profit maximizing under perfect competition and monopoly MCQs – Page 2

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

21. Most empirical studies show that firms cost curves ?
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A. slope down to the right and then level off.

B. slope up to the right

C. are U-shaped

D. slope down to the right

22. Which of the following is a correct statement about the relationship between average product (AP) and marginal product (MP) ?
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A. If TP is declining, then AP is negative

B. If AP is at a maximum, then MP is also,

C. If AP exceeds MP then AP is falling

D. If AP = MP, then total product is at a maximum.

23. A firm in perfectly competitive industry is producing 50 units, its profit-maximising quantity. Industry price is 2 and total fixed costs and total variable cost are 25 and 40 respectively. The firms economic profit is ?
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A. 15

B. 35

C. 30

D. 60

24. A firm in a monopolistically competitive industry ?
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A. sells a fixed amount of output regardless of price.

B. must lower price to sell more output.

C. can sell an infinite amount of output at the market-determined price

D. must raise price to sell more output

25. In contestable markets, large oligopolistic firms, end up behaving like ?
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A. a cartel

B. a monopoly

C. perfectly competitive firms

D. monopolistically competitive firms.

26. In the long run ?
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A. all firms must make economic profits.

B. there are no fixed factors of production

C. a firm can vary all inputs, but it cannot change the mix of inputs it uses.

D. a firm can shut down, but it cannot exit the industry

27. Which statement is False ?
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A. There are no fixed costs in the long run

B. Fixed costs are zero if the firms is producing nothing.

C. Fixed costs are the difference between total costs and total variable costs

D. Fixed costs do not depend on the firms level of output

28. When one firm in the breakfast cereal market started an advertising campaign that stressed the nutritional value of its cereals, all other cereal manufacturers started similar advertising campaign This suggests that the breakfast cereal market is ?
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A. monopolistically competitive

B. indeterminate from this information

C. oligopolistic

D. perfectly competitive

29. Relative to a competitively organized industry a monopoly ?
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A. Produces less output, charges lower prices and earns only a normal profit

B. Produces less output, charges higher prices and earns economic profits.

C. produces less output, charges lower prices and earns economic profits

D. produces more output, charges higher prices and earns economics profits

30. The normal rate of profit for relatively risk-free firms will be _________ the interest rate on risk-free government bonds?
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A. approximately one-half

B. smaller than

C. approximately equal to

D. larger than

31. Which of the following statements best describes the outcome under monopolistic competition ?
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A. In monopolistic competition, there are too many firms and each firm produce a slightly different product at a scale that is less than optimal

B. In monopolistic competition there are too few firms and each firm produce a slightly different product at scale that is greater than optimal

C. in monopolistic competition there is the correct number of firm and each firm produces a slightly different product at an optimal scale.

D. In monopolistic competition there are too many firms and each firm produce a slightly different product at the optimal scale

32. If firms can neither enter nor leaves an industry, the relevant time period is the ?
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A. immediate run

B. short run

C. intermediate run

D. long run

33. A monopolistically competitive firm that is incurring a loss will produce as long as the price that the firm charges is sufficient to cover ?
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A. advertising costs

B. fixed costs

C. marginal costs

D. variable costs

34. A graph showing all the combinations capital and labor available for a given total cost is the ?
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A. isocost line.

B. expenditure set

C. isoquant

D. budget constraint

35. The rate at which a firm can substitute capital for labour and hold output constant is the ?
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A. marginal rate of production

B. law of diminishing marginal returns.

C. marginal rate of factor substitution

D. marginal rate of substitution

36. In contestable markets large oligopolistic firms end up behaving like ?
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A. monopolistically competitive firms

B. perfectly competitive firms

C. a cartel

D. a monopoly.

37. The costs that depend on output in the short run are ?
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A. total fixed cost only.

B. total variable costs only.

C. both total variable costs and total costs.

D. total costs only

38. If the total product of two workers is 80 and the total product of 3 workers is 90 then the average product of the third worker is ________ and the marginal product of the third worker is _________?
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A. 160; 270

B. 10; 30

C. 10; 3.33

D. 30; 10

39. When ________ substitutes exist, a monopolist has ________ power to raise price?
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A. more; less

B. no; infinite

C. more; more

D. fewer; less

40. A form of industry structure characterized by a few firms, each large enough to influence market price is ?
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A. monopolistic competition

B. perfect competition

C. oligopoly

D. monopoly

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