Question

1. Under monopolistic competition, which of the following is true:

A) In the short run, the firm behaves as a firm in perfect competition.

B) In the long run equilibrium, firms will make positive profits.

C) If there are economic profits, in the long run new firms enter leading to a decrease in demand for the existing firm.

D) All of the above are true.

E) None of the above are true

2. In the market equilibrium, a single-price monopolist

A) always generates lower total surplus than in perfect competition

B) restricts output to increase profits

C) charges a price higher than the marginal cost

D) a, b, and c are true

E) always produces at an efficient scale

3. Which of the following statement(s) are true?

A) A single price monopolist producing in the inelastic part of the demand curve could increase its total revenue by increasing the price.

B) A single-price monopolist that maximizes profits never produces in the inelastic part of the demand curve

C) The total revenue of single-price monopolist is minimized when demand is perfectly elastic.

D) a and b are true

E) b and c are true

4. Which of the following statement(s) are true?

A) Unregulated natural monopoly produces at a socially efficient scale.

B) Natural monopoly under average-cost pricing produces at an efficient scale

C) Natural monopoly under marginal-cost pricing generates a deadweight loss.

D) b and c are true

E) none of the above are true

Answer 1