1) Suppose a recent and widely circulated medical article has reported new benef
ID: 1215762 • Letter: 1
Question
1) Suppose a recent and widely circulated medical article has reported new benefits of cycling for exercise. Simultaneously, the price of the parts needed to make bikes falls. If the change in supply is greater than the change in demand, the price will ____________ and the quantity will ____________.
A) Rise, Rise
B) Fall, Fall
C) Rise, Fall
D) Fall, Rise
2) What is the main difference between a competitive firm and a monopoly firm?
A) The number of customers served by the firm.
b) Monopoly firms are more efficient and therefore have lower costs.
c) Monopoly firms can generally earn positive profits over a longer period of time.
b) Monopoly firms sell products that are more price-elastic.
3) A competitive firm's profit-maximizing price is $15. At MC=MR, the output is 100 units. At this level of production, average total costs are $12. The firm's profits are
A) $300 in the short run and long run
b) $300 in the short run and zero in the long run
c) $500 in the short run and long run
D) $500 in the short run and zero in the long run
4) An industry is defined as
A) a group of firms producing the exact same products and services.
b) firms producing items that sell though the same distribution channels.
c) firms that have the same resources and capabilities.
D) a group of firms producing products that are close substitutes.
5) Which of the following is NOT an example of an entry barrier?
A) Government protection through patents or licensing requirements.
B) Strong brands.
C) Low capital requirements for entry.
D) Lower costs driven by economies of Scale.
Explanation / Answer
1) Price will fall and quality will rise
2)c) Monopoly firms can generally earn positive profits over a longer period of time. as there is no competitior.
3) b) $300 in the short run and zero in the long run
profit = 15*100 - 12*100 = $300
4) a group of firms producing the exact same products and services.
5) Lower costs driven by economies of Scale.
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