practice questions and problems for chapters 12 and 13

practice questions and problems for chapters 12 and 13 -...

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ECON 2100 Practice Question and Problems for Chapters 12 and 13 Name: __________________________ Date: _____________ 1. When a monopolistically competitive firm is making zero economic profits, it is producing at the output level at which the average total cost curve is tangent to the demand curve faced by the firm. At this output A) the firm is maximizing profits, and marginal cost must equal marginal revenue. B) the firm is not maximizing profits, and a slight increase or decrease in output will lead to positive profits. C) since economic profits are equal to zero, the marginal revenue equals marginal cost condition is irrelevant and need not hold. D) the marginal revenue equals marginal cost condition continues to be relevant, but the marginal revenue and marginal cost curves need not intersect directly below the point of tangency between the average total cost curve and the demand curve faced by the firm. 2. Suppose a monopolistically competitive firm can increase its profits by decreasing its output. Then it must be the case that at the current output: A) marginal revenue is less than zero. B) price is less than marginal revenue. C) marginal revenue is less than marginal cost. D) price is less than average total cost. 3. Which of the following advertising slogans provides information to potential buyers? A) “Coffee Palace—stop and smell the coffee.” B) “Karaoke Maker wants you to just sing it!” C) “Bee's Beachside Restaurant is the only restaurant on the beach for 50 miles.” D) “The Happy Hotel has a happy bed for you.” 4. Toby operates a small deli downtown. The deli industry is monopolistically competitive. If some delis leave the industry, Toby's _____ curve will shift _____. A) marginal cost; left Page 1
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B) marginal cost; right C) demand; left D) demand; right Use the following to answer question 5: Figure: Monopolistic Competition V 5. (Figure: Monopolistic Competition V) The accompanying figure illustrates a firm in the _____; in the _____, the demand and marginal revenue curves will shift _____. A) short run; long run; right B) long run; short run; left C) short run; long run; left D) long run; short run; right 6. Suppose a monopolistically competitive firm is in long-run equilibrium. Then: A) price equals marginal revenue. B) price equals marginal cost. C) price is greater than average total cost. D) none of the above are true. Page 2
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Use the following to answer question 7: Figure: Monopolistic Competition II 7. (Figure: Monopolistic Competition II) The accompanying figure shows the demand, marginal revenue, marginal cost, and average total cost curves for Pat's Pizza Parlor, a monopolistic competitor in the food-to-go industry. When Pat's Pizza Parlor maximizes profit, profit will be: A) $0. B)
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This note was uploaded on 03/16/2010 for the course ECON 2100 taught by Professor Klimenko during the Spring '08 term at Georgia Institute of Technology.

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practice questions and problems for chapters 12 and 13 -...

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