Question

68. One difference between a perfectly competitive firm and a monopoly firm is

a. a perfectly competitive firm maximizes profit by producing the quantity of output at which

MR = MC, and the monopoly firm does not.

b. a monopoly firm is resource allocative efficient, and a perfectly competitive firm is not.

c. the monopoly firm charges the highest per-unit price for its product, and the perfectly

competitive firm does not.

d. the demand curve and the marginal revenue curve are the same for the perfectly

competitive firm, but they are not the same for the monopoly firm.

e. c and d

69. Which of the following assumptions applies to both perfect competition and monopolistic competition?

a. many buyers and sellers

b. easy entry into and exit from the market

c. profit-maximizing behavior by firms in both market structures

d. a and c

e. all of the above

70. Resource X is necessary to the production of good Y. If the price of resource X rises, the _____________

curve for good Y will shift ____________ resulting in a(n) _____________ in the equilibrium price of Y

and a(n) ____________ in the equilibrium quantity of Y.

a. supply; rightward; decrease; increase.

b. demand; leftward; decrease; decrease

c. demand; rightward; increase; increase

d. supply; leftward; increase; decrease

e. supply; leftward; increase; increase

Answer 1

68.Ans: e) c and d

Explanation:

Differences between a perfectly competitive firm and a monopoly firm are;

• The monopoly firm charges the highest per-unit price for its product, and the perfectly competitive firm does not.

• The demand curve and the marginal revenue curve are the same for the perfectly competitive firm, but they are not the same for the monopoly firm.

Under perfect competition , the industry is the price maker whereas the firm is the price taker. It means there is an unique price in the market . Firms are not able to change the market price. They can sell or produce as much as they can at the prevailing market price.

So under perfect competition , Price = Marginal Revenue = Average Revenue ( P = MR = AR) and demand curve is horizontal.

Under monopoly market structure , firm is a price searcher.

69.Ans: e) all of the above

Explanation:

The following assumptions applies to both perfect competition and monopolistic competition;

• There are many buyers and sellers
• There is easy entry into and exit from the market
• profit-maximizing behavior by firms in both market structures.

70.Ans: d) supply; leftward; increase; decrease

Explanation:

Resource X is necessary to the production of good Y. If the price of resource X rises, the cost of production will increase. So the supply curve for good Y will shift lefward or backward . As a result , the equilibrium price of Y will increase and  the equilibrium quantity of Y will decrease.