QUIZ 2

A perfectly competitive firm can be identified when

• There are other firms in the industry producing close substitute

• It is a market only for normal profit in the short run

• Its average revenue equals marginal revenue

• It experiences diminishing marginal returns

A condition needed for perfectly competitive industry to exist is that

• There are no obstacle to free the mobility of resources

• Buyers are able to influence the price of the commodity

• All units of a commodity are considered by buyers to be different

• Buyers discriminate in their purchases based on non-price factors

The demand curve for the product sold by a firm in a perfectly competitive market is

• Perfectly elastic

• Perfectly inelastic

• Relative, but not perfectly elastic

• Relative, but not perfectly inelastic

The demand curve for a firm which is also a demand curve for the market is only found in the market of

• Perfect competition

• Monopolistic competition

• Monopoly

• Oligopoly

Assume that a perfectly competitive firm increases 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

Profit maximising rule, MC=MR is followed by

• A monopoly, but not a perfectly competitive firm

• A perfectly competitive firm, but not a monopoly

• Both a monopoly and a perfectly competitive firm

• Neither a monopoly nor a perfectly competitive firm

Supernormal profits are guaranteed for

• A monopoly, but not a perfectly competitive firm

• A perfectly competitive firm, but not a monopoly

• Both a monopoly and a perfectly competitive firm

• Neither a monopoly nor a perfectly competitive firm

A monopoly firm will shut down and will not produce at the profit maximising quantity of output in the short run if

• Price is greater than marginal cost

• Price is less than marginal cost

• Price is less than average variable cost

• Price is greater than average total cost

Compared to the equilibrium price and quantity sold in a competitive market, a monopolist will charge a price and sell a quantity

• Higher ; larger

• Lower ; larger

• Higher ; smaller

• Lower ; smaller

If a monopoly practices price discrimination, it will

• Earn a smaller profit

• Earn less 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