Question

Please answer the six questions.

Question 1

Monopolistic competition occurs when _____ firms are competing in a market to sell _____ products.

Group of answer choices

many; identical

many; similar but differentiated

few; similar but differentiated

few; identical

Question 2

A firm's variable costs _____ depending on the level of production, and typically include _____.

Group of answer choices

do not change; labor and raw materials

change; labor and raw materials

stay constant; salaries and insurance

vary; advertising and rent

Question 3

Which of the following is an example of a variable cost for a bakery?

Group of answer choices

The rent the bakery pays on its storefront

The insurance the bakery pays on its delivery trucks

The wages the bakery pays to its bakers

The money the bakery spends on research and development for new types of bread

Question 4

I'MaGadgetCo. produces and sells widgets. Last year, it produced 6,000 widgets and sold each one for $10. To produce the 6,000 widgets, the company incurred variable costs of $36,000 and a total cost of $60,000. I'MaGadgetCo's average fixed cost to produce 6,000 widgets was

Group of answer choices

$3

$4

$1

$7

Question 5

If a firm is a perfect competitor, then

Group of answer choices

it must be a relatively large player compared to its competitors in the overall market.

barriers to entry will make it difficult for new competing firms to enter its market.

it will face only a few competing firms in the market.

competitors selling identical products will keep it from raising its price.

Question 6

The perceived demand curve faced by a firm in perfect competition is

Group of answer choices

a perfectly horizontal line.

a line sloping downward sharply.

a perfectly vertical line.

a line sloping downward slightly.

Answer 1

1. Monopolistic competition occurs when “few” firms are competing in a market to sell “similar but differentiated” products

2. A firm's variable costs “changes” depending on the level of production, and typically include “labour and raw materials”

3. “The wages the bakery pays to its bakers” is an example of a variable cost for a bakery.

4. Average Fixed cost = 4

Total fixed cost = total cost – variable cost = 60000 – 36000 = 24000$

No of units produced = 6000

Average fixed cost per unit = 24000 / 6000 = 4

5. If a firm is a perfect competitor, then “competitors selling identical products will keep it from raising its price”. The perfect competition firm has many competitors selling identical product and are price taker.

6. The perceived demand curve faced by a firm in perfect competition is “perfectly horizontal line.”

This is because the firm is price taker and have to accept the market price.