firms to enter

b.an incentive for existing firms to increase prices

c.at least one firm engaged in advertising

d.an incentive for existing firms to decrease prices

e.the absence of product differentiation

34.              Which statement is not consistent with Joseph Schumpeter’s hypothesis?

a.Monopolies use profit to invest in research and development.

b.Monopolies end up being more efficient than competitive firms.

c.Monopoly prices end up being lower than prices generated in perfect competition.

d.Perfect competition is more conducive to innovation than monopoly.

e.Perfect competition is more efficient than monopoly.

35.              In the text, when the Nick Rudd Ice Company starts as a monopoly and then finally faces
                            competition from a new entering ice company, its

a.price falls, its economic profit falls, but its output increases

b.price falls, its economic profit falls, and its ATC falls

c.price falls, its economic profit falls, and it faces a more elastic demand curve

d.price increases, its economic profit falls, and it faces a less elastic demand curve

e.ATC falls, its economic profit falls, and it faces a less elastic demand curve

36.              In an added perspective, we learn that Elaine Rodier gave up a job as a nursery school
                            teacher to make appetizers. In doing this, she incurs a(n)

a.implicit cost less than her lost income

b.explicit cost at least equal to her lost income

c.opportunity cost at least equal to her lost income

d.variable cost equal to her lost income

e.marginal cost equal to her lost income

37.              One reason why firms in monopolistically competitive markets earn zero profit in the
                            long run is because

a.product differentiation disappears

b.barriers to entry become prohibitive

c.the price elasticity of demand for each firm falls to zero

d.so many firms enter the market that each firm’s demand curve eventually becomes
tangent to the firm’s ATC curve

e.each firm’s ATC curve shifts upward to eventually become tangent to its demand
curve

38.              In the Theory of Price, George Stigler points out that a monopolist is no less desirous of
                            profits than a competitive firm. According to Stigler, what distinguishes the monopolist
                            from other entrepreneurs?

a.strategy

b.morality

c.objective

d.market position

e.motivation

39.              If a monopoly finds that at the present level of production, marginal revenue exceeds
                            marginal cost, the firm should

a.shut down

b.increase production

c.maintain the production level because MR > MC signifies economic profit

d.decrease production so that MC will equal MR

e.raise price

40.              The demand curve that a monopolist firm faces is

a.the same as the demand curve facing a perfectly competitive firm except the
monopolist is a price maker and the competitive firm is a price taker

b.the same as the demand curve facing a perfectly competitive firm except the
monopolist is a price taker and the competitive firm is a price maker

c.horizontal, because there are no close substitutes for its product

d.the same as its industry demand curve

e.vertical, because there are no close substitutes for its product