Questions on monopolistic competition

Monopolistic competition

Question 1

To what extent are hairdressers a good example of firms operating under monopolistic competition?

Question 2

Which of the following markets/industries are closest to the economists d definition of monopolistic competition – you may select more than one:

1. Airlines
2. Petrol retailers
3. Plumbers
4. Independent electrical retailers
5. Coffee growers in Brazil
6. Electricity generating firms
7. Retail banks

Question 3

Draw separate diagrams to show a firm under monopolistic competition making supernormal profits in the short run and normal profits in the long run.

Question 4

Evaluate monopolistic competition as a market structure.

Question 5 – Multiple choice

Which of the following options, 1 – 5, are true for the statement ‘A firm in long run equilibrium under monopolistic competition will exhibit‘:

1. Allocative but not productive efficiency
2. Productive but not allocative efficiency
3. Neither productive nor allocative efficiency
4. Super-normal profits
5. Both allocative and productive efficiency