Question : 31) The entry and exit of firms in a monopolistically : 1244641

31) The entry and exit of firms in a monopolistically competitive market guarantee that

A) marginal revenue equals marginal cost and average total cost is minimized.

B) firms can earn economic profits in the long run.

C) price equals average total cost in the long run.

D) firms can earn economic profits in the short run.

32) When new firms are encouraged to enter a monopolistically competitive market

A) some existing firms must be earning economic profits.

B) they do so because there is insufficient product differentiation.

C) the demand curve facing an existing firm shifts to the right.

D) the marginal cost curve facing an existing firm shifts downwards.

33) If firms in a monopolistically competitive market are earning economic profits, which of the following scenarios best reflects the change a representative firm experiences as the market adjusts to its long-run equilibrium?

A) Demand decreases and becomes less elastic.

B) Demand decreases and becomes more elastic.

C) Demand increases and becomes less elastic.

D) Demand increases and becomes more elastic.

34) Long-run equilibrium under monopolistic competition and perfect competition is similar in that

A) firms produce at the minimum point of their average cost curves.

B) price equals marginal cost.

C) firms break even.

D) price equals marginal revenue.

Figure 11-13

35) Refer to Figure 11-13. What is the profit maximizing output level?

A) Q1 units

B) Q2 units

C) Q3 units

D) Q4 units

36) Refer to Figure 11-13. What is the output price?

A) P4

B) P3

C) P2

D) P1

37) Refer to Figure 11-13. What is the area that represents the firm’s profit?

A) profit = 0

B) P4edP2

C) P4eaP1

D) P3baP2

38) Refer to Figure 11-13. Economies of scale are exhausted at which output level?

A) Q1 units

B) Q2 units

C) Q3 units

D) more than Q1 units

39) Refer to Figure 11-13. If the diagram represents a typical firm in the market, what is likely to happen in the long run?

A) Some firms will exit the market causing the demand to increase for firms remaining in the market.

B) New firms will enter the market causing the demand to decrease for existing firms. 

C) Inefficient firms will exit the market and new cost-efficient firms will enter the market.

D) Competition will be intensified as firms strive to make long-run profits.

40) Refer to Figure 11-13. If the diagram represents a typical firm in the market, what is likely to happen to its average cost of production in the long run?

A) It will probably fall since the firm must be cost efficient to remain competitive.

B) It will probably fall since the firm will be selling less than its current amount.

C) It will probably rise since the firm will be producing less than its current amount.

D) It will probably rise since its long-run demand is likely to be higher.

Figure 11-14

Figure 11-14 illustrates a monopolistically competitive firm.