Question 1

If a monopoly produces where marginal revenue is equal to marginal cost then:

Accepted Answer

A)  if short run average cost is less than price, the monopoly will have a normal profit. 
B)  if short run average cost is equal to price, the monopoly will have a normal profit. 
C)  the monopoly is guaranteed to make a normal profit. 
D)  if short run average cost is greater than price, the monopoly will have a normal profit. 
E)  if average variable cost is greater than price, the monopoly will have be operating at a loss. 
A)  if short run average cost is less than price, the monopoly will have a normal profit. 
B)  if short run average cost is equal to price, the monopoly will have a normal profit. 
C)  the monopoly is guaranteed to make a normal profit. 
D)  if short run average cost is greater than price, the monopoly will have a normal profit. 
E)  if average variable cost is greater than price, the monopoly will have be operating at a loss. B

Question 2

In a monopoly, if price is lower than average variable cost, then:

Accepted Answer

A)  the monopoly will be operating at a loss. 
B)  the monopoly will be operating at a profit. 
C)  the monopoly is in a shut down situation. 
D)  its operating loss is greater than total fixed cost. 
E)  its total revenue will be greater than total fixed cost. 
A)  the monopoly will be operating at a loss. 
B)  the monopoly will be operating at a profit. 
C)  the monopoly is in a shut down situation. 
D)  its operating loss is greater than total fixed cost. 
E)  its total revenue will be greater than total fixed cost. C

Question 3

Suppose that the firm has the following short run cost data and that B is the only variable input and the price of B is fixed. Using the following table, what is the firm's best short run output if it has no choice but to sell its product at the prevailing market price of $1.50?

Accepted Answer

A)  200 
B)  500 
C)  700 
D)  800 
E)  900 
A)  200 
B)  500 
C)  700 
D)  800 
E)  900 B

Question 4

A monopoly in the short run will try to produce where:

Accepted Answer

A)  revenue is maximized. 
B)  costs are minimized. 
C)  marginal revenue is greater than marginal cost. 
D)  marginal revenue is equal to marginal cost as long as price is greater than average variable cost. 
E)  marginal revenue is equal to marginal cost as long as price is greater than short run average cost. 
A)  revenue is maximized. 
B)  costs are minimized. 
C)  marginal revenue is greater than marginal cost. 
D)  marginal revenue is equal to marginal cost as long as price is greater than average variable cost. 
E)  marginal revenue is equal to marginal cost as long as price is greater than short run average cost.

Question 5

A monopoly has all of the following features) EXCEPT:

Accepted Answer

A)  a product that is duplicated by other firms. 
B)  the market demand curve is the firm's demand curve. 
C)  entry is effectively blocked over the long run. 
D)  a single seller for the market's product. 
E)  a product not duplicated by other firms. 
A)  a product that is duplicated by other firms. 
B)  the market demand curve is the firm's demand curve. 
C)  entry is effectively blocked over the long run. 
D)  a single seller for the market's product. 
E)  a product not duplicated by other firms.

Question 6

Given the following data for a perfectly competitive firm, what is the amount of profit the firm will make at the profit maximizing output?
P = MR = $100
TC = 1,000 + 125Q - .5Q2
SMC = 125 - Q
Q = units produced per month
TFC = $1000

Accepted Answer

A)  none - the firm would shut down 
B)  $1,312.50 
C)  $2,548.63 
D)  -$1,425.86 
E)  -$2,351.27 
A)  none - the firm would shut down 
B)  $1,312.50 
C)  $2,548.63 
D)  -$1,425.86 
E)  -$2,351.27

Question 7

Using the above short run cost data, find the amount of profit the firm would make at the profit maximizing output.

Accepted Answer

A)  none - the firm would shut down 
B)  $550.00 
C)  $625.00 
D)  -$525.00 
E)  -$650.00 
A)  none - the firm would shut down 
B)  $550.00 
C)  $625.00 
D)  -$525.00 
E)  -$650.00

Question 8

In the short run, a purely competitive firm can be expected to shut down if:

Accepted Answer

A)  price is less than short run average cost. 
B)  price is less than average variable cost. 
C)  price is less than average fixed cost. 
D)  total costs exceed total revenue. 
E)  short-term marginal cost is above average variable cost. 
A)  price is less than short run average cost. 
B)  price is less than average variable cost. 
C)  price is less than average fixed cost. 
D)  total costs exceed total revenue. 
E)  short-term marginal cost is above average variable cost.

Question 9

Determine whether the following perfectly competitive firm should produce output in the short run or temporarily shut down, given:
P = $100
TC = 1,000 + 125Q - .5Q2
Where:
Q = units produced per month
If the firm does not operate, it will lose its $1,000 of fixed costs. What profit or loss will the firm have if it operates where MR = SMC? Does this profit or loss check with your decision on whether to produce or temporarily shut down?

Accepted Answer

As MR of $100 is below AVC of $112.5 at

Question 10

The demand curve of the perfectly competitive firm is equal to its marginal revenue curve.

Accepted Answer

A) True 
 B)False

Question 11

Using the above short run cost data, find the amount of profit the firm would make at the profit maximizing output.

Accepted Answer

A)  none - the firm would shut down 
B)  $57.83 
C)  $60.25 
D)  -$57.83 
E)  -$60.25 
A)  none - the firm would shut down 
B)  $57.83 
C)  $60.25 
D)  -$57.83 
E)  -$60.25

Question 12

Under perfect competition, there are many small firms, and the individual firm takes the market price as a given.

Accepted Answer

A) True 
 B)False

Question 13

In the short run, as long as SMC = MR = P, if price is greater than average variable cost, the firm should continue to operate.

Accepted Answer

A) True 
 B)False

Question 14

Given the above data, what profit would the firm make at the profit maximizing output?

Accepted Answer

A)  $2,500 
B)  $5,000 
C)  $7,520 
D)  $10.000 
E)  None - It would shut down 
A)  $2,500 
B)  $5,000 
C)  $7,520 
D)  $10.000 
E)  None - It would shut down

Question 15

The demand curve for the homogeneous product of a perfectly competitive industry is determined by the preferences of consumers.

Accepted Answer

A) True 
 B)False

Question 16

In the absence of government regulation, a monopoly firm can indefinitely sustain greater than normal profits.

Accepted Answer

A) True 
 B)False

Question 17

Suppose that a typical firm in a perfectly competitive industry has the following long run total cost function:
   
If this function remains stable, what will be the long-run price for the firm's product?

Accepted Answer

The long-run equilibrium price

Question 18

Complete the revenue and cost data in the following table, assuming that the firm is a monopoly that has been allowed to set its own price for its home monitoring service. Q refers to the number of consumers, and the revenue and cost data are per month.)
   
3.
PAGEXXX Chapter 8 - Perfect Competition and Monopoly
Chapter 8 - Perfect Competition and Monopoly 
a. What output and price will the firm choose? Explain why, relating your answer to the general condition for profit maximization.
b. How much profit will the firm have at its maximum?

Accepted Answer

@#IMG-DLM& a. The firm would seek to produce at 25

Question 19

Which of the following is NOT a condition of a perfectly competitive market?

Accepted Answer

A)  A very large number of buyers and sellers. 
B)  The products are homogeneous. 
C)  All buyers and sellers have perfect knowledge of market conditions and of any changes in the market conditions that occur. 
D)  Firms are able to get together and effectively agree on restricting quantity supplied and raising prices. 
E)  There are no artificial interferences with the activities of the buyers and sellers. 
A)  A very large number of buyers and sellers. 
B)  The products are homogeneous. 
C)  All buyers and sellers have perfect knowledge of market conditions and of any changes in the market conditions that occur. 
D)  Firms are able to get together and effectively agree on restricting quantity supplied and raising prices. 
E)  There are no artificial interferences with the activities of the buyers and sellers.

Question 20

The demand curve of the perfectly competitive firm is equal to its average revenue curve.

Accepted Answer

A) True 
 B)False

If a monopoly produces where marginal revenue is equal to marginal cost then:

In a monopoly, if price is lower than average variable cost, then:

Suppose that the firm has the following short run cost data and that B is the only variable input and the price of B is fixed. Using the following table, what is the firm's best short run output if it has no choice but to sell its product at the prevailing market price of $1.50?

A monopoly in the short run will try to produce where:

A monopoly has all of the following features) EXCEPT:

Given the following data for a perfectly competitive firm, what is the amount of profit the firm will make at the profit maximizing output? P = MR = $100 TC = 1,000 + 125Q - .5Q² SMC = 125 - Q Q = units produced per month TFC = $1000

Using the above short run cost data, find the amount of profit the firm would make at the profit maximizing output.

In the short run, a purely competitive firm can be expected to shut down if:

The demand curve of the perfectly competitive firm is equal to its marginal revenue curve.

Using the above short run cost data, find the amount of profit the firm would make at the profit maximizing output.

Under perfect competition, there are many small firms, and the individual firm takes the market price as a given.

In the short run, as long as SMC = MR = P, if price is greater than average variable cost, the firm should continue to operate.

Given the above data, what profit would the firm make at the profit maximizing output?

The demand curve for the homogeneous product of a perfectly competitive industry is determined by the preferences of consumers.

In the absence of government regulation, a monopoly firm can indefinitely sustain greater than normal profits.

Suppose that a typical firm in a perfectly competitive industry has the following long run total cost function: If this function remains stable, what will be the long-run price for the firm's product?

Which of the following is NOT a condition of a perfectly competitive market?

The demand curve of the perfectly competitive firm is equal to its average revenue curve.

Introduction, Basic Principles, and Methodology

Revenue of the Firm

Topics in Demand Analysis and Estimation

Economic Forecasting

Production Analysis

Cost of Production

Profit Analysis of the Firm

Monopolistic Competition and Oligopoly

Games, Information and Strategy

Topics in Pricing and Profit Analysis

Factor Markets

Fundamentals of Project Evaluation

Risk in Project Analysis

Economics of Public Sector Decisions

Legal and Regulatory Environment of the Firm

Filters

Exam 8: Perfect Competition and Monopoly

If a monopoly produces where marginal revenue is equal to marginal cost then:

In a monopoly, if price is lower than average variable cost, then:

Suppose that the firm has the following short run cost data and that B is the only variable input and the price of B is fixed. Using the following table, what is the firm's best short run output if it has no choice but to sell its product at the prevailing market price of $1.50?

A monopoly in the short run will try to produce where:

A monopoly has all of the following features) EXCEPT:

Given the following data for a perfectly competitive firm, what is the amount of profit the firm will make at the profit maximizing output? P = MR = $100 TC = 1,000 + 125Q - .5Q2 SMC = 125 - Q Q = units produced per month TFC = $1000

Using the above short run cost data, find the amount of profit the firm would make at the profit maximizing output.

In the short run, a purely competitive firm can be expected to shut down if:

The demand curve of the perfectly competitive firm is equal to its marginal revenue curve.

Using the above short run cost data, find the amount of profit the firm would make at the profit maximizing output.

Under perfect competition, there are many small firms, and the individual firm takes the market price as a given.

In the short run, as long as SMC = MR = P, if price is greater than average variable cost, the firm should continue to operate.

Given the above data, what profit would the firm make at the profit maximizing output?

The demand curve for the homogeneous product of a perfectly competitive industry is determined by the preferences of consumers.

In the absence of government regulation, a monopoly firm can indefinitely sustain greater than normal profits.

Suppose that a typical firm in a perfectly competitive industry has the following long run total cost function: If this function remains stable, what will be the long-run price for the firm's product?

Which of the following is NOT a condition of a perfectly competitive market?

The demand curve of the perfectly competitive firm is equal to its average revenue curve.

Introduction, Basic Principles, and Methodology

Revenue of the Firm

Topics in Demand Analysis and Estimation

Economic Forecasting

Production Analysis

Cost of Production

Profit Analysis of the Firm

Monopolistic Competition and Oligopoly

Games, Information and Strategy

Topics in Pricing and Profit Analysis

Factor Markets

Fundamentals of Project Evaluation

Risk in Project Analysis

Economics of Public Sector Decisions

Legal and Regulatory Environment of the Firm

Filters

Given the following data for a perfectly competitive firm, what is the amount of profit the firm will make at the profit maximizing output? P = MR = $100 TC = 1,000 + 125Q - .5Q² SMC = 125 - Q Q = units produced per month TFC = $1000