Question

1. A gas station operates in a monopolistically competitive market and is in short-run equilibrium. Suppose that a fixed cost for this firm decreases. As a result, the firm's price will _____, the firm's output will _____, and the firm's economic profit will _____.

A) increase; increase; increase

B) increase; increase; decrease

C) stay the same; stay the same; increase

D) decrease; stay the same; increase

2. An increase in the productivity of labor due to improved technology will:

A) result in a lower wage.

B) decrease the quantity of labor hired.

C) decrease the demand for labor.

D) increase the demand for labor.

3. A monopolistic competitor may choose to advertise in order to:

A) reduce excess capacity.

B) increase the demand for its product.

C) collude more effectively with other firms.

D) produce on the upward-sloping portion of its average total cost curve.

4. Suppose the Herfindahl-Hirschman Index (HHI) for the industry is 900. Compared to an industry with an HHI of 10,000, this market is considered:

A) a strongly competitive market.

B) a somewhat competitive market.

C) oligopolistic.

D) monopolistic.