ECO 204 Quiz 06

1. 1. For a firm in a perfectly competitive market, at the profit-maximizing quantity:

• MR = MC = P

• P> MR = MC

• MR = MC < P

• MR = P < MC

2. For a firm in a monopoly market, at the profit-maximizing quantity:

• MR = MC = P

• P > MR = MC

• MR = MC > P

• MR = P < MC

3. In a perfectly competitive market, a firm will shut down in the short run when:

• P < ATC

• P < TVC

• TR < TC

• TR < TVC

4. A perfectly competitive firm exits the market in the long run when:

• P < AVC

• P < TVC

• P < ATC

• TC < TR

5. The supply curve of a perfectly competitive firm in the short run is

• the firm marginal cost curve

• the firm marginal revenue curve

• the firm marginal cost curve above its average variable cost

• the firm marginal cost curve above its average total cost

6. If a competitive firm is (i) selling 1,000 units of its product at a price of $9 per unit and (ii) earning a positive profit, then

• its total cost is less than $9,000

• its marginal revenue is less than $9

• its average revenue is greater than $9

• the firm cannot be a competitive firm since competitive firms can only earn zero profit

7. Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has

• less incentive to advertise than it would otherwise have

• less market power than it would otherwise have

• more control over the price of diamonds than it would otherwise have

• higher profits than it would otherwise have

8. Patent and copyright laws are major sources of

• natural monopolies

• resource monopolies

• antitrust regulation

• government-created monopolies

9. When a monopolist increases the amount of output that it produces and sells, the price of its output

• stays the same

• increases

• decreases

• may increase or decrease depending on the price elasticity of demand

10. Which of the following statements is true of a monopoly firm?

• A monopoly firm is a price taker and has no supply curve

• A monopoly firm is a price maker and has no supply curve

• A monopoly firm is a price maker and has a downward-sloping supply curve

• A monopoly firm is a price maker and has an upward-sloping supply curve