Output Total Costs 100 $400 101 402 102 405 103 409 104 414 105 420 106 427 107
ID: 1104084 • Letter: O
Question
Output
Total Costs
100
$400
101
402
102
405
103
409
104
414
105
420
106
427
107
435
1. Refer to the table above. If the price is $5, the perfectly competitive firm should produce
A.
107 units.
B.
105 units.
C.
104 units.
D.
106 units.
2. The MR curve of a monopolist is
downsloping and identical to the demand curve.
B.
downward-sloping and below the demand curve.
C.
downsloping and above the demand curve.
D.
horizontal and same as the market demand curve
3 For a monopolistic competitive firm, which of the following is true in the long run?
A.
P = MC.
B.
Economic profit is zero.
C.
ATC is minimized.
D.
All of the above.
4. Which of the following is a characteristic of oligopoly?
A.
Many firms
B.
Easy entry and exit
C.
Strategic dependence
D.
None of the above
Output
Total Costs
100
$400
101
402
102
405
103
409
104
414
105
420
106
427
107
435
Explanation / Answer
1. C. 104 units.
A firm produces at the equilibrium point where marginal revenue is equal to marginal cost. Under perfect competition, P = MR = 5
MC = Change in TC from 103 to 104 unit = 114 - 109 = 5
2. B. downward-sloping and below the demand curve.
A monopolist faces downward sloping demand (average revenue) and marginal revenue curve and MR curve lies below AR curve.
3. B. Economic profit is zero.
In long run, profits are zero so that no new firms enter or leave the industry. The industry overall is in equilibrium.
4. C. Strategic dependence
There are few firms in oligopoly who are interdependent in their pricing and output decisions.
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