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Focused topic practice

profit maximizing under perfect competition and monopoly MCQs

Practise focused profit maximizing under perfect competition and monopoly questions with marked answers for exam preparation and subject revision.

profit maximizing under perfect competition and monopoly Mcqs

1. If a firm has some degree of market power, then output price ?
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A. is determined by the actions of other firms in the industry

B. no longer influences the amount demand of the firms product

C. becomes a decision variable for the firm

D. is guaranteed to be above a firms average cost.

2. In monopolistic competition firms achieve some degree of market power ?
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A. because of barriers to entry into the industry

B. by producing differentiated products

C. because of barriers to exit from the industry

D. by virtue of size alone

3. Maximum profit can be shown on a diagram using ?
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A. the AC and MC curves

B. the MR and AR curves

C. the AC and AR curves

D. the MR and MC curves

4. The slope of marginal revenue curve is ?
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A. the same as the slope of the demand curve

B. twice as steep as the demand curve

C. always equal to one.

D. half as steep as the demand curve

5. Assume that firms in an oligopoly are currently colluding to set price and output to maximise total industry profit. If the oligopolists are forced to stop colluding, the price charged by the oligopolists will _________ and the total output produced will __________?
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A. increase; decrease

B. increase; increase

C. decrease; increase

D. decrease; decrease

6. If the ABC Typing Service is earning a rate of return greater than the return necessary for the business to continue operations, then ?
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A. total costs exceed normal profit

B. the firm is earning are economic profit

C. normal profit is zero

D. total costs exceed total revenue

7. The kinked demand curve model of oligopoly assumes the elasticity of demand ?
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A. is perfectly elastic if price increases and perfectly inelastic if price decreases

B. is constant regardless of whether price increase of decrease.

C. in response to a price increases is more elastic than the elasticity of demand in response to a price decrease

D. in response to a price increase is less elastic than the elasticity of demand in response to a price decrease

8. The formula for average variable cost (AVC) is ?
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A. Dq/DTVC

B. TVC/q

C. q/TVC

D. DTVC/Dq

9. Which of the following statements is False ?
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A. participants in a contestable market are continuously faced with competition or the threat of competition because entry is cheap

B. In a contestable market forces will guarantee that the firms produce efficiently or be driven out of business

C. In a contestable market, economic profits cannot persist in the long run.

D. For a market to be contestable, the product must be produced with a labor-intensive technology

10. If you were running a firm in a perfectly competitive industry, you would be spending your time making decisions on ?
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A. none of these

B. how much of each input to use?

C. how much to spend on advertising?

D. What price to charge

11. Monopolistic competition differs from perfect competition primarily because ?
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A. in monopolistic competition entry into the industry is blocked

B. in monopolistic competition, firms can differentiate their products

C. in perfect competition firms can differentiate their products

D. in monopolistic competition there are relatively few barriers to entry.

12. A firm will shut down in the short run if ?
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A. variable costs exceed revenues

B. it is suffering a loss.

C. fixed costs exceed revenues.

D. total costs exceed revenues

13. In a monopoly, marginal revenue is ?
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A. always greater than price

B. always equal to price

C. less than price at low levels of output and greater than price at high levels of output

D. lower than price for all units other than the first

14. Which of the following statements best describes the outcome under monopolistic competition ?
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A. It is not efficient because too little output is produced and the output that is produced is produced at a cost above minimum average total cost

B. It is not efficient because too little output is produced but is efficient in that the output produced is produced at minimum average total cost.

C. It is efficient because entry is free and economic profits are eliminated in the long run.

D. It is efficient because the right amount of output is produced, but not efficient in that the output produced is produced at a cost above minimum average total cost

15. Diminishing marginal return implies ?
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A. decreasing average fixed costs.

B. decreasing average variable costs.

C. decreasing marginal costs.

D. increasing marginal costs.

16. An industry that has a relatively small number of firms that dominate the market is called ?
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A. a natural monopoly

B. a merged industry

C. a concentrated industry

D. a colluding industry

17. A group of firms that gets together to make price and output decisions is called ?
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A. price leadership