Multiple choice

Question 1

Which statement is true?

 A. The monopolistic competitor always makes a profit in the short run.

 B. The monopolistic competitor operates at peak efficiency.

 C. Product differentiation takes place in the minds of the buyers.

 D. Most consumers would prefer lower prices and less product differentiation.

Question 2

Monopolistic competition differs from perfect competition only with respect to:

 A. the number of firms in the industry.

 B. product differentiation.

 C. barriers to entry.

 D. economies of scale.

Question 3

In the long run in monopolistic competition:

 A. most firms are making a profit.

 B. the absence of entry barriers ensures that there are no profits.

 C. economies of scale ensure that there are no profits.

 D. most firms are losing money.

Question 4

Which statement is true?

 A. Most firms in the United States are monopolistic competitors.

 B. Most firms in the United States are perfect competitors.

 C. Most consumers would prefer lower prices and less product differentiation.

 D. The monopolistic competitor always makes a profit in the short run.