Question

46   In a perfectly competitive market, the type of decision a firm has to make is different in the short run than in the long run. Which of the following is an example of a short-run decision a perfectly competitive firm makes?

a. the profit-maximizing level of output

b. how much to spend on advertising and sales promotion

c. what price to charge buyers for the product

d. whether or not to enter or exit an industry

47 Which barrier to entry is an exclusive right granted to the author or composer of a literary, musical, dramatic or artistic work?

a. patent

b. copyright

c. public franchise

d. government license

Answer 1

46. In a perfectly competitive market firms will try to maximise as much profit as possible in the short run as in the long run the equilibrium profit will be zero. Thus it will take a decision on profit maximising level of output. All other factors will be done on long term basis as expenditure on promotion is a huge cost and it cannot be reversed, the price to charge buyers also impacts other competitors prices which has a long term effect, entry and exit is on long term basis and once you enter you cannot exit immediately. Thus the first option is the answer.

47. Copyright is the exclusive right granted to the author or artistic work. It entails that only the author can sell his or her work and earn money on it, no one else can copy it. Patent is when an organisation collectively produced a product and it can sell it for a particular period. All other options are wrong as public franchise is a state sponsored monopoly and government license is the license given by the government to an organisation. Thus copyright is the correct choice.