Which of the following is NOT characteristics of the structure of perfectly competitive markets?
B) Few Sellers
Market Structure describes which of the following characteristics?
The ease of entry and exit into a market
The similarity of the product sold
The number of firms in each industry
Which of the following is NOT a characteristic of a perfectly competitive market?
D) Firms are price makers, not takers
Because a competitive firm is a price taker, it faces a demand curve that is what?
Perfectly Elastic (Horizontal)
Marginal revenue is the change in
Total revenue brought about by selling one more unit of output
In short-run perfectly competitive equilibrium, which of the following is always true?
B) Profit can be negative, zero, or positive
A perfectly competitive firm in the short-run maximizes its profit by producing the output where
A) marginal cost equals price (T)
B) marginal cost equals marginal revenue (T)
C) Total revenue minus total cost is at a maximum
The firm which does not have ability to select the price of the product is:
A) can not maximize profit
B) is a price maker (F)
C) has a horizontal individual demand curve
D) will go out of business due to losses

Correct Answer: C

In the short run, a perfectly competitive equilibrium, which of the following is always true:
Profit can be negative, positive, or zero.
Profit is maximum when at an output where
C) Marginal revenue equals marginal cost
A perfectly competitive firm sells its output for $250 per unit and the marginal cost is $250 per unit. To maximize short run profit, the firm should:
C) Maintain its current output

Correct Answer: C

In the short run, a perfectly competitive firm’s most profitable output level is where:
A) marginal cost equals marginal revenue
B) total revenue minus total cost is at a maximum
C) Both of the above

Note: Marginal Revenue = Marginal Cost
Total Revenue – Total Cost = Maximum

Monopoly is a market structure characterized by:
A) Very strong barrier to entry
B) A single firm facing the market demand curve
C) Sole seller of a product for which there are a few substitutes
Which of the following is true for a monopoly?
C) Single seller that is a price maker
The demand curve a monopolist faces is:
The market demand curve (since they are the only ones in the market/ they own the market)

Note: ALWAYS downward sloping

Which of the following is true for a monopolist?
A) Price is above marginal revenue

Note: since price is above marginal revenue, the demand curve is always ABOVE the marginal curve

A monopolist maximizes economic profit only when:
A) Marginal cost equals marginal revenue (T)
To maximize profit, a monopolist should choose a price where demand is:
A) Elastic

Note: A monopolist will always choose output on the elastic area of demand, and on that part, marginal revenue is equal to marginal cost

Which of the following is true for a monopolist
C) Its straight line demand curve is above the marginal revenue curve

Correct Answer: C

A monopoly:
A) Faces a market demand curve which is horizontal
B) Has a marginal revenue curve which lies above its demand curve
C) Will maximize profit by producing an output level where MR;MC
D) None of the above

Correct Answer: D

A monopolist’s attempt to price discriminate can be successful if
A) Differences in the price elasticity of demand among a group of buyers
For successful price discrimination, a monopolist’s customers must:
D) Be unable to resell the product

Correct Answer: D

A monopoly firm will charge (compared to a perfectly competitive firm):
A higher price and sell less
Price ; Marginal Revenue
If hamburgers used to be produced in a perfectly competitive market, and now the market has become a monopoly, we can expect:
Less hamburgers to be sold at a higher price
Economic Profit Formula
Total Cost – (Explicit + Implicit Costs)
Economic Profit Formulas
Total Revenue – Total Cost (Explicit + Implicits)

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