final_-ans-b - 1. A major difference between monopolistic...

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Unformatted text preview: 1. A major difference between monopolistic competition and perfect competition is the degree of product differentiation. Pure competition has none and differentiation always exists in monopolistic competition. a. True b. False ANS: A 2. A good is said to be excludable if a. those who do not pay for it can be prevented from consuming it b. those who do not produce the good can be prevented from consuming it c. it is not traded in a public market d. there is no rivalry in consuming it e. its use can be continued indefinitely ANS: A Figure 1. 3. Figure 1 shows the situation facing a natural monopoly that cannot price discriminate. What quantity will be produced if the firm is regulated to earn only normal profit? a. $20 b. $18 c. $15 d. $10 ANS: C 4. Figure 1 shows the situation facing a natural monopoly that cannot price discriminate. What quantity will be produced if the firm is regulated to be efficient? a. $20 b. $18 c. $15 d. $10 ANS: D 5. Jim's Shoe Shine Shop operates in a perfectly competitive market. If its marginal revenue is $5 per shine, then a. the next shine will bring in less than $5 in additional revenue b. the next shine will bring in more than $5 in additional revenue c. the market price per shine is $5 d. price is less than $5 e. price is equal to total revenue at all output levels ANS: C 6. Figure 10-2 illustrates a monopolistically competitive firm. In order to maximize profit, or minimize loss, the firm will a. close down b. produce approximately 10 units of output and charge approximately $500 c. produce approximately 7.5 units of output and charge nearly $600 d. produce approximately 12.5 units of output and charge approximately $425 e. produce 5 units of output and charge $650 ANS: B 7. The maximum total economic profit, or minimum economic loss, for the monopolistically competitive firm in Figure 10-2 is a. zero b. a profit of $575.00 c. a profit of $1,562.50 d. a profit of $2,000.00 e. a loss of $375.00 ANS: D 8. At the profit-maximizing, or loss-minimizing, output level, the firm in Figure 10-2 has total cost approximately equal to a. $2,000 b. $3,000 c. $3,600 d. $800 e. $1,625 ANS: B 9. Assume the firm in Figure 10-2 is currently producing 13 units of output and charging $380 each. The firm a. will increase its profit if it raises its price and reduces its production level b. will increase its profit if it lowers its price and expands its production level c. cannot increase economic profit by changing its price and output since it is already maximizing its profit d. will increase its profit if it raises its price and expands its production level e. will increase its profit by lowering its price and reducing its production level ANS: A 10. The total fixed cost in Figure 10-2 is a. increasing as more is produced b. decreasing as more is produced c. larger than variable costs d. less than $1,000 e. more than $1,000 ANS: D 11. In monopolistic competition, nonprice competition a. allows firms to earn above-normal profit in the long run b.b....
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This note was uploaded on 09/14/2011 for the course ECON 103 taught by Professor Gispy during the Spring '11 term at Prairie State College .

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final_-ans-b - 1. A major difference between monopolistic...

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