1) For the perfectly or purely competitive firm, profit maximization occurs at a
ID: 1193576 • Letter: 1
Question
1) For the perfectly or purely competitive firm, profit maximization occurs at an output level where:
a) P = MC.
b) MC = ATC.
c) P = AVC.
d) P < AVC.
2) For any company operating in a marketplace, the firm attempts to maximize the value of company’s worth by setting output where:
a) costs are lowest.
b) P < AVC.
c) MR = MC.
d) AR = MC.
3) The market for micro-computers (PCs) is fairly competitive, the products are somewhat homogeneous, and, over time, firms have entered looking to make profits on new configurations of the micro-computer. Over time, profits:
have risen dramatically.
have stayed about the same for most firms.
have become razor thin for many producers.
are not important since this industry is in the nonprofit sector.
4) Sometimes an old company in an industry can build a larger plant that has lower costs per unit than a potential entrant (newcomer) can duplicate. That is market:
a) weakness based on cost.
b) power based on scale economies.
c) power based on specific assets.
d) weakness based on reputation deficiency.
5) Under monopoly, there are:
a) unexploited gains from trade (or, inefficiencies).
b)many competitors.
c) the advantages of heterogeneous products.
d) problems of easy entry.
6) Elmer’s Glue has captured the market for school glue. It is preferred by both students and parents alike. It takes very little capitalization to enter the market but nobody successfully does. The glue clearly needs no patents or secret formulas. This type of market is called:
a) pure or perfect competition.
b) oligopoly.
c) monopolistic competition.
d) monopoly
7) In a monopolistically competitive market, the advantage that a seller has over competitors or newcomers is:
a) consumer preference for its brand.
b) low costs from the learning curve effect.
c) economies of scale.
d) the license or patent.
8) In a Nash equilibrium, firms are clearly strategically interdependent and:
a) they cooperate with each other to determine market outcomes.
b)they determine price in a closed auction bid system.
c) they are dependent on differentiated goods.
d) they are non-cooperative in determining market outcomes.
9) The Prisoner’s Dilemma and the problem of the cartel are very similar. In both cases:
a) cooperation would improve the outcome, but it rarely happens.
b) cooperation is the only solution.
c) non-cooperation would improve the outcome, but it rarely happens.
d) non-cooperation is an instable solution.
10) The benefit of the mixed strategy is:
a) higher returns for both players in the market.
b) lower returns for both players in the markets.
c) the element of consistency that baffles the rivals.
d) the element of surprise that baffles the rivals
11) Though Nash games are noncooperative, a cooperative outcome is more likely if
a) long run gains are greater than short run gains.
b) firms can easily monitor the outcomes from cooperation.
c) firms expect the market relationship to last a long time.
d) All of the above.
Explanation / Answer
ans 1
a) P = MC
ans2
c) MR = MC
3.
c)have become razor thin for many producers.
becauses price will remain same but due to new firms market share will decrease so profit decreases.
4.
b) power based on scale economies.
5,
c) the advantages of heterogeneous products.
6.
d) monopoly
7.
a) consumer preference for its brand
8.
d) they are non-cooperative in determining market outcomes.
9.
a) cooperation would improve the outcome, but it rarely happens.
10.
d) the element of surprise that baffles the rivals
11.
d) all of the above
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