question
Which of the following statements does not describe a perfectly competitive market
A. A large number of firms are involved.
B. Entry and exit are relatively easy.
C. In the short run firms can earn profits, minimize losses, or earn a normal profit.
D. Price is greater than marginal revenue.
A. A large number of firms are involved.
B. Entry and exit are relatively easy.
C. In the short run firms can earn profits, minimize losses, or earn a normal profit.
D. Price is greater than marginal revenue.
answer
Price is greater than marginal revenue
question
A perfectly competitive firm
A. can sell as much output as it wants at the equilibrium price.
B. must lower its price to sell more output.
C. can select the price for its output.
D. is a price maker.
A. can sell as much output as it wants at the equilibrium price.
B. must lower its price to sell more output.
C. can select the price for its output.
D. is a price maker.
answer
can sell as much output as it wants at the equilibrium price
question
Price for a perfectly competitive seller equals
A. average revenue divided by price.
B. marginal revenue divided by price.
C. total revenue.
D. marginal revenue.
A. average revenue divided by price.
B. marginal revenue divided by price.
C. total revenue.
D. marginal revenue.
answer
marginal revenue
question
In the short run, a perfectly competitive firm calculates the profit-maximizing (or loss-minimizing) production output by equating
A. price and average variable cost.
B. price and average total cost.
C. price and marginal revenue.
D. marginal revenue and marginal cost.
A. price and average variable cost.
B. price and average total cost.
C. price and marginal revenue.
D. marginal revenue and marginal cost.
answer
marginal revenue and marginal cost
question
In a perfectly competitive industry, firms seek to maximize
A. marginal profit.
B. total revenue per unit.
C. total profit.
D. their percentage of the total market.
A. marginal profit.
B. total revenue per unit.
C. total profit.
D. their percentage of the total market.
answer
total profit
question
Assume the Unico Corporation is producing 40 units of output and selling the output in a perfectly competitive market for $5 per unit. Its total fixed costs are $110 and its average variable cost is $4 for each of the 40 units of output. Unico
A. earns a profit of $40.
B. maximizes its profits.
C. earns a loss of $70.
D. should shut down.
A. earns a profit of $40.
B. maximizes its profits.
C. earns a loss of $70.
D. should shut down.
answer
earns a loss of $70
question
In the short run, if ATC is greater than price at the output level where MC = MR then
A. new firms may be incentivized to enter the industry.
B. the firm may be able to minimize losses.
C. the firm will shut down.
D. the firm will realize an economic profit
A. new firms may be incentivized to enter the industry.
B. the firm may be able to minimize losses.
C. the firm will shut down.
D. the firm will realize an economic profit
answer
the firm may be able to minimize losses
question
A perfectly competitive firm's short-run supply curve is at its lowest point when MC equals the minimum point of
A. the average fixed cost curve.
B. the marginal revenue curve.
C. the average total cost curve.
D. the average variable cost curve.
A. the average fixed cost curve.
B. the marginal revenue curve.
C. the average total cost curve.
D. the average variable cost curve.
answer
the average variable cost curve
question
Which of the following is not a characteristic of monopoly?
A. It produces a unique product.
B. Entry to the market is blocked.
C. Its demand curve is downward sloping.
D. Its demand curve is perfectly elastic.
A. It produces a unique product.
B. Entry to the market is blocked.
C. Its demand curve is downward sloping.
D. Its demand curve is perfectly elastic.
answer
Its demand curve is perfectly elastic
question
A monopolist's demand curve
A. is the same as the market demand curve.
B. is perfectly inelastic.
C. is perfectly elastic.
D. is the same as the marginal revenue curve.
A. is the same as the market demand curve.
B. is perfectly inelastic.
C. is perfectly elastic.
D. is the same as the marginal revenue curve.
answer
is the same as the market demand curve
question
A monopolist's marginal revenue curve
A. is perfectly inelastic.
B. is perfectly elastic.
C. lies below the demand curve.
D. lies above the demand curve
A. is perfectly inelastic.
B. is perfectly elastic.
C. lies below the demand curve.
D. lies above the demand curve
answer
lies below the demand curve
question
Which of the following statements explains why a pure monopolist's marginal revenue is less than price
A. Its demand curve is perfectly inelastic.
B. Its demand curve is perfectly elastic.
C. It must lower price to sell more output, and the lower price applies to all units of output sold.
D. Its marginal revenue curve slopes upward.
A. Its demand curve is perfectly inelastic.
B. Its demand curve is perfectly elastic.
C. It must lower price to sell more output, and the lower price applies to all units of output sold.
D. Its marginal revenue curve slopes upward.
answer
It must lower price to sell more output, and the lower price applies to all units of output sold
question
Assuming the same costs, a monopoly will
A. produce more and charge a higher price than a perfectly competitive firm.
B. produce less and charge a higher price than a perfectly competitive firm.
C. produce less and charge a lower price than a perfectly competitive firm.
D. produce more and charge a lower price than a perfectly competitive firm.
A. produce more and charge a higher price than a perfectly competitive firm.
B. produce less and charge a higher price than a perfectly competitive firm.
C. produce less and charge a lower price than a perfectly competitive firm.
D. produce more and charge a lower price than a perfectly competitive firm.
answer
produce less and charge a higher price than a perfectly competitive firm.
question
Which of the following statements explains when a natural monopoly occurs
A. Diseconomies of scale occur as ATC decreases over a wide range of output.
B. A monopoly owns or controls a resource necessary to produce the product.
C. Economies of scale occur as ATC decreases over a wide range of output.
D. Economies of scale are obtained from constant costs over a wide range of output.
A. Diseconomies of scale occur as ATC decreases over a wide range of output.
B. A monopoly owns or controls a resource necessary to produce the product.
C. Economies of scale occur as ATC decreases over a wide range of output.
D. Economies of scale are obtained from constant costs over a wide range of output.
answer
Economies of scale occur as ATC decreases over a wide range of output.
question
The MR = MC rule is used to analyze
A. only monopoly profit maximization.
B. only perfect competition profit maximization.
C. both monopoly and perfect competition profit maximization
D. This rule is not used to analyze profit.
A. only monopoly profit maximization.
B. only perfect competition profit maximization.
C. both monopoly and perfect competition profit maximization
D. This rule is not used to analyze profit.
answer
both monopoly and perfect competition profit maximization
question
In monopolistically competitive markets, entry barriers
A. do not exist.
B. are more prevalent than in perfectly competitive markets but less than in monopoly markets.
C. are more prevalent than in monopoly markets but less than in perfectly competitive markets.
D. are blocked.
A. do not exist.
B. are more prevalent than in perfectly competitive markets but less than in monopoly markets.
C. are more prevalent than in monopoly markets but less than in perfectly competitive markets.
D. are blocked.
answer
are more prevalent than in perfectly competitive markets but less than in monopoly markets
question
It is more difficult to analyze a monopolistically competitive market than a perfectly competitive market because in a monopolistically competitive market
A. products are differentiated, which results in nonprice competition.
B. a normal profit in the long run is normal.
C. there is only one firm.
D. firms are characterized by mutual interdependence
A. products are differentiated, which results in nonprice competition.
B. a normal profit in the long run is normal.
C. there is only one firm.
D. firms are characterized by mutual interdependence
answer
products are differentiated, which results in nonprice competition
question
In which of the following markets are demand and marginal revenue equal
A. Monopoly, oligopoly, and monopolistic competition
B. Monopoly, oligopoly, and perfect competition
C. Perfect competition only
D. Monopolistic competition only
A. Monopoly, oligopoly, and monopolistic competition
B. Monopoly, oligopoly, and perfect competition
C. Perfect competition only
D. Monopolistic competition only
answer
Perfect competition only
question
In the short run, monopolistically competitive firms
A. can earn an economic profit, minimize a loss, earn a normal profit, and shut down.
B. can only earn a normal profit.
C. can only earn an economic profit.
D. must shutdown if price is less than average total cost
A. can earn an economic profit, minimize a loss, earn a normal profit, and shut down.
B. can only earn a normal profit.
C. can only earn an economic profit.
D. must shutdown if price is less than average total cost
answer
can earn an economic profit, minimize a loss, earn a normal profit, and shut down
question
Oligopolies produce
A. standard products.
B. differentiated products.
C. unique products.
D. Both A and B are correct.
A. standard products.
B. differentiated products.
C. unique products.
D. Both A and B are correct.
answer
Both A and B are correct
question
In which market model does mutual interdependence exist
A. Perfect competition
B. Monopoly
C. Monopolistic competition
D. Oligopoly
A. Perfect competition
B. Monopoly
C. Monopolistic competition
D. Oligopoly
answer
Oligopoly
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