1. The market for lawn services is perfectly competitive. Larry\'s Lawn Service
ID: 1219730 • Letter: 1
Question
1. The market for lawn services is perfectly competitive. Larry's Lawn Service cannot increase its total revenue by raising its price because ________.
A) Larry's supply of lawn services is perfectly elastic
B) the demand for Larry's services is perfectly inelastic
C) Larry's supply of lawn services is inelastic
D) the demand for Larry's services is perfectly elastic
2. In the short run, perfectly competitive firms ________ but in the long run, perfectly competitive firms________.
A) can incur an economic loss; incur an economic loss
B) can incur an economic losses; make zero economic profit
C) must make an economic profit; make an economic profit
D) can incur an economic loss; make an economic profit
3. A monopolistic firm has a sales schedule such that it can sell 10 prefabricated garages per week at $20,000
each, but if it increases its output to 11 per week it can sell those at $18,000 each. The marginal revenue of the eleventh unit of sales per week is _______
4. Which of the following companies most closely approximates a monopolistic competitor?
A) Pittsburgh Plate Glass
B) Dunkin Donuts
C) Ford Motor Company
D) Microsoft
Explanation / Answer
1) In perefectly competitive industry firm cannot increase their profit by increasing price becuase demand curves are always elastic in case of perfect competition.
2) In short run a perfectly competitive firm can incurr economic losses but in long run it makes zero profit.
3) So marginal revenue is (11 X 18000 -10 X 20000) =-2000
4) Microsoft is a part of monopolistic competition. Because there is no barrier in it industry and the sell similar but heterogenous product.
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