Question

1. One thing a monopoly firm has to do that a perfectly competitive firm does not have to do is a.search for its profit-maximizing price b.advertise c.minimize its losses d.produce the quantity of output at which P=MC e. Produce a high-quality product

2. Which of the following statements is true a.the motivation for the rent-seeking is not the same as the motivation for profit-seeking b.economic rent is a payment in excess of opportunity cost c.the deadweight loss triangle is not considered the graphic representation of one of the costs of monopoly, instead, it is one of the costs of not having a monopoly d.rent seeking is almost always an irrational activity as far as the rent-seekers are concerned e.a and d

3. The ______ Acts, passed by the British Parliament in the 1760s imposed taxes on a variety of products imported into the American colonies. a.smooth Hawley tariff b.tea c.townsend d.british east India

4. In a monopolistic competitive market which of the following factors probably does not give rise to product differentiation? A.packing of the product b.brand names c.loyalty of customers to a particular producer d.quality difference e.the small number of sellers

5. Which of the following industries is the best real-world example of monopolistic competition? A.soft drinks b.electricity generation c.automobiles d.computer software

6. The monopolistic competitive firm faces a ____ demand curve. A.horizontal b.vertical c.downward sloping d.upward sloping

7. Which of the following is not correct about contestable markets? A.there is easy entry into and costless exit from the market b.new firms entering the market can produce the product at the same cost as current firms c.firms exiting the market can easily dispose of their fixed assets by selling them elsewhere d.firms already in the market have technological advantages e.b and c

8. In the prisoner’s dilemma, each prisoner would be best off if a.both confess b.one confesses but the other does not c.one confesses regardless of what the other does d.neither confesses

9. In the prisoner’s dilemma, both prisoners end up ____ which turns out to be ____ confessed. A.confessing, better for them than if they had both not b.confessing, worse for them than if they had both not c.not confessing, better for them than if they had both d.not confessing, worse for them than if they both

10. The profit-maximizing monopolistic competitor produces where a.price equals marginal cost and marginal revenue b.marginal cost equals marginal revenue but not price c.price equals marginal revenue but not marginal cost d.price equals marginal cost but not marginal revenue

11. The monopolistic competitive firm will most likely earn a normal profit in the long run because of a.product differentiation b.many buyers and sellers c.easy entry and exit d.b and c

Answer 1

1.Option A

A monopolist can determine its profit-maximizing price and quantity by analyzing the marginal revenue and marginal costs of producing an extra unit. If the marginal revenue exceeds the marginal cost, then the firm can increase profit by producing one more unit of output.

2.Option E

Rent seeking harms economic growth by reducing competition and innovation. It leads to the wasteful use of valuable resources and talents in unproductive activities and invariably redistributes resources from large unorganised populations to small organised groups.

3.Option C

The Townsend Acts were a series of laws passed by the British government on the American colonies . They placed new taxes and took away some freedoms from the colonists. New taxes on imports of paper, paint, lead, glass, and tea were levied.

4.Option E

Because the products all serve the same purpose, there are relatively few options for sellers to differentiate their offerings from other firms'. There might be "discount" varieties that are of lower quality, but it is difficult to tell whether the higher-priced options are in fact any better. This uncertainty results from imperfect information: the average consumer does not know the precise differences between the various products, or what the fair price for any of them is. Firms offer products or services that are similar, but not perfect substitutes.