1. As new firms enter a monopolistically competitive market, the demand faced by each competing firm becomes more inelastic. A) True B) False

2 The long-run equilibrium of a monopoly is characterized by its price being equal to its MR but always greater than its ATC. A) True B) False

3. A monopolistically competitive firm sets its price equal to its MR, while keeping it above MC. A) True B) False

4. We say that the long-run equilibrium of a monopolistically competitive firm reflects excess capacity because its MC is not equal to its ATC. A) True B) False

5. In a duopoly with a zero marginal cost, according to the Cournot model, at equilibrium the sum of the two firms' output would be more than 50 percent of the market demand at a zero price. A) True B) False

6. In the kinked demand curve model it is assumed that the demand faced by an oligopoly is less elastic when it lowers the price but more elastic when it raises the price. A) True B) False

7. A distinguishing characteristic of monopolistically competitive market is price discrimination. A) True B) False

8. The general explanation for the relative price stability in an oligopolistic market is the existence of some degree of decision interdependency among the firms in the market. A) True B) False

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Markets that are homogeneous but lack a perfect alternative are said to be monopolistic competitive markets The market is crowded with buyers and sellers as a result of companies freedom to enter and ... View the full answer