CHAPTER 7 : DETERMINANT OF OUTPUT LEVEL AND MARKET PRICE STRUCT

1. A perfect competitive firm can maximize profits when output is produced at a level where

• marginal revenue is equal to average cost.

• marginal revenue is equal to average fixed cost.

• marginal revenue is equal to marginal cost.

• marginal revenue is equal to average variable cost.

Average revenue for a monopoly is

• less than price

• equal to marginal revenue

• less than marginal revenue

• greater than marginal revenue

A monopolistically competitive firm can be identified by the fact that

• it is making abnormal profit in the long run

• it will increase price to increase profit

• its average revenue equals marginal revenue

• there are other firms in the industry producing close substitutes goods

Which of the following statements is FALSE of an oligopolistic firm?

• It faced a kinked demand curve.

• It is independent of others’ actions.

• It has influences over the market price

• It maximizes profit at the point where the marginal revenue equal to marginal cost.

The profit-maximizing price charged for goods produced is RM16. The intersection of the marginal revenue and marginal cost curves occurs when the output is 10 units and marginal cost is RM8. The average cost for 10 units of output is RM6.

Compute the firm monopolist's profit under these conditions.

• RM60

• RM80

• RM100

• RM160

Show which of the following as an example of a barrier to entry in a monopoly market?

• Johnny obtained a copyright for the song he wrote and recorded

• Lily offered free samples of her latest flavored coffee drink to entire customers to buy a cup

• Mark charges a lower price to students than to faculty for his printing services

• Brian charges a higher hourly price to business students than to liberal arts students for his economics tutoring

If the equilibrium production level of the firm is 1,900 units, calculate the firm's profit

• RM19,000

• RM10,000

• RM9,500

• RM9,800

Assume that a perfectly competitive firm increases the production from 10 units to 11 units. If the market price is RM20 per unit, total revenue for 11 units is

• RM20

• RM200

• RM210

• RM220

They are the characteristics of the monopoly market EXCEPT:

• Producer is single

• No substitutes goods

• There are restriction in the market

• The market is always profitable

If a perfectly competitive firm is confronted with an equilibrium price of RM5, its marginal revenue

• may be either greater or lesser than RM5

• will also be RM5

• will be lesser than RM5

• will be greater than RM5