Question 1

The best or optimum level of output for a perfectly competitive firm is given by the point:

Accepted Answer

A)  MR = AC
B)  MR = MC
C)  MR exceeds MC by the greater amount
D)  MR = MC and MC is rising D

Question 2

A profit-maximizing monopoly firm with a demand curve P = 50 ? Q is a perfect pricediscriminator. If it has marginal costs of Rs. 10/unit and fixed costs of Rs. 30, it will produce _____ units of output and will make______ profit.

Accepted Answer

A)  40; Rs. 400
B)  40; Rs. 770
C)  20; Rs. 370
D)  20; Rs. 400 B

Question 3

P = a - bQ is the demand cure of a monopolist. Which of the following statements is true?

Accepted Answer

A)  AR & MR are equal
B)  The rate of decline of MR is twice the rate of decline of AR
C)  The demand curve has unit elasticity
D)  slope of MR is zero. B

Question 4

A perfectly competitive firm should reduce output or shut down in the short run if market price is equal to marginal cost and price is:

Accepted Answer

A)  greater than average total cost
B)  less than average total cost
C)  greater than average variable cost
D)  less than average variable cost

Question 5

If the demand curve for a monopolist is P = 100 -20Q, then the marginal revenue of that firm is given by the equation:

Accepted Answer

A)  MR = 200 ? 20Q
B)  MR = 50 ? 40Q
C)  MR = 100 ? 20Q
D)  MR = 100 ? 40Q

Question 6

In an input-output matrix, the principal diagonal of this matrix represents the amount of input each industry takes from ___output.

Accepted Answer

A)  other industry's
B)  government sector's
C)  household sector's
D)  its own output

Question 7

One difference between perfect competition and monopolistic competition is that:

Accepted Answer

A)  In perfect competition, the products are slightly differentiated between firms
B)  There are a larger number of firms in monopolistic competition
C)  There are a smaller number of firms in perfectly competitive industries
D)  Firms in monopolistic competition have some degree of market power

Question 8

In monopoly, if p = Rs. 10 at the point on the demand curve where ? = 0.5, MR is:

Accepted Answer

A)  5
B)  0
C)  ?1
D)  ?10

Question 9

A price discriminating Monopolist is considered more efficient than a single prices monopolist because:

Accepted Answer

A)  a price discriminating Monopolist knows its consumers better
B)  a price discriminating Monopolist can set prices more efficiently
C)  a price discriminating Monopolist produces a higher level of output
D)  a price discriminating Monopolist can produce it's output at a lower cost

Question 10

If the demand facing a monopolist is P = 100 ? 10Q and marginal cost is constant at 20, then the profit maximizing price and quantity for this monopolist are:

Accepted Answer

A)  P = 60 and Q = 4
B)  P = 20 and Q = 8
C)  P = 90 and Q = 10
D)  P = 4 and Q = 60

Question 11

In monopoly, when the demand curve is elastic, MR is:

Accepted Answer

A)  1
B)  0
C)  positive
D)  negative

Question 12

In a monopoly, marginal revenue is:

Accepted Answer

A)  equal to AR
B)  less than AR
C)  more than AR
D)  initially less than AR then more than AR

Exam 7: Market Structures and Pricing Strategies