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