1)Monopolistic competitive firms and perfectly competitive firms are similar in that both

	set price equal to marginal cost.
	face no barriers to entry or exit.
	face a horizontal demand curve.
	produce a homogeneous product.
	all of the above

2)A monopolist is a _______________ and a monopolistic competitive firm is

	price searcher; also a price searcher.
	price taker; a price searcher.
	price taker; also a price taker.
	price searcher; a price taker.

3)Which if the following is an example of an oligopoly market in which the firms produce a homogeneous product?

	aluminum
	soap
	breakfast cereals
	tires

4)In an oligopoly market, unlike in other market structures, firms

	face a downward-sloping demand curve.
	can produce a homogeneous product or a differentiated product.
	use advertising.
	face low barriers to entry and exit.

5)The demand curve facing a firm in monopolistic competition is downward sloping, because the firm

	sells a differentiated product.
	is the entire industry by itself.
	is small relative to the market.
	b and c

6)In long run equilibrium, the monopolistic competitor will most likely

	be earning zero economic profit.
	be operating at the lowest point on its average total cost curve.
	charge a price that is equal to marginal revenue.
	charge a price that is equal to marginal cost.
	c and d

7)A firm in a monopolistic competitive industry will produce an output level at which

	P < MR.
	P > MR.
	P = MC.
	P = MR.

8)The excess capacity theorem states that a monopolistic competitor

	will produce an output level smaller than the one that would minimize its unit costs.
	will produce an output level where MR > MC.
	generally does not attain long run equilibrium, and thus charges a higher price than it should.
	typically produces too much of a good at too low a quality.

9)The monopolistic competitive firm produces the output at which

	marginal revenue equals marginal cost.
	price equals marginal cost.
	there is resource allocative efficiency.
	average total cost is at a minimum.

10)Which of the following is an example of a monopolistic competitor?

	General Motors
	a wheat farmer in Iowa
	a long-distance telephone company
	a family-owned Italian restaurant

11)The monopolistic competitor faces a __________ demand curve and therefore is a price __________.

	downward-sloping; searcher.
	horizontal; taker.
	downward-sloping; taker.
	horizontal; searcher.

12)The monopolistic competitive firm faces a __________ demand curve.

	horizontal
	vertical
	downward-sloping
	upward-sloping

13)Which of the following industries is the best real-world example of monopolistic competition?

	automobiles
	electricity generation
	computer software
	soft drinks

14)In a monopolistic competitive industry,

	each firm in the industry produces a slightly differentiated product.
	there are barriers to entry.
	there are barriers to exit.
	there are few sellers.

15)Which of the following is one of the assumptions upon which the theory of monopolistic competition is built?

	There are many sellers.
	There are few buyers.
	It is difficult to enter the industry.
	Each firm in the industry produces a homogeneous product.