32) The primary reason why monopolistically competitive firms cannot make an economic profit in the long run is because
A) there are barriers to entry.
B) there is freedom of entry.
C) the antitrust laws prevent profit from increasing.
D) recessions occur.
E) they collude to make a normal profit.
33) In monopolistic competition, the entry of new firms
A) shifts existing firms’ demand curves rightward.
B) shifts existing firms’ demand curves leftward.
C) only results in a movement along the existing firms’ demand curves.
D) has no effect on the existing firms’ demand curves.
E) shifts existing firms’ supply curves rightward.
34) When a monopolistically competitive firm’s demand curve shifts leftward, what happens to its marginal revenue curve?
A) Nothing, the marginal revenue curve is unchanged.
B) It disappears.
C) It shifts rightward.
D) It shifts leftward.
E) None of the above is correct because the effect on the marginal revenue curve depends on whether the demand was initially elastic or inelastic.
35) If firms in monopolistic competition are making economic profits, then
A) they can expect to earn the profits indefinitely.
B) new rivals enter the industry and the demand for any seller’s good decreases.
C) the market demand becomes more inelastic.
D) the industry is in long-run equilibrium.
E) new rivals enter the industry and the demand for any seller’s good increases.
36) Nike is a firm in monopolistic competition. If Nike is making an economic profit from new cross-training shoe, over time the demand for these shoes
A) increases as new firms enter the market.
B) decreases as new firms enter the market.
C) does not change as new firms enter the market.
D) decreases as firms exit the market.
E) increases as firms exit the market.
37) In the long run, firms in monopolistic competition make zero economic profit. When firms make zero economic profit, in the long run they exit the industry.
A) The first sentence is correct and the second sentence is incorrect.
B) The first sentence is incorrect and the second sentence is correct.
C) Both sentences are correct.
D) Both sentences are incorrect.
E) More information about the presence or absence of barriers to entry and exit is needed to determine if the statements are true or false.
38) When firms in monopolistic competition incur an economic loss, some firms will
A) enter the industry and produce more products.
B) exit the industry, and demand will increase for the firms that remain.
C) exit the industry, and demand will decrease for the firms that remain.
D) enter the industry, and demand will become more elastic for the original firms.
E) exit the industry and other firms will enter.
39) When firms in monopolistic competition are making an economic profit, firms will
A) enter the industry, and demand will increase for the original firms.
B) exit the industry, and demand will increase for the firms that remain.
C) exit the industry, and demand will decrease for the firms that remain.
D) enter the industry, and demand will decrease for the original firms.
E) enter the industry and then will exit the industry.
40) At a long-run equilibrium in monopolistic competition, price equals
A) average total cost.
B) marginal cost but not marginal revenue.
C) marginal revenue but not marginal cost.
D) zero.
E) marginal revenue and marginal cost.
41) In the long run, a firm in monopolistic competition will produce
A) where average total cost is minimized.
B) where price equals average total cost, but average total cost is not at its minimum.
C) zero output.
D) any possible amount of output.
E) where price equals marginal cost.
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