Question

37. P=MC for firms only in:

a. Monopoly markets.

b. Oligopoly markets.

c. Perfectly competitive markets.

d. Monopolistically competitive markets.

41. If a firm produces no output, its only cost will be:

a. It’s variable cost.

b. It’s fixed cost.

c. It’s marginal cost.

d. None of the above.

44. A distinguishing characteristic of monopolistic competition is:

a. Price discrimination.

b. Product differentiation.

c. High barriers to entry.

d. Profits in both the short and long-run.

48. In monopolistic competition, a firm’s demand curve is tangent to the long-run average cost curve because:

a. Barriers to entry are very high.

b. Entry eliminates economic profit, and exit eliminates losses.

c. Advertising is ineffective in differentiating a product.

d. All of the above.

49. In the long-run firms in monopolistic competition produce at:

a. The lowest point on their average total cost curve.

b. A point to the left of the lowest point on their average total cost curve.

c. A point to the right of the lowest point on their average total cost curve.

d. Where P=MC.

51. A similarity of an oligopoly and a monopoly is:

a. Zero profits in the long run.

b. The number of firms in the industry.

c. The existence of market power.

d. All of the above.

52. The kinked demand curve reflects the idea that:

a. Rivals match price increases.

b. Rivals do not match price decreases.

c. Prices may remain rigid even in the face of cost increases.

d. All of the above.

53. In an oligopoly:

a. The barriers to entry are high.

b. Firms are independent.

c. Resources are allocated most efficiently.

d. Price competition is common.

Answer 1

37.Ans: c) Perfectly competitive markets.

Explanation:

Under perfect competition , the profit maximization condition is where price equals marginal cost ( P = MC).

41.Ans: b)  It’s fixed cost.

Explanation:

Fixed cost are available even at zero level of output and remain constant throughout the subsequent level of production.

44. Ans: b) Product differentiation.

Explanation:

Monopolistic firms produce differentiated products which have close substitutes.

48.Ans: b) Entry eliminates economic profit, and exit eliminates losses.

49.Ans: a) The lowest point on their average total cost curve.

Explanation:

In the long run , under monopolistic competition , firms earn normal profit . At this point , P = ATC = MC.

51.Ans: c) The existence of market power.

Explanation:

The existence of market power is high under both monoply and oligopoly market structure.

52.Ans: c) Prices may remain rigid even in the face of cost increases.

53.Ans: a) The barriers to entry are high.