Perfect Competition and Monopoly

Which of the following could attract new firm to join an industry?

• Normal profits

• Economic losses

• Economic profits

• Accounting profits

A firm operating in a perfectly competitive market will shut down when price is below the minimum of a(n) ____________.

• marginal cost curve

• average total cost curve

• average fixed cost curve

• average variable cost curve

A perfect competitive firm charges a price that is ____________.

• different to other firms

• higher than other firms

• lower than other firms

• similar to other firms

A firm faces a perfectly elastic demand curve, if _____________.

• MC = MR

• MR = AR

• AR = MC

• ATC = AVC

Which of the following describes a monopoly firm?

• Single seller

• Many sellers

• Many substitutes

• No barrier to entry

If a monopoly firm practices price discrimination the firm will _____________.

• earn smaller profit

• produce lower quantity than before price discrimination

• charge a higher price when demand is inelastic and a lower price when demand is elastic

• charge a higher price when demand is elastic and a lower price when demand is inelastic

Identify the profit maximizing level of output for this monopoly firm.

Identify the profit maximizing level of price for this monopoly firm.

Based on the following graph, calculate the total profit earns by this firm.

List two (2) characteristics of monopoly firm.