Question

Question 1

Although the purely monopolistic firm is the only firm in the industry, there are some restraints on a monopoly's ability to change price and profits. Whivh one of the following is not such a restraint?

Select one:

a. A monopolistic firm is constrained by the costs of production.

b. The federal government retrict pure monopolies to making only a normal profit.

c. A monopolistic firm is constrained by demand for the product.

d. A monopolistic firm has competition from other industries that produce close substitutes.

Comparig pure competition and pure monopoly in the long run and assuming the same cost curves, which of the following is true?

Question 2

Comparig pure competition and pure monopoly in the long run and assuming the same cost curves, which of the following is true?

a. Since the purely monopolistic firm's price is higher than its marginal cost, resources are allocated inefficiently from the sicial point of view, so that consumers get less than they prefer. This is not true of the purely competitve firm.

b. The purely monopolistic firm's costs are lower than the purely competitive firm's.

c. The competitive industry's price in the long run is higher than that of purely monopolistic industry.

d. The purely monopolistic frim's price is lower and its output higher than the puely competitve firm's.

For the purely monopolistic firm during the short run, which of the following is not true?

Question 3:

For the purely monopolistic firm during the short run, which of the following is not true?

a. Price is gigher than marginal cost.

b. The firm maximizes profits and minimizes losses by producing at that point at which marginal costs are rqual tp marginal revenue.

c. The firm is faced by the same four possible profit or loss situations that confront the purely competitive firm in the short run.

d. The firms sets its price at the point at which average revenue equals averagetotal cost in all situations.

For the purely monopolistic firm in the long run, which of the following is not true?

Question 4

For the purely monopolistic firm in the long run, which of the following is not true?

a. The firm's marginal revenue curve is below its demand average revenue curve.

b. The firm is likely to obtain an economic profit.

c. The firm incur economic losses, because if the firm left the industry, the industry itself would disappear.

d. The firm usually produces at less than full capacity that is, at some scale that is less than the most efficient one.

Answer 1

1. A monopolistic firm is not constrained by demand of product. Therefore option c is correct

2. In purely monopolistic firm price is higher than MC so resources allocate inefficiently, consumers get less output. But in perfect competition P=MC. So resources allocate efficiently. Therefore option a is correct.

3. In monopolistic competition in the short run profit is maximised at MR=MC and according to this output price sets on demand curve that is on average revenue.

But in perfect competition profit is maximized at P=AR=MR=MC

So option c is correct.

4. In monopolistic competition there are few firms so if one firm left whole industry can not disappear. The existing firms stil incur economic profit. Option c is correct.