1. When firms enter a perfectly competitive market: Select one: a. supply increa

ID: 1166374 • Letter: 1

Question

When firms enter a perfectly competitive market:

Select one:

a. supply increases and price falls

b. supply increases and price rises

c. supply shifts to the left and price falls

d. supply shift to the left and price rises

Monopolies exist due to barriers to entry. Which of the following does NOT act as a barrier to entry?

Select one:

a. copyrights, patents, trademarks

b. economies of scale

c. control of a key resource

d. restricted access to the production process

A monopolist is producing where MR=$100 and MC= $87. What should the monopolist do?

Select one:

a. Decrease production and increase price in order to maximize profits.

b. Increase production and decrease price in order to maximize profits.

c. Decrease production and decrease price in order to maximize profits.

d. Increase production and increase price in order to maximize profits.

1. The correct answer is: a)

Reason: as new firms enter the market, the supply increases and due to excess supply, the price falls.

2. The correct answer is: b)

Reason: this is clearly not a barrier to entry.

3. The correct answer is: b)

Reason: since, MR > MC, the monopolist should increase production and thereby reduce price on order to maximise profits.

Thanks!

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