Lesson 4.3.1

4.3.1 Monopolistic competition: short and long run equilibrium Quiz: OCR Economics, Unit 4

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 4.3.1, Monopolistic competition: short and long run equilibrium: 20 multiple choice questions for the OCR Economics (H460), Unit 4: Market structures, written with Revision Ninja.

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The 20 questions

  1. Which market structure features many buyers and sellers selling slightly differentiated products?

    • Monopoly
    • Monopolistic competition
    • Perfect competition
    • Oligopoly

  2. What type of barriers to entry exist in a monopolistically competitive market?

    • Absolute
    • High
    • Very low
    • Sunk cost only

  3. What type of profit can a firm in monopolistic competition make in the long run?

    • Supernormal profit
    • Normal profit
    • Subnormal loss
    • Monopoly profit

  4. If firms make supernormal profit in the short run, what happens to individual demand in the long run?

    • Remains unchanged
    • Shifts left
    • Shifts right
    • Becomes vertical

  5. What condition determines the profit-maximising level of output for a monopolistically competitive firm?

    • P = ATC
    • MR = MC
    • AR = MC
    • MR = 0

  6. Where is the long-run equilibrium price found on a monopolistically competitive firm's diagram?

    • Where MR = MC
    • Where MR = AR
    • At minimum AC
    • Where AR = AC

  7. Is a monopolistically competitive firm allocatively efficient in the long run?

    • No, P < MC
    • Yes, P = AC
    • No, P > MC
    • Yes, P = MC

  8. What term describes the output difference between minimum average cost and actual long-run output?

    • Economies of scale
    • X-inefficiency
    • Deadweight loss
    • Excess capacity

  9. How does the price elasticity of demand compare between monopoly and monopolistic competition?

    • More elastic
    • Perfectly elastic
    • Less elastic
    • Perfectly inelastic

  10. If existing firms make short-run losses, what happens to the number of firms in the long run?

    • Stays constant
    • Fluctuates endlessly
    • Increases
    • Decreases

  11. What relationship exists between Average Revenue (AR) and Marginal Revenue (MR) for these firms?

    • MR equals AR
    • MR below AR
    • MR above AR
    • MR is vertical

  12. In long-run equilibrium, what is the geometric relationship between the AR curve and the LRAC curve?

    • Above LRAC
    • Intersecting LRAC
    • Tangent to LRAC
    • Parallel to LRAC

  13. A local coffee shop lowers prices to gain market share. Which feature of monopolistic competition does this illustrate?

    • Collusive pricing
    • Limit pricing
    • Price discrimination
    • Price competition

  14. Which type of efficiency may be achieved through heavy branding and product innovation in monopolistic competition?

    • Dynamic efficiency
    • Pareto efficiency
    • Allocative efficiency
    • Productive efficiency

  15. High street hairdressers operate in monopolistic competition. What is a key method they use to compete non-price?

    • Brand loyalty
    • Output quotas
    • Collusion
    • Predatory pricing

  16. What impact does increased product differentiation have on a firm's average revenue curve?

    • Vertical
    • Less elastic
    • More elastic
    • Perfectly elastic

  17. In the short run, what allows a monopolistically competitive firm to make supernormal profit?

    • Collusive agreements
    • Government subsidies
    • Product differentiation
    • High entry barriers

  18. A firm produces where MR = MC = £5 and AR = £8. What is its price?

    • £8
    • £3
    • £13
    • £5

  19. Why is dynamic efficiency in monopolistic competition often lower than in oligopoly?

    • Lack of competition
    • Homogeneous products
    • High entry barriers
    • Normal profit only

  20. In the long run, productively efficient output occurs where average cost is at what point?

    • Minimum
    • Undefined
    • Maximum
    • Zero

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