Question 1

A perfect competitor's output in the short run is the quantity that:

Accepted Answer

A)  sets MC equal to MR = P.
B)  sets AVC = P.
C)  minimizes ATC.
D)  sets ATC = P.
E)  none of the above are correct.

Question 2

The marginal principle means:

Accepted Answer

A)  people will maximize their income or profits or satisfactions by counting only marginal benefits of a decision.
B)  people will maximize their income or profits or satisfactions by counting the total benefits of a decision.
C)  people will maximize their income or profits or satisfactions by counting none of the benefits of a decision.
D)  people will maximize their income or profits or satisfactions by counting the negative aspects of a decision.
E)  none of the above.

Question 3

Falling marginal revenue facing an individual firm is incompatible with:

Accepted Answer

A)  growth of the firm.
B)  perfect competition.
C)  oligopoly.
D)  barriers to entry.
E)  none of the above.

Question 4

Regardless of demand, monopoly profits are always positive in the absence of government regulation.

Accepted Answer

A) True 
 B)False

Question 5

If a firm finds out that its marginal revenue is greater than its marginal cost, it should:

Accepted Answer

A)  increase production and sales.
B)  decrease production and sales.
C)  encourage the entry of other firms into the market.
D)  keep raising its selling price till marginal revenue equals marginal cost.
E)  change nothing because profits are maximized.

Question 6

Rivalry can exist in an imperfect competition industry

Accepted Answer

A) True 
 B)False

Question 7

Use the following to answer questions :
Table 9-2 
-The demand curve facing an imperfect competitor is given in Table 9-2.If the firm is able to produce at any output level, then the price and quantity which maximize total revenue are:

Accepted Answer

A)  P = 9; q = 8.
B)  P = 8; q = 12.
C)  P = 7; q = 16.
D)  P = 6; q = 20.
E)  P = 5; q = 22.

Question 8

A profit-maximizing imperfect competitor is at equilibrium when marginal revenue is equal to marginal cost.

Accepted Answer

A) True 
 B)False

Question 9

The market demand curve and the demand curve facing the firm are the same in all imperfectly competitive markets.

Accepted Answer

A) True 
 B)False

Question 10

Use the following to answer questions :
Table 9-1 
-Suppose an imperfect competitor faces the demand curve defined in Table 9-1, and its MC is constant at $2.00.If the firm is able to produce at any output level, then it maximizes profits at:

Accepted Answer

A)  P = 5; q = 8
B)  P = 4; q = 12.
C)  P = 3; q = 17.
D)  P = 2; q = 22.
E)  none of the above if fixed costs are less than $1.00.

Question 11

Intense rivalry between Chrysler, Ford and GM means perfect competition in the U.S.auto industry.

Accepted Answer

A) True 
 B)False

Question 12

To maximize profits or minimize losses (if the firm produces) , a firm must be sure it is producing at an output where:

Accepted Answer

A)  total revenue is greater than average cost.
B)  total revenue is equal to average cost.
C)  marginal revenue is greater than marginal cost.
D)  marginal revenue is equal to marginal cost.
E)  none of the above is correct.

Question 13

An individual perfect competitor faces a horizontal demand curve.

Accepted Answer

A) True 
 B)False

Question 14

Monopolists tend to charge a higher price than the market will bear.

Accepted Answer

A) True 
 B)False

Question 15

If the firm described in the previous question has no fixed costs, its profits are:

Accepted Answer

A)  $48.
B)  $54.
C)  $24.
D)  $4.
E)  -$12

Question 16

Unlike the curve for a monopolist, the total revenue curve for a single perfect competitor would be a straight line rising to the right from the origin.

Accepted Answer

A) True 
 B)False

Question 17

The automobile industry in the United States can best be described as an oligopoly.

Accepted Answer

A) True 
 B)False

Question 18

The slope of the total profit curve is always equal to marginal revenue minus marginal cost.

Accepted Answer

A) True 
 B)False

Question 19

A natural monopoly is:

Accepted Answer

A)  a market in which the industry's output can be efficiently produced only by a single firm.
B)  a market in which the industry's output is produced by a single firm.
C)  a market where many sellers can produce the output.
D)  not a real option.
E)  none of the above.

Question 20

Use the following to answer questions :
Table 9-1 
-Consider the demand curve given in Table 9-1.If the imperfectly competitive firm is able to produce at any output level, then the price and quantity which maximize total revenue are:

Accepted Answer

A)  P = 5; q = 8
B)  P = 4; q = 12.
C)  P = 3; q = 17.
D)  P = 2; q = 22.
E)  P = 1; q = 27.

Exam 9: Imperfect Competition and Monopoly

Falling marginal revenue facing an individual firm is incompatible with:

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The automobile industry in the United States can best be described as an oligopoly.

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If a firm finds out that its marginal revenue is greater than its marginal cost, it should:

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The marginal principle means:

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A profit-maximizing imperfect competitor is at equilibrium when marginal revenue is equal to marginal cost.

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A natural monopoly is:

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Regardless of demand, monopoly profits are always positive in the absence of government regulation.

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Use the following to answer questions : Table 9-2 -The demand curve facing an imperfect competitor is given in Table 9-2.If the firm is able to produce at any output level, then the price and quantity which maximize total revenue are:

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If the firm described in the previous question has no fixed costs, its profits are:

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Monopolists tend to charge a higher price than the market will bear.

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A perfect competitor's output in the short run is the quantity that:

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An individual perfect competitor faces a horizontal demand curve.

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The slope of the total profit curve is always equal to marginal revenue minus marginal cost.

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Intense rivalry between Chrysler, Ford and GM means perfect competition in the U.S.auto industry.

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To maximize profits or minimize losses (if the firm produces) , a firm must be sure it is producing at an output where:

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Use the following to answer questions : Table 9-1 -Suppose an imperfect competitor faces the demand curve defined in Table 9-1, and its MC is constant at $2.00.If the firm is able to produce at any output level, then it maximizes profits at:

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Rivalry can exist in an imperfect competition industry

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The market demand curve and the demand curve facing the firm are the same in all imperfectly competitive markets.

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Unlike the curve for a monopolist, the total revenue curve for a single perfect competitor would be a straight line rising to the right from the origin.

Correct AnswerverifiedShow Answer

Use the following to answer questions : Table 9-1 -Consider the demand curve given in Table 9-1.If the imperfectly competitive firm is able to produce at any output level, then the price and quantity which maximize total revenue are:

Correct AnswerverifiedShow Answer

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