Deck 8: Understanding Market Structures and Firm Behavior

Question 1

When a perfectly competitive industry is in long-run equilibrium, all firms in the industry

A)earn zero economic profits
B)produce a level of output where short-run marginal cost is equal to short-run average total cost
C)produce a level of output where long-run marginal cost is equal to long-run average cost
D)All of the above are correct

Answer 1

All of the above are correct

Question 2

The short-run supply curve of a perfectly competitive firm

A)is equal to that portion of the short-run marginal cost curve that is above the average variable cost curve
B)is equal to that portion of the short-run marginal cost curve that is above the average total cost curve
C)is equal to that portion of the short-run average total cost curve that is above the average variable cost curve
D)None of the above is correct

Answer 2

is equal to that portion of the short-run marginal cost curve that is above the average variable cost curve

Question 3

A monopolist produces 14,000 units of output and charges Rs.14 per unit. Its marginal revenue is Rs.8, its marginal cost is Rs.7 and rising, its average total cost is Rs.10, and its average variable cost is Rs.9. The monopolist should

A)increase curve output, which will result in an increase in the firm\s positive economic profit
B)increase output, which will reduce the firm\s economic losses
C)shut down, which will reduce the firm\s economic losses
D)decrease output, which will result in an increase in the firm\s positive economic

Answer 3

increase curve output, which will result in an increase in the firm\s positive economic profit

Question 4

Which of the following is a characteristic of monopolistic competition?

A)Few sellers
B)A differentiated product
C)Easy entry into and exit from the industry
D)All of the above

Question 5

If an imperfectly competitive firm is producing a level of output where marginal cost is equal to marginal revenue, marginal revenue is below average variable cost, and price is equal to average total cost, then the firm

A)should shut down
B)should decrease output, but should not shut down
C)should increase output
D)None of the above is correct

Question 6

Which of the following is a criticism of the theory of monopolistic competition?

A)It is difficult to define a monopolistically competitive market and to determine the firms and products that comprise it
B)When product differentiation is slight, each firm\s demand curve is nearly horizontal so the perfectly competitive solution provides an adequate approximation to the monopolistically competitive solution
C)When there are strong brand preferences and few producers of many differentiated products, or when there are many producers but only a few compete as rivals for any given consumer, then the oligopoly solution provides an adequate approximation to the monopolistically competitive solution
D)All of the above are correct

Question 7

Marginal revenue is equal to price for which one of the following types of market structure?

A)Monopoly
B)Perfect competition
C)Monopolistic competition
D)Oligopoly

Question 8

Third degree price discrimination occurs when the monopolist charges different prices for the same commodity in different

A)Markets
B)places
C)continents
D)countries

Question 9

Lerner Index is a measure of:

A)Elasticity of demand
B)Monopoly power
C)Inequality

Question 10

The dual pricing system of charging high price during peak time and low price during of peak time is called

A)Double pricing
B)Dual pricing
C)kinked pricing
D)peak load pricing

Question 11

The marker structure which have very large number of sellers selling Identical products is called

A)Perfect competition
B)Monopoly
C)Monopolistic competition
D)Oligopoly

Question 12

The marker structure with Perfect mobility of factors and products is called

A)Perfect competition
B)Monopoly
C)Monopolistic competition
D)Oligopoly

Question 13

The marker structure with Perfect knowledge is called

A)Perfect competition
B)Monopoly
C)Monopolistic competition
D)Oligopoly

Question 14

The large number of firms producing the same commodity ensure that the individual firm has no control over

A)Price of the commodity
B)The quantity of the commodity
C)Both of the above
D)None of the above

Question 15

Individual firm has no control on the price of the commodity in the market is a condition of

A)Perfect competition
B)Monopoly
C)Monopolistic competition
D)Bilateral monopoly

Question 16

In a Perfect competitive market

A)Firm is the price giver and the industry is a price taker
B)Firm is the price taker and the industry is a price giver
C)Both are price makers
D)Both are price takers

Question 17

Under perfect market conditions the individual firm in the industry has ------------------- control over the price of the product.

A)Some
B)Full
C)No
D)None of the above

Question 18

The marker structure which have large number of sellers selling differentiated product is called

A)Perfect competition
B)Monopoly
C)Monopolistic competition
D)Oligopoly