31) The main difference between the cost structure of the monopoly firm and that

Question

31) The main difference between the cost structure of the monopoly firm and that of a perfectly competitive firm is 31) A) the shut-down point B) marginal cost is downward sloping C) the beginning of the rational range of production D) the break-even point E) none of the above 32) The distinguishing characteristic of monopolistic competition is 32) A) high fixed costs B) interdependence of firms in the industry C) producers are price takers D) product differentiation E) difficulty of entry 33) 33) The distinguishing difference between a perfectly competitive firm and a monopoly firm is A) average revenue B) fixed cost C) marginal cost D) cost structure E) profit maximizing behavior

Explanation / Answer

31)- D -The difference in cost of monopoly and Perfectly competitive firm is there difference in break even point, it is point where total revenue is greater than total cost , in PCM , P =MC so the total revenue can never be greater than total cost , but under Monopoly the firm do attain break even point.

32) -D- The main characteristics of monopolistic competition is its product differentiation, it is a type of firm where producers sell nearly same type of products and there are large number of sellers and buyers in the market. To make their product more attractive they tend to product differentiation via advertisement , marketting. For example pepsodent and colgate are both toothpaste but they make their product look different via advertisements.

33)- A- Under PCM the AR curve or demand curve is horizontal i.e perfectly elastic due to the presence of large number of sellers ,if you increase the price of the product the entire demand for the product will be lost , due to presence of the other sellers in the market also AR = MR in PCM

                                   Whereas in a monopoly the AR curve is downward slopping due to the presence of a single seller and the price is determined by the seller not the market forces and AR is not equal to MR in monoply.

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