1. What is the trademinus−off that consumers face when buying the product of a monopolistically competitive? firm?
A. Consumers pay higher prices but the products are produced by highly efficient firms.
B. Consumers pay a price greater than marginal? cost, but have the luxury of choices more suited to their tastes.
C. Consumers pay higher prices but receive better quality goods compared to the output of perfectly competitive firms.
D. Consumers pay lower prices but have fewer choices.
2. If a monopolistically competitive firm has excess capacity
A. it is experiencing diseconomies of scale.
B. it produces an output rate that places it on the negatively sloped portion of its average total cost curve.
C. it is producing beyond the minimum efficient scale.
D. it has exhausted all economies of scale.
3. If a? firm's long−run average total curve shows that it can produce? 5,000 DVDs at an average cost of? $2.00 and? 15,000 DVDs at an average cost of? $1.50, this is evidence of
A.economies of scale.
B.diminishing returns.
C.diseconomies of scale.
D.the law of supply.
4. Economists have long debated whether there is a significant loss of well-being to society in markets that are monopolistically competitive rather than perfectly competitive. Which of the following offers the best reason why some economists believe that monopolistically competitive markets are less efficient than perfectly competitive? markets?
A. In contrast to perfectly competitive? markets, firms in monopolistically competitive markets can charge a price greater than average total cost in the short run.
B. In contrast to perfectly competitive? markets, firms in monopolistically competitive markets earn economic profits in long−run equilibrium.
C. In contrast to perfectly competitive? markets, neither allocative efficiency nor productive efficiency are achieved in monopolistically competitive markets.
D. In contrast to perfectly competitive? markets, firms in monopolistically competitive markets do not produce where price equals average total cost in long−run equilibrium.