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1. Which of the following is a firm in a perfectly competitive market?

1) a local corn farmer

2) the Tennessee Valley Authority, a large electricity producer that serves areas of five states

3) pizza delivery

4) a grocery store

5) Kate Spade, fashion designer

2. Compare a perfectly competitive market with a monopolistically competitive market.

The markup the firm charges in a monopolistically competitive market is ___________ the markup charged by a firm in a perfectly competitive market.

The firm's excess capacity in a monopolistically competitive market is ___________ the firm's excess capacity in a firm in a perfectly competitive market.

The efficiency of a monopolistically competitive market is ___________ the efficiency of a perfectly competitive market.

  1)greater than; less than; greater than
  2)greater than; greater than; less than
  3)less than; less than; greater than
  4)greater than; less than; equal to

3. In the long run, how is price related to marginal cost in both perfect competition and in monopolistic competition?

  1) The long-run price is driven to marginal cost in both competitive markets and markets that are monopolistically competitive.
  2 )Both markets can charge more than the marginal cost in the long run because products are differentiated in both markets.
  3) Products are identical in perfectly competitive markets, so a firm must charge less than the marginal cost in order to differentiate itself. This is not true in monopolistically competitive markets where firms can charge more than marginal cost.
  4) Because monopolistically competitive firms have market power, they set a price higher than marginal cost, while competitive firms cannot.

4. Titleist has an advertising slogan is "The #1 ball in golf"€ Consumers can also buy generic golf balls. The manufacturers of generic golf balls do not engage in any advertising. Assume that the average total cost of producing Titleist and generic golf balls is the same.

Which producer has a stronger incentive to maintain quality control in the production of golf balls?

  1) Titleist
  2) a manufacturer of generic golf balls

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Joshua Stredder
Joshua StredderLv10
28 Sep 2019
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Related questions

Which of the following is a firm in a perfectly competitive market?

1) A local corn farmer

2) The Tennessee Valley Authority, a large electricity producer that serves areas of five states

3) Pizza delivery

4) A grocery store

5) Kate Spade, fashion designer Compare a perfectly competitive market with a monopolistically competitive market.

1-7 True or False

1) In the short run, a perfectly competitive firm can earn positive, zero, or negative profit depending on the market price of the firm's output.

2)In the model of the perfectly competitive firm, the firm's fixed costs are equal to its implicit costs of production.

3)Assume the market price is greater than average total cost at the perfectly competitive firm's profit-maximizing level of output. In this case, the firm is earning positive economic profits, which act as an incentive for new firms to enter the market.

4)Assume that at the current level of output, price equals marginal revenue, but is less than average total cost. So long as price is greater than average variable cost, the firm should continue to operate in the short run to minimize its losses.

5)The fact that a firm is a price-setter does not ensure it will make a positive economic profit in the short run and over time.

6)Barriers to entry serve to limit the number of firms that operate in a particular market and, as 11) such, reduce the amount of total profit earned in the market.

7)In the prisoner's dilemma game, each player's dominant strategy is also the Nash equilibrium.

14-17 Multiple Choice

14) Marginal revenue is equal to:
A) the change in P x Q due to a one unit change in output. B) the change in quantity divided by the change in price.

C) the change in price divided by the change in output. D) price, but only if the firm is a price searcher.

15) In order to maximize its profits, a price-taking firm should produce the level of output at which:

A) marginal revenue = marginal cost. B) total revenue = total cost.

C) variable revenue = variable cost. D) average revenue = average cost.

16) Assume that there is an improvement in the technology used by firms in a perfectly competitive industry that is initially in long-run equilibrium. In the short run this would cause:

A) cannot be determined with the information given. B) no change in the firm's economic profit.
C) a decrease in the firm's economic profit. D) an increase in the firm's economic profit.

17) Assume at the firm's profit-maximizing level of output P = AVC. In this case, the firm will be:

A) incurring an economic loss. B) earning a positive economic profit.

C) earning economic profit = 0. D) breaking even.

I have the following questions for my Managerial Economics course.

1.

A principal-agent problems occur when managerial decisions are not consistent with the firm's shareholders' interests.

A) True
B) False

2.

A firm making more than a normal profit may still be experiencing an economic loss.

A) True
B) False

3.

An inferior good is a good whose demand decreases as its prices decreases.

A) True
B) False

4.

Assuming that crude oil is an input to automobile tires as well as to gasoline, a reduction in the tariff on imported crude oil would likely result in an increase in the number of tires sold but tire prices may increase or decrease.

A) True
B) False

5.

Other things remaining unchanged, advertisement would likely make demand for a good more price elastic.

A) True
B) False

6.

The cross price elasticity demand for a good with respect to the price of a complementary good is negative.

A) True
B) False

7.

When the marginal product of labor is smaller than its average product, marginal cost will be smaller than average variable cost.

A) True
B) False

8.

With capital measured along the vertical axis and labor along the horizontal axis the slope of an isoquant is equal to the ratio between the price of capital over the price of labor.

A) True
B) False

9.

If the ratio between the price of labor and the price of capital (w/r) is smaller than the ration between the marginal product of labor and the marginal product of capital, the firm should hire more capital.

A) True
B) False

10.

Normally the ratio between the price of a variable input and the marginal product of that input is equal to marginal cost.

A) True
B) False

11.

When labor is a variable input the product of wage and marginal product of labor is equal to the profit-maximizing price.

A) True
B) False

12.

If the price falls below the average total cost the firm may not shut down in the short run.

A) True
B) False

13.

When a perfectly competitive firm is producing at its profit maximizing level of output, its MR is equal to price and its MC while it may or may not be making an economic profit.

A) True
B) False

14.

The price a profit maximizing monopoly charges is always greater than its marginal cost as well as it MR while it may not be greater than its ATC.

A) True
B) False

15.

As new firms enter a monopolistically competitive market, the demand faced by each competing firm becomes more inelastic.

A) True
B) False

16.

The long-run equilibrium of a monopoly is characterized by its price being equal to its MR but always greater than its ATC.

A) True
B) False

17.

A monopolistically competitive firm sets its price equal to its MR, while keeping it above MC.

A) True
B) False

18.

We say that the long-run equilibrium of a monopolistically competitive firm reflects excess capacity because its MC is not equal to its ATC.

A) True
B) False

19.

In a duopoly with a zero marginal cost, according to the Cournot model, at equilibrium the sum of the two firms' output would be more than 50 percent of the market demand at a zero price.

A) True
B) False

20.

In the kinked demand curve model it is assumed that the demand faced by an oligopoly is less elastic when it lowers the price but more elastic when it raises the price.

A) True
B) False

21.

A distinguishing characteristic of monopolistically competitive market is price discrimination.

A) True
B) False

22.

The general explanation for the relative price stability in an oligopolistic market is the existence of some degree of decision interdependency among the firms in the market.

A) True
B) False

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