36) Suppose in the city of Blacksburg music stores operate in a monopolistically competitive market. If the price of CDs in Blacksburg is currently equal to $20 per CD and the average cost of CDs is $15 in the long run we expect the price of CDs to A) increase. B) stay the same. C) decrease and the average cost of selling CDs to increase. D) decrease and the average cost of selling CDs to decrease. 37) If firms in a monopolistically competitive market are earning economic profits greater than zero in the short run then in the long run A) firms will exit this market. B) profits will increase. C) profits will decrease. D) demand will not change. 38) If a firm is operating in a monopolistically competitive market then in the long-run A) the firm will earn a zero economic profit. B) the firm will maximize its profit by producing the output level at which the average cost is minimized. C) the firm will maximize its profit by producing the output level at which the marginal revenue is minimized. D) all of the above 39) Suppose that a monopolistically competitive market is in its long-run equilibrium. If the market demand curve shifts to the right due to changes in consumer preferences A) the number of firms in the market will increase in the short-run. B) firms will earn positive economic profits in the short-run. C) firms’ average costs of production will increase as they increase output levels in the short-run. D) none of the above 40) Suppose that a monopolistically competitive market is in its long-run equilibrium. If the market demand curve shifts to the left due to a recession A) the number of firms in the market decreases in the short-run. B) some firms may earn negative profits in the short-run. C) firms’ average costs of production decreases as they decrease output levels in the short-run. D) none of the above 41) Under the conditions of monopolistic competition A) prices are always lower in the long run than in the short run. B) firm profits are always higher in the long run than in the short run. C) average costs of production are always higher in the short run than in the long run. D) None of the above is correct. 42) Under the conditions of monopolistic competition if a firm is earning economic profits in the short run A) prices are higher in the long run than in the short run. B) firm profits are higher in the long run than in the short run. C) average costs of production are higher in the long run than in the short run. D) long-run economic profits are positive. 43) Suppose coffee is sold in a monopolistically competitive market where coffee is differentiated by coffee shop location. As firms enter in the long run and the price of coffee falls A) the market quantity of coffee demanded will increase but the quantity of coffee supplied by any individual coffee shop declines. B) the market quantity of coffee demanded will decrease as does the quantity supplied from any individual coffee shop. C) the average costs of production decline. D) the profits of individual coffee shops increase. 44) As firms enter a monopolistically competitive market in the long run A) price increases the market quantity demanded increases and the quantity supplied by an individual firm increases. B) price decreases the market quantity demanded increases and the quantity supplied by an individual firm decreases. C) price decreases but firm profits increase as average costs decrease. D) price increases and firm profits increase. 45) In a monopolistically competitive market if price is greater than average cost A) firms will enter. B) firms will exit. C) there will be no change in the number of firms. D) the market is in long-run equilibrium.
