Question

1.) You would expect to find product differentiation in which market structures?

a. Natural monopoly and oligopoly

b. Oligopoly and monopolistic competition

c. Monopolistic competition and monopoly

d. Very competitive markets only

2.)A firm should not shut down if

a. It can cover variable costs

b. All of these

c. Variable costs are greater than fixed costs

d. Fixed costs are very low

3.)If marginal cost is greater than marginal revenue the firm should

a. Exit the market

b. Shutdown

c. Reduce output

d. Increase output

Answer 1

1.

In perfect competition market products are homogeneous in nature due to change in price is constant

In monopoly where there is single seller and large number of buyers products generally not differentiated

But if we talk about oligopoly and monopolistic market in product are differentiated in terms of shape, size, colour, quality etc

So the answer is option B.

2

A firm generally faces two type of cost that are fixed cost and variable cost

Fixed cost are those costs which is constant in the short run

Example can be building, machinery, land etc

Variable cost of those cost which increases as the production rises

So a firm shut down when its price is greater than the average variable cost

In other words if the firm is able to manage its variable cost then it will no got not go for shutdown

Hence the correct answer is option A

3.

Marginal cost is the additional cost that arises by producing one extra additional good

Marginal revenue is the additional revenue that is generated by producing one extra additional unit

A firm generally goal is to maximize the profit and it occurs where the marginal cost and marginal revenue are equal

But if the marginal cost is greater than the marginal revenue then the firm is producing more than enough goods and it should reduce the output

Answer is option C