Intermediate Microeconomics by Patrick M. Emerson

True or false

Module 19: Monopolistic Competition

1. A distinguishing feature between perfectly and monopolistically competitive markets is the substantially smaller number of firms in the latter.

2. A distinguishing feature between perfectly and monopolistically competitive markets is the differentiation of products across firms in the latter.

3. Compared to perfect competitors, monopolistic competitors face demand curves that are less price-elastic.

4. Compared to perfect competitors, monopolistic competitors face more substantial entry barriers.

5. Depending on product differentiation & entry barriers, a small market with only a few firms might be either oligopolistic or monopolistically competitive.

6. The firm-level diagram for monopolistic competitors more closely resembles that for perfect competitors than that for monopolists.

7. Like monopolists, monopolistic competitors face the entire market demand curve.

8. P = MC for a profit-maximizing monopolistic competitor.

9. P > MR for a profit-maximizing monopolistic competitor.

10. In a monopolistically competitive market over the long run, positive profits attract new entrants which reduce demand for products sold by incumbent firms.

11. In the long run, P = AC for a monopolistic competitor.

12. In the long run, monopolistic competitors produce at minimum AC.

13. Monopolistic competitors are inefficiently large.

14. The prevalence of monopolistically competitive markets suggests that consumers are willing to sacrifice some cost efficiency for the sake of product variety.