Unit 6 Review 3

Which of the following is a reason cited for inefficiencies in monopolistically competitive industries?

• low prices

• zero profit in the long run

• low barriers to entry

• excess capacity

• price equal to marginal cost

Which of the following are ways that firms in an oligopolistic industry attempt to legally collude?

• product differentiation

• advertising

• price leadership

• nonprice competition

• game theory

An increase in which of the following will cause a firm’s marginal cost curve to shift upward?

• the price of a variable input

• the price of a fixed input

• the level of output

• the demand for the firm’s product

• availability of inputs

Which of the following is more likely to occur when there are high barriers to entry in an industry?

• The industry will be characterized by diseconomies of scale.

• The firm(s) in the industry will charge a price equal to average total cost

• The firm(s) in the industry are price takers.

• The firm(s) in the industry earn economic profits in the long run.

• The firm(s) are more likely to have a standardized product

When a perfectly competitive firm sells additional units of output, its total revenue will

• remain constant

• increase at a constant rate

• increase at a decreasing rate

• increase at an increasing rate

• decrease at an increasing rate

If regulators want to ensure that a natural monopoly produces the largest quantity of output that achieves normal profit, they will require:

• price equal to marginal cost

• price equal to average variable cost

• price equal to marginal revenue

• price equal demand

• price equal to average total cost