Lesson 3.4.3
3.4.3 Monopolistic competition Quiz: Pearson Edexcel Economics, Unit 3
20 questions
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Lesson 3.4.3, Monopolistic competition: 20 multiple choice questions for the Pearson Edexcel Economics (9EC0), Unit 3: Theme 3: Business behaviour and the labour market, written with Revision Ninja.
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The 20 questions
-
Which feature distinguishes monopolistic competition from perfect competition?
- Homogeneous products
- Single seller
- Differentiated products
- High entry barriers
-
What is the price elasticity of demand for a firm in monopolistic competition?
- Relatively elastic
- Perfectly inelastic
- Perfectly elastic
- Relatively inelastic
-
At what output level does a monopolistically competitive firm maximise profit?
- P equals MC
- AR equals ATC
- MR equals zero
- MR equals MC
-
What profit level do monopolistically competitive firms earn in long-run equilibrium?
- Supernormal profit
- Subnormal profit
- Normal profit
- Monopoly profit
-
In the long run, monopolistically competitive firms produce output at which capacity level?
- Allocative efficiency
- Full capacity
- Minimum average cost
- Excess capacity
-
Which market is the best example of monopolistic competition?
- Hair salons
- Wheat farming
- Aircraft manufacture
- Tap water supply
-
How does successful product differentiation affect a firm's demand curve?
- Perfectly elastic
- Less elastic
- More elastic
- Perfectly inelastic
-
Unlike perfectly competitive firms, monopolistically competitive firms face which type of demand curve?
- Vertical
- Downward sloping
- Perfectly elastic
- Horizontal
-
Why is monopolistic competition allocatively inefficient in the long run?
- Marginal cost exceeds price
- Price equals marginal cost
- Price exceeds marginal cost
- Output equals zero
-
A restaurant has price £20 and average total cost £15 at an output of 100 meals. What is its supernormal profit?
- £100
- £2,000
- £500
- £1,500
-
What enables a monopolistically competitive firm to earn short-run supernormal profit?
- Homogeneous products
- Collusive pricing
- Product differentiation
- High entry barriers
-
What is a major benefit to consumers in a monopolistically competitive market?
- Greater product variety
- Allocative efficiency
- Productive efficiency
- Lower market prices
-
Why do firms in monopolistically competitive markets advertise their products?
- To differentiate products
- To lower costs
- To lower barriers
- To increase contestability
-
What level of profit is earned by firms in monopolistic competition in the long run?
- Subnormal profit
- Supernormal profit
- Normal profit
- Accounting profit
-
Which inefficiency occurs in monopolistic competition because price exceeds marginal cost?
- Productive inefficiency
- Allocative inefficiency
- Dynamic inefficiency
- X-inefficiency
-
A firm faces demand P = 50 - Q and total cost TC = 100 + 10Q. What output maximises profit?
- Q = 40
- Q = 10
- Q = 25
- Q = 20
-
Using the same firm (P = 50 - Q, TC = 100 + 10Q) at Q = 20, what is supernormal profit?
- £600
- £0
- £200
- £300
-
How does the entry of new firms affect an existing firm's demand curve in monopolistic competition?
- Becomes vertical
- Shifts left
- Shifts right
- Remains unchanged
-
When new competitors enter a monopolistically competitive market, what happens to price elasticity of demand for an existing firm?
- It increases
- It reaches zero
- It stays constant
- It decreases
-
In monopolistic competition, excess capacity means firms produce at an output level where average total cost is:
- Still falling
- Equal to zero
- At its minimum
- Already rising
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