Question

1..A pure monopolist will maximize profits by producing at that output where price and marginal cost are equal.
A)True
B)False

2..In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to:
A)average total cost.
B)marginal revenue.
C)average variable cost.
D)average cost.

3..Which is not true for a monopolistically competitive industry?
A).Firms tend to operate with excess capacity.
B). Each firm faces a downward-sloping demand curve.
C). These firms earn zero economic profits in the long run.
D). The portion of the marginal-cost curve above the average-variable-cost curve is the short-run supply curve for the firm.

4. Price exceeds marginal revenue for the pure monopolist because the:
law of diminishing returns is inapplicable.
A)demand curve is downsloping.
B)monopolist produces a smaller C)output than would a purely competitive firm.
D)demand curve lies below the marginal revenue curve.

5. If a monopolist is producing quantity whereas marginal revenue is equal to $125 and the marginal cost is equal to $125, the monopolist should:
A)increase production and lower the price to maximize profits.
B)continue producing at the current price to maximize profits.
C)decrease production and increase price to maximize profits.
D)increase production and increase price to maximize profits.
E)decrease production and decrease price to maximize profits.

6. The Clayton Act of 1914:
A)outlawed price discrimination, tying contracts, intercorporate stockholding, and interlocking directorates that lessen competition.
B)prohibited unfair or deceptive acts or practices in commerce that tend to reduce competition.
C)outlawed vertical and conglomerate mergers.
D)prohibited one firm from acquiring the assets of another when the effect was to limit competition.

7. Which of the following is not a barrier to entry?
A)patents
B)X-inefficiency
C)economies of scale
D)ownership of essential resources

Answer 1

1.

False.

Explanation :

Monopolist faces downward sloping demand curve and marginal revenue curve for monopolistically competitive firm is below the demand curve. Firm maximises it's profit where MR equals MC. Thus price is greater than MC.

2.

Marginal revenue

Explanation :

Firm maximises it's profit where MR equals MC in both the time period, long run and short run.

3.

D). The portion of the marginal-cost curve above the average-variable-cost curve is the short-run supply curve for the firm.

Explanation :

Monopolistically competitive firm has excess capacity in long run because it produce where MR equals MC and less than MC intersects ATC.

They earn zero economic profit because free entry and exit. They have some market power with differentiate product so they face downward sloping demand curve.

And their price is always higher than MC. So we can not say potion of MC curve above AVC is short run supply curve.

4.

A)demand curve is downward sloping

Explanation :

Because demand is downward sloping, marginal revenue curve for is below demand curve and firm maximizes its profit where MR equals MC. So price is always higher than marginal revenue.

5.

B)continue producing at the current price to maximize profits.

Explanation :

Firm maximises it's profit where MR equals MC.