Question

PLEASE ANSWER EACH QUESTION 1 thru 4

Question 1.

In a market with perfectly competitive firms, the market demand curve is and the demand curve facing each individual firm is?

Select one:

a. downward sloping; horizontal

b. upward sloping; horizontal

c. horizontal; upward sloping

d. horizontal; downward sloping

e. horizontal; horizontal

Question 2.

Pure monopoly is defined as?

Select one:

a. an industry consisting of a single seller.

b. a market in which many rival firms compete for sales.

c. a market structure consisting of a single buyer.

d. a market structure that involves many substitute products.

Tom is the monopoly provider of a town's TV cable service, whose current subscription price is $20.00 per month. In order to attract one more subscriber, he has to lower his price to $19.95. What is true of Tom's marginal revenue from that additional subscriber?

Question 3

Select one:

a. Tom's marginal revenue is between $19.95 and $20.00.

b. Tom's marginal revenue is greater than $19.95.

c. Tom's marginal revenue equals $19.95.

d. Tom's marginal revenue is less than $19.95.

Question 4.

Which market structure has the largest number of firms?

Select one:

a. monopolistic competition

b. monopoly

c. oligopoly

d. perfect competition

Answer 1

1) In a perfectly competitive market the market demand curve is a downward sloping line. Price is determined by the intersection of market demand and market supply. Once the market price has been determined by market supply and demand forces, individual firms become price takers. Individual firms are forced to charge the equilibrium price of the market. The demand curve for an individual firm is thus equal to the equilibrium price of the market. Hence correct option is a).

2) b) is not correct answer. Because there are no rival firms in case of Monopoly.

C) there is no restriction on the number of buyers in case of Monopoly

In case of Monopoly, the firm is the single seller selling a product. Hence the correct option is option a).

3) The Monopolist in order to sell an additional unit has to reduce the price of all the previous units. Therefore the marginal revenue for the monopolist is lesser than the price.

Therefore only option d) is correct.

4) The number of firms in case of Monopoly is the least, then comes oligopoly, after that monopolistic competition in which number of firms is large enough but not as large as perfect competition. The largest number of firms is the largest in perfect competition. Hence option d) is correct.