profit maximizing under perfect competition and monopoly MCQs – Page 3

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

41. An industry that realizes such large economies of scale in producing its product that single-firm production of that good or service is most efficient is called ?
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A. a natural monopoly

B. a government franchise monopoly

C. a fixed cost monopoly

D. a economies of scale monopoly

42. A graph showing all the combinations of capital and labor that can used to produce a given amount of output is ?
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A. a production functions

B. an isocost line

C. an indifference curves.

D. an isoquant.

43. In which of the following circumstances would a cartel be most likely to work ?
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A. The fast-food market where there are a large number of producers but the demand for fast food is inelastic

B. The market for copper, where there are very few producers and the product is standardized.

C. The automobile industry, where there are few producers but there is great product differentiation.

D. The coffee market where the product is standardized and there are a large number of coffee growers.

44. Suppose Handels Ice Cream experiences economies of scale up to a certain point and diseconomies of scale beyond that point. Its long-run average cost curve is most likely to be ?
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A. downward sloping to the right

B. U-shaped

C. upward sloping to the right

D. Horizontal

45. The cosmetics industry is not considered by economists to be a good example of perfect competition because ?
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A. there are many EU and government health controls on cosmetic products

B. there are a very large number of firms in the industry

C. firms spend a large amount of money on advertising

D. profit margins are very high for both producers and retailers

46. Engineers for the All-Terrain Bike Company have determined that a 15% increase in all inputs will cause a 15% increase in output Assuming that input prices remain constant, you correctly deduce that such a change will cause ________ as output increases?
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A. marginal costs to increase

B. average costs to remain constant

C. average costs to increase

D. average costs to decrease

47. Form societys point of view, society would be better off if a monopolist ?
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A. produced less and charged a higher price

B. produced more and charged a lower price

C. produced more and charged a higher price

D. produced less and charged a lower price.

48. The short run, as economists use the phrase, is characterized by ?
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A. a period where the law of diminishing returns does not hold.

B. at least one fixed factor of production and firms neither leaving nor entering the industry

C. all inputs being variable

D. no variable inputs that is all of the factors of production are fixed

49. A price- and quantity-fixing agreement is known as?
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A. game theory,

B. collusion

C. price leadership

D. price concentration

50. The long-run equilibrium outcomes in monopolistic competition and perfect competition are similar because in both market structures ?
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A. the efficient output level will be produced in the long run

B. firms realize all economies of scale

C. firms will be producing at minimum average cost

D. firms will only earn a normal profit

51. Economic profits are ?
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A. the opportunity costs of all inputs

B. the difference between total revenue and total costs.

C. a rate of profit that is just sufficient to keep owners and investors satisfied

D. anything greater than the normal opportunity cost of investing

52. The short run, as economists use the phrase, in characterized by ?
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A. at least one fixed factor of production and firms neither leaving nor entering the industry.

B. a period where the law of diminishing returns does not hold

C. all inputs being variable

D. no variable inputs that is, all of the factors of production are fixed

53. Suppose we know that a monopolist is maximizing its profits. Which of the following is a correct inference? the monopolist has?
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A. maximized its total revenue

B. maximized the difference between marginal revenue and marginal cost.

C. set price equal to its average cost

D. equated marginal revenue and marginal cost

54. Which of the following is most likely to be a variable cost for a firm ?
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A. The interest payments made on loans.

B. The franchisers fee that a restaurant must pay to the national restaurant chain

C. The payroll taxes that are paid on employee wages.

D. The monthly rent on office space that it leased for a year

55. The formula for average fixed costs is ?
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A. Dq/DTFC

B. TFC/q

C. q/TFC

D. TFC q

56. Marginal revenue is ?
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A. the additional profit the firms earns when it sells an additional unit of output

B. the difference between total revenue and total cost

C. The ratio of total revenue to quantity.

D. the added revenue that a firm takes in when it increases output by one additional unit.

57. A market is defined as perfectly contestable if ?
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A. entry to it is costly but exit from it is costless

B. entry to it and exit from it are both costless

C. entry to it and exit from it are both costly

D. entry to ti costless but exist from it is costly

58. Market power is ?
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A. a firms ability to charge any price it likes

B. a firms ability to raise price without losing all demand for its product

C. a firms ability to monopolies a market completely.

D. a firms ability to sell any amount of output it desires at the market-determined price.

59. An oligopoly with a dominant price leader will produce a level of output ?
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A. between that which would prevail under competition and that which a monopolistic competitor would choose in the same industry.

B. equal to what a monopolist would choose in the same industry

C. that would prevail under competition

D. between that which would prevail under competition and that which a monopolist would choose in the same industry

60. Profit-maximizing firms want to maximize the difference between ?
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A. marginal revenue and marginal cost.

B. total revenue and total cost

C. total revenue and marginal cost

D. marginal revenue and average cost

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