Question : 31) If entry into a monopolistically competitive industry occurs because : 1384249

31) If entry into a monopolistically competitive industry occurs because of positive profits earned by the existing firms, the

A) industry demand curve will shift to the left.

B) industry demand curve will shift to the right.

C) demand curve for each existing firm will shift to the left.

D) demand curve for each existing firm will shift to the right.

E) demand curves for the existing firms will remain unchanged.

32) Compared with perfect competition, monopolistic competition results in

A) a wider variety of the good produced, but at higher unit costs.

B) the same degree of variety of the good, but higher unit costs.

C) fewer varieties of the good produced at lower unit costs.

D) fewer varieties of the good produced at higher unit costs.

E) a clearly more efficient social outcome.

33) A monopolistically competitive firm maximizes profits in the short run

A) by equating MC with price.

B) by equating MC with MR.

C) when P = AVC.

D) when P = ATC.

E) by maximizing total revenue.

34) Suppose that a monopolistically competitive firm decides to raise its price. The theory of monopolistic competition predicts that

A) this firm would lose some, but not all of its customers.

B) this firm would increase its profits.

C) this firm would lose all of its customers.

D) increasing the price has no effect on profits.

E) a large loss of customers as the demand facing the firm is quite inelastic.

35) The main difference between perfect competition and monopolistic competition is

A) there are more firms in perfect competition.

B) perfect competition has freedom of entry and exit.

C) monopolistic competition has product differentiation.

D) firms earn profits in the long run in monopolistic competition.

E) monopolistic competition has lower costs.

36) Of the following, which is the best example of a monopolistically competitive firm?

A) Apple

B) Air Canada

C) Burger King

D) a PEI potato farmer

E) a local hair salon

37) The presence of significant scale economies in an industry implies that

A) a large share of the market is required by each firm to achieve the lowest possible cost per unit.

B) the minimum efficient scale of operation occurs at fairly low output levels.

C) barriers to entry in the industry are non-existent.

D) this industry is more efficient than others.

E) the firms in the industry will behave as perfect competitors.

38) The demand curve facing a monopolistically competitive firm is quite elastic because

A) there are many close substitutes to the good the firm is producing.

B) goods that are complements to the good the firm is producing also have elastic demand curves.

C) of the possibility of entry of new firms.

D) the industry is producing a homogeneous product.

E) firms are not behaving strategically.

39) Consider an industry that is monopolistically competitive. In such a market,

A) only one firm is present in the industry.

B) firms set prices without any threat of competition.

C) firms set prices and are constrained by the existence of close substitutes for their product.

D) firms do not have any price-setting ability because the product is homogeneous.

E) firms can charge slightly different prices even though they produce identical goods.

40) A good example of a monopolistically competitive firm is

1) The Gap clothing store.

2) a neighbourhood drycleaner.

3) a Prince Edward Island potato farmer.

A) 1 only

B) 2 only

C) 3 only

D) 1 and 2 only

E) 1 and 3 only