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MULTIPLE CHOICE
1. In monopolistic competition if there is profit, there is:
a. a signal for new firms to enter.
b. a motive for existing firms to increase prices.
c. proof that advertising works.
d.a motive for existing firms to decrease prices.
e. product differentiation.
2. We can represent the entry of new firms into a monopolistically competitive market by shifting the existing firms':
a. demand curves downward.
b. demand curves upward.
c. demand curves more inelastic.
d. cost curves upward.
e. cost curves downward.
3. Compared to monopoly, the market results with monopolistic competition are usually expected to be:
a. worse because consumers get fewer choices.
b. worse because consumers pay a higher price.
c. the same.
d. better because consumers get less output.
e. better because consumers pay a lower price.
1. In monopolistic competition if there is profit, there is:
a. a signal for new firms to enter.
b. a motive for existing firms to increase prices.
c. proof that advertising works.
d.a motive for existing firms to decrease prices.
e. product differentiation.
2. We can represent the entry of new firms into a monopolistically competitive market by shifting the existing firms':
a. demand curves downward.
b. demand curves upward.
c. demand curves more inelastic.
d. cost curves upward.
e. cost curves downward.
3. Compared to monopoly, the market results with monopolistic competition are usually expected to be:
a. worse because consumers get fewer choices.
b. worse because consumers pay a higher price.
c. the same.
d. better because consumers get less output.
e. better because consumers pay a lower price.
MULTIPLE CHOICE
1. Which of the following statements best describes firms under monopolistic competition?
a. Profits will be positive in the long run.
b. Price always equals average variable cost.
c. In the long run, positive economic profit will be eliminated.
d. Marginal revenue equals minimum average total cost in the short run.
2. A monopolistic competitive firm is inefficient because the firm:
a. is not maximizing its profit.
b. is producing at an output where average total cost is not minimum.
c. earns positive economic profit in the long run.
d. none of these.
3. Which of the following is true for a firm operating under perfect competition, monopolistic
competition, and monopoly?
a. Firms earn positive economic profits in the long run.
b. Firms earn zero economic profits in the long run.
c. Profits are maximized when marginal cost equals marginal revenue.
d. Price equals marginal cost.
1. Which of the following statements best describes firms under monopolistic competition?
a. Profits will be positive in the long run.
b. Price always equals average variable cost.
c. In the long run, positive economic profit will be eliminated.
d. Marginal revenue equals minimum average total cost in the short run.
2. A monopolistic competitive firm is inefficient because the firm:
a. is not maximizing its profit.
b. is producing at an output where average total cost is not minimum.
c. earns positive economic profit in the long run.
d. none of these.
3. Which of the following is true for a firm operating under perfect competition, monopolistic
competition, and monopoly?
a. Firms earn positive economic profits in the long run.
b. Firms earn zero economic profits in the long run.
c. Profits are maximized when marginal cost equals marginal revenue.
d. Price equals marginal cost.
MULTIPLE CHOICE
1. Which of the following statements best describes the price, output, and profit conditions of
monopolistic competition?
a. Price will equal marginal cost at the profit-maximizing level of output; profits will be positive in the long-run.
b. Price will always equal average variable cost in the short run and either profits or losses
may result in the long run.
c. Marginal revenue will equal marginal cost at the short run, profit-maximizing level of
output; in the long run, economic profit will be zero.
d. Marginal revenue will equal average total cost in the short run; long-run economic profits
will be zero.
2. In the long run, a monopolistic competitive firm will operate at a price which:
a. is higher than minimum long-run average cost.
b. equals minimum long-run average cost.
c. equals marginal cost.
d. none of these.
1. Which of the following statements best describes the price, output, and profit conditions of
monopolistic competition?
a. Price will equal marginal cost at the profit-maximizing level of output; profits will be positive in the long-run.
b. Price will always equal average variable cost in the short run and either profits or losses
may result in the long run.
c. Marginal revenue will equal marginal cost at the short run, profit-maximizing level of
output; in the long run, economic profit will be zero.
d. Marginal revenue will equal average total cost in the short run; long-run economic profits
will be zero.
2. In the long run, a monopolistic competitive firm will operate at a price which:
a. is higher than minimum long-run average cost.
b. equals minimum long-run average cost.
c. equals marginal cost.
d. none of these.
MULTIPLE CHOICE
1. A monopolistic competitive firm is inefficient because the firm:
a. earns positive economic profit in the long run.
b. is producing at an output corresponding to the condition that marginal cost equals price.
c. is not maximizing its profit.
d. produces an output where average total cost is not minimum.
2. Which of the following statements best describes firms under monopolistic competition?
a. There is little price or quality competition.
b. The firms compete, using quality, location, advertising, and price.
c. Firms do not compete using advertising.
d. There is little competition between firms.
1. A monopolistic competitive firm is inefficient because the firm:
a. earns positive economic profit in the long run.
b. is producing at an output corresponding to the condition that marginal cost equals price.
c. is not maximizing its profit.
d. produces an output where average total cost is not minimum.
2. Which of the following statements best describes firms under monopolistic competition?
a. There is little price or quality competition.
b. The firms compete, using quality, location, advertising, and price.
c. Firms do not compete using advertising.
d. There is little competition between firms.
MULTIPLE CHOICE
1. The marginal revenue curve of a monopolistically competitive firm will always lie:
a. below the firm's demand curve.
b. parallel to the firm's demand curve.
c. parallel to the firm's quantity axis.
d. above the firm's demand curve.
2. Which of the following is the best example of a monopolistically competitive market?
a. Wheat.
b. Automobiles.
c. Diamonds.
d. Retail sales.
3. The theory of monopolistic competition predicts that in long-run equilibrium a monopolistically
competitive firm will:
a. produce the output level at which price equals long-run marginal cost.
b. operate at minimum long-run average cost.
c. overutilize its insufficient capacity.
d. produce the output level at which price equals long-run average cost.
1. The marginal revenue curve of a monopolistically competitive firm will always lie:
a. below the firm's demand curve.
b. parallel to the firm's demand curve.
c. parallel to the firm's quantity axis.
d. above the firm's demand curve.
2. Which of the following is the best example of a monopolistically competitive market?
a. Wheat.
b. Automobiles.
c. Diamonds.
d. Retail sales.
3. The theory of monopolistic competition predicts that in long-run equilibrium a monopolistically
competitive firm will:
a. produce the output level at which price equals long-run marginal cost.
b. operate at minimum long-run average cost.
c. overutilize its insufficient capacity.
d. produce the output level at which price equals long-run average cost.
TRUE/FALSE
1. In a natural monopoly, the long - run average cost curve declines and therefore average cost is lower when there is only one seller.
2. A natural monopoly maximizes profits at the point at which price equals minimum average total cost.
3. A monopoly earns the most profit by charging a price where demand is inelastic.
4. When a monopoly price discriminates, it charges the highest price to the group of buyers with the least elastic demand.
1. In a natural monopoly, the long - run average cost curve declines and therefore average cost is lower when there is only one seller.
2. A natural monopoly maximizes profits at the point at which price equals minimum average total cost.
3. A monopoly earns the most profit by charging a price where demand is inelastic.
4. When a monopoly price discriminates, it charges the highest price to the group of buyers with the least elastic demand.
multiple choice
1. In perfect price discrimination, which of the following are reduced to zero?
a. Consumer surplus and producer surplus
b. Producer surplus and deadweight loss
c. Consumer surplus and deadweight loss
d. Producer surplus and total welfare
e. None of the above.
1. In perfect price discrimination, which of the following are reduced to zero?
a. Consumer surplus and producer surplus
b. Producer surplus and deadweight loss
c. Consumer surplus and deadweight loss
d. Producer surplus and total welfare
e. None of the above.
MULTIPLE CHOICE
1. A monopolist who is able to price discriminate by charging two different groups different prices:
a. will set prices so that the demand curve for one group is inelastic at the price charged and
the demand curve for the other group is elastic at the price charged.
b. will set prices so that both group's demand curves are elastic at the prices charged.
c. will set prices so that both group's demand curves are inelastic at the prices charged.
d. will set higher prices for the group whose demand curve is more elastic.
e. will do both b. and d.
2. Ceteris paribus, in which of the following cases would we expect economic profits to be greatest?
a. an unregulated monopolist who is able to price discriminate.
b. an unregulated monopolist who is unable to price discriminate.
c. a regulated monopolist required to charge a price no greater than marginal cost.
d. a regulated monopolist required to charge a price no greater than average cost.
1. A monopolist who is able to price discriminate by charging two different groups different prices:
a. will set prices so that the demand curve for one group is inelastic at the price charged and
the demand curve for the other group is elastic at the price charged.
b. will set prices so that both group's demand curves are elastic at the prices charged.
c. will set prices so that both group's demand curves are inelastic at the prices charged.
d. will set higher prices for the group whose demand curve is more elastic.
e. will do both b. and d.
2. Ceteris paribus, in which of the following cases would we expect economic profits to be greatest?
a. an unregulated monopolist who is able to price discriminate.
b. an unregulated monopolist who is unable to price discriminate.
c. a regulated monopolist required to charge a price no greater than marginal cost.
d. a regulated monopolist required to charge a price no greater than average cost.
MULTIPLE CHOICE
1. Which of the following is a problem with government regulation of natural monopolies?
a. creation of excessive profits levels
b. reduced incentives to cut costs
c. decreased number of firms in the market
d. lack of influence from special interest groups
e. all of the above.
2. If a regulatory board wanted to make sure that a natural monopoly chose a price resulting in the efficient level of output, it should set a price equal to:
a. marginal cost.
b. average fixed cost.
c. average variable cost.
d. average total cost.
e. average total cost, plus a ten percent normal return on investment.
1. Which of the following is a problem with government regulation of natural monopolies?
a. creation of excessive profits levels
b. reduced incentives to cut costs
c. decreased number of firms in the market
d. lack of influence from special interest groups
e. all of the above.
2. If a regulatory board wanted to make sure that a natural monopoly chose a price resulting in the efficient level of output, it should set a price equal to:
a. marginal cost.
b. average fixed cost.
c. average variable cost.
d. average total cost.
e. average total cost, plus a ten percent normal return on investment.
MULTIPLE CHOICE
1. Monopolists are criticized because they are inefficient. What is meant by this statement?
a. Monopolists charge too high a price.
b. Monopolists don't innovate enough to control pollution.
c. Monopolists produce a large quantity of waste.
d. Monopolists usually don't produce at the minimum of the ATC.
e. Monopolists could use their resources better elsewhere.
2. Average - cost pricing for a natural monopoly will:
a. result in the socially efficient level of output.
b. result in a less than socially efficient level of output.
c. result in a greater than socially efficient level of output.
d. result in the firm suffering economic losses.
e. result in the firm earning economic profit.
1. Monopolists are criticized because they are inefficient. What is meant by this statement?
a. Monopolists charge too high a price.
b. Monopolists don't innovate enough to control pollution.
c. Monopolists produce a large quantity of waste.
d. Monopolists usually don't produce at the minimum of the ATC.
e. Monopolists could use their resources better elsewhere.
2. Average - cost pricing for a natural monopoly will:
a. result in the socially efficient level of output.
b. result in a less than socially efficient level of output.
c. result in a greater than socially efficient level of output.
d. result in the firm suffering economic losses.
e. result in the firm earning economic profit.
