Question 1

Which is true if a firm faces a downward-sloping demand curve? AU: Edit ok?

Accepted Answer

A)  The demand for its product must be inelastic. 
B)  It can control both price and quantity sold. 
C)  It must reduce its price to sell more units. 
D)  It will always make a profit. 
A)  The demand for its product must be inelastic. 
B)  It can control both price and quantity sold. 
C)  It must reduce its price to sell more units. 
D)  It will always make a profit.

Question 2

A monopolistically competitive firm will _____.

Accepted Answer

A)  charge the same price as its competitors do 
B)  always produce at the minimum efficient scale of production 
C)  have some control over its price because its product is differentiated 
D)  produce an output level that is productively and allocatively efficient 
A)  charge the same price as its competitors do 
B)  always produce at the minimum efficient scale of production 
C)  have some control over its price because its product is differentiated 
D)  produce an output level that is productively and allocatively efficient

Question 3

Which of the following is true in an oligopoly market?

Accepted Answer

A)  The pricing decisions of all other firms have no effect on an individual firm. 
B)  Individual firms pay no attention to the behaviour of other firms. 
C)  Advertising of one firm has no effect on all other firms. 
D)  One firm's pricing decision affects all the other firms. 
A)  The pricing decisions of all other firms have no effect on an individual firm. 
B)  Individual firms pay no attention to the behaviour of other firms. 
C)  Advertising of one firm has no effect on all other firms. 
D)  One firm's pricing decision affects all the other firms.

Question 4

If a monopolistically competitive firm breaks even,the firm is earning as much in this industry as it could in any other comparable industry.

Accepted Answer

A) True 
 B)False

Question 5

The Jeans Store sells 7 pairs of jeans per day when it charges $100 per pair.It sells 8 pairs of jeans per day at a price of $90 per pair.What is the marginal revenue of the eighth pair of jeans?

Accepted Answer

A)  $20 
B)  $90 
C)  $100 
D)  $700 
A)  $20 
B)  $90 
C)  $100 
D)  $700

Question 6

Why are demand and marginal revenue represented by the same curve for a firm in a perfectly competitive market,but by separate curves for a firm in a monopolistically competitive market?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

A perfectly competitive firm faces a hor

Question 7

The statement that is true about marginal revenue is:

Accepted Answer

A)  If marginal revenue is zero, it means that quantity demanded falls to zero when a firm changes its price. 
B)  If marginal revenue is negative, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price. 
C)  If marginal revenue is positive, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price. 
D)  Marginal revenue increases as price falls and quantity sold increases. 
A)  If marginal revenue is zero, it means that quantity demanded falls to zero when a firm changes its price. 
B)  If marginal revenue is negative, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price. 
C)  If marginal revenue is positive, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price. 
D)  Marginal revenue increases as price falls and quantity sold increases.

Question 8

The profit-maximising rule for a monopolistically competitive firm is ______.

Accepted Answer

A)  to produce a quantity that maximises market share 
B)  to produce a quantity that maximises total revenue 
C)  to produce a quantity such that marginal revenue equals marginal cost 
D)  to produce a quantity such that price equals marginal cost 
A)  to produce a quantity that maximises market share 
B)  to produce a quantity that maximises total revenue 
C)  to produce a quantity such that marginal revenue equals marginal cost 
D)  to produce a quantity such that price equals marginal cost

Question 9

Table 9.4
 $\begin{array}{|c|c|c|c|c|c|c|}
\hline \begin{array}{c}
\text { Quantity } \
\text { Sold }
\end{array} & \begin{array}{c}
\text { Price } \
\text { (dollars )}
\end{array} & \begin{array}{c}
\text { Total } \
\text { Revenue } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Revenue }
\end{array} & \begin{array}{c}
\text {Total}\
\text { Cost } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Cost }
\end{array} & \begin{array}{c}
\text { Profit } \
\text { (dollars) }
\end{array} \
\hline 0 & 10 & 0 & \cdots & 2 & \cdots & -2 \
\hline 1 & 9 & 9 & & 8 & & \
\hline 2 & 8 & 16 & & 13 & & \
\hline 3 & 7 & 21 & & 17 & & \
\hline 4 & 6 & 24 & & 20 & & \
\hline 5 & 5 & 25 & & 22 & & \
\hline 6 & 4 & 24 & & 26 & & \
\hline
\end{array}$
 Table 9.4 lists estimated revenues and costs (per week) for plastic vials (100 vials per box) for the Victoria Biological Supplies Company. Victoria sells plastic vials to university and private research laboratories.
-Refer to Table 9.4.Based on the data in the table,which of the following statements is true?

Accepted Answer

A)  The table summarises Victoria's short-run, rather than long-run, market for plastic vials. 
B)  Victoria could be either a monopolistically competitive or a perfectly competitive firm. 
C)  Victoria should shut down temporarily. 
D)  Victoria should advertise more in order to increase the demand for plastic vials. 
A)  The table summarises Victoria's short-run, rather than long-run, market for plastic vials. 
B)  Victoria could be either a monopolistically competitive or a perfectly competitive firm. 
C)  Victoria should shut down temporarily. 
D)  Victoria should advertise more in order to increase the demand for plastic vials.

Question 10

Table 9.4
 $\begin{array}{|c|c|c|c|c|c|c|}
\hline \begin{array}{c}
\text { Quantity } \
\text { Sold }
\end{array} & \begin{array}{c}
\text { Price } \
\text { (dollars )}
\end{array} & \begin{array}{c}
\text { Total } \
\text { Revenue } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Revenue }
\end{array} & \begin{array}{c}
\text {Total}\
\text { Cost } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Cost }
\end{array} & \begin{array}{c}
\text { Profit } \
\text { (dollars) }
\end{array} \
\hline 0 & 10 & 0 & \cdots & 2 & \cdots & -2 \
\hline 1 & 9 & 9 & & 8 & & \
\hline 2 & 8 & 16 & & 13 & & \
\hline 3 & 7 & 21 & & 17 & & \
\hline 4 & 6 & 24 & & 20 & & \
\hline 5 & 5 & 25 & & 22 & & \
\hline 6 & 4 & 24 & & 26 & & \
\hline
\end{array}$
 Table 9.4 lists estimated revenues and costs (per week) for plastic vials (100 vials per box) for the Victoria Biological Supplies Company. Victoria sells plastic vials to university and private research laboratories.
-Refer to Table 9.4.What is true at Victoria's profit-maximising output?

Accepted Answer

A)  Profit equals $2. 
B)  Total revenue equals $24 and total cost equals $20. 
C)  Total revenue equals $25 and total cost equals $22. 
D)  Total revenue equals $21 and total cost equals $17. 
A)  Profit equals $2. 
B)  Total revenue equals $24 and total cost equals $20. 
C)  Total revenue equals $25 and total cost equals $22. 
D)  Total revenue equals $21 and total cost equals $17.

Question 11

One way by which firms differentiate their products is to find a market niche.

Accepted Answer

A) True 
 B)False

Question 12

Monopolistically competitive firms have downward-sloping demand curves.In the long run,monopolistically competitive firms earn zero economic profits.These two characteristics imply that in the long run ________.

Accepted Answer

A)  monopolistically competitive markets achieve productive efficiency 
B)  monopolistically competitive markets achieve allocative efficiency 
C)  monopolistically competitive firms earn economic profits 
D)  monopolistically competitive firms have excess capacity 
A)  monopolistically competitive markets achieve productive efficiency 
B)  monopolistically competitive markets achieve allocative efficiency 
C)  monopolistically competitive firms earn economic profits 
D)  monopolistically competitive firms have excess capacity

Question 13

If a perfectly competitive firm maximises short-run profits,its marginal revenue will be positive and less than its price.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not a characteristic of oligopoly?

Accepted Answer

A)  The ability to influence price 
B)  A small number of firms 
C)  Low barriers to entry 
D)  Interdependent firms 
A)  The ability to influence price 
B)  A small number of firms 
C)  Low barriers to entry 
D)  Interdependent firms

Question 15

Table 9.2
 $$\begin{array} { | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { (cases) }
\end{array} & \begin{array} { c } 
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Revenue } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Cost } \
\text { (dollars) }
\end{array} \
\hline 1 & 75 & 75 & 60 \
\hline 2 & 70 & 140 & 85 \
\hline 3 & 65 & 195 & 105 \
\hline 4 & 60 & 240 & 115 \
\hline 5 & 55 & 275 & 130 \
\hline 6 & 50 & 300 & 155 \
\hline 7 & 45 & 315 & 190 \
\hline 8 & 40 & 320 & 230 \
\hline 9 & 35 & 315 & 280 \
\hline
\end{array}$$ Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 9.2 shows the firm's demand and cost schedules.
-Refer to Table 9.2.What is the output (Q)that maximises profit,and what is the price (P)charged?

Accepted Answer

A)  P = $55; Q = 5 cases 
B)  P = $50; Q = 6 cases 
C)  P = $45; Q = 7 cases 
D)  P = $40; Q = 8 cases 
A)  P = $55; Q = 5 cases 
B)  P = $50; Q = 6 cases 
C)  P = $45; Q = 7 cases 
D)  P = $40; Q = 8 cases

Question 16

Price leadership is a form of explicit collusion where one firm in an oligopoly announces a price change and expects all other firms to follow suit.

Accepted Answer

A) True 
 B)False

Question 17

Only one of the following statements is correct.The statements compare perfectly competitive (PC)markets and monopolistically competitive (MC)markets.Which statement is correct?

Accepted Answer

A)  Productive efficiency is achieved in both PC and MC markets. Allocative efficiency is achieved only in MC markets. 
B)  Allocative efficiency is achieved in both PC and MC markets. Productive efficiency is achieved only in PC markets. 
C)  Productive efficiency and allocative efficiency are both achieved in PC markets. Neither is achieved in MC markets. 
D)  Allocative efficiency is achieved only in PC markets. Productive efficiency is achieved only in MC markets. 
A)  Productive efficiency is achieved in both PC and MC markets. Allocative efficiency is achieved only in MC markets. 
B)  Allocative efficiency is achieved in both PC and MC markets. Productive efficiency is achieved only in PC markets. 
C)  Productive efficiency and allocative efficiency are both achieved in PC markets. Neither is achieved in MC markets. 
D)  Allocative efficiency is achieved only in PC markets. Productive efficiency is achieved only in MC markets.

Question 18

Assuming that the total market size remains constant,a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because ______.

Accepted Answer

A)  new entrants into the market are more likely to have cutting edge products 
B)  as the firm raises its price in the long run, it will lose some customers to new entrants in the market 
C)  some of its customers have switched to purchasing the products of new entrants in the market 
D)  its costs of production rises 
A)  new entrants into the market are more likely to have cutting edge products 
B)  as the firm raises its price in the long run, it will lose some customers to new entrants in the market 
C)  some of its customers have switched to purchasing the products of new entrants in the market 
D)  its costs of production rises

Question 19

Table 9.3
 $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Quantity } & \begin{array} { c } 
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Revenue } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Variable } \
\text { Cost } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & 21 & 0 & 0 & 50 \
\hline 1 & 20 & 20 & 16 & 66 \
\hline 2 & 19 & 38 & 31 & 81 \
\hline 3 & 18 & 54 & 45 & 95 \
\hline 4 & 17 & 68 & 59 & 109 \
\hline 5 & 16 & 80 & 75 & 125 \
\hline 6 & 15 & 90 & 93 & 143 \
\hline 7 & 14 & 98 & 112 & 162 \
\hline 8 & 13 & 104 & 140 & 190 \
\hline 9 & 12 & 108 & 180 & 230 \
\hline 10 & 11 & 110 & 230 & 280 \
\hline
\end{array}$$ Table 9.3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 9.3.The average variable cost of production at its optimal output level is _____.

Accepted Answer

A)  $0 (because its optimal output = 0) 
B)  $15 
C)  $14.75 
D)  $29 
A)  $0 (because its optimal output = 0) 
B)  $15 
C)  $14.75 
D)  $29

Question 20

In theory,in the long run,monopolistically competitive firms earn zero profits.However,in reality,there are some ways by which a firm can avoid losing profits.Which of the following is one such way?

Accepted Answer

A)  Gradually increase the markup on the goods produced 
B)  Lower the price of its products to expand its market share 
C)  Identify new markets and develop products precisely for those markets 
D)  Find a market niche and keep it as narrow as possible so as to prevent other producers from entering this market segment 
A)  Gradually increase the markup on the goods produced 
B)  Lower the price of its products to expand its market share 
C)  Identify new markets and develop products precisely for those markets 
D)  Find a market niche and keep it as narrow as possible so as to prevent other producers from entering this market segment

Which is true if a firm faces a downward-sloping demand curve? AU: Edit ok?

A monopolistically competitive firm will _____.

Which of the following is true in an oligopoly market?

If a monopolistically competitive firm breaks even,the firm is earning as much in this industry as it could in any other comparable industry.

The Jeans Store sells 7 pairs of jeans per day when it charges $100 per pair.It sells 8 pairs of jeans per day at a price of $90 per pair.What is the marginal revenue of the eighth pair of jeans?

The statement that is true about marginal revenue is:

The profit-maximising rule for a monopolistically competitive firm is ______.

One way by which firms differentiate their products is to find a market niche.

Monopolistically competitive firms have downward-sloping demand curves.In the long run,monopolistically competitive firms earn zero economic profits.These two characteristics imply that in the long run ________.

If a perfectly competitive firm maximises short-run profits,its marginal revenue will be positive and less than its price.

Which of the following is not a characteristic of oligopoly?

Price leadership is a form of explicit collusion where one firm in an oligopoly announces a price change and expects all other firms to follow suit.

Only one of the following statements is correct.The statements compare perfectly competitive (PC)markets and monopolistically competitive (MC)markets.Which statement is correct?

Assuming that the total market size remains constant,a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because ______.

In theory,in the long run,monopolistically competitive firms earn zero profits.However,in reality,there are some ways by which a firm can avoid losing profits.Which of the following is one such way?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

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Exam 9: Monopolistic Competition and Oligopoly

Which is true if a firm faces a downward-sloping demand curve? AU: Edit ok?

A monopolistically competitive firm will _____.

Which of the following is true in an oligopoly market?

If a monopolistically competitive firm breaks even,the firm is earning as much in this industry as it could in any other comparable industry.

The Jeans Store sells 7 pairs of jeans per day when it charges $100 per pair.It sells 8 pairs of jeans per day at a price of $90 per pair.What is the marginal revenue of the eighth pair of jeans?

The statement that is true about marginal revenue is:

The profit-maximising rule for a monopolistically competitive firm is ______.

One way by which firms differentiate their products is to find a market niche.

Monopolistically competitive firms have downward-sloping demand curves.In the long run,monopolistically competitive firms earn zero economic profits.These two characteristics imply that in the long run ________.

If a perfectly competitive firm maximises short-run profits,its marginal revenue will be positive and less than its price.

Which of the following is not a characteristic of oligopoly?

Price leadership is a form of explicit collusion where one firm in an oligopoly announces a price change and expects all other firms to follow suit.

Only one of the following statements is correct.The statements compare perfectly competitive (PC)markets and monopolistically competitive (MC)markets.Which statement is correct?

Assuming that the total market size remains constant,a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because ______.

In theory,in the long run,monopolistically competitive firms earn zero profits.However,in reality,there are some ways by which a firm can avoid losing profits.Which of the following is one such way?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopoly Markets

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters