1.

(04.01 MC) The government of a small country is trying to encourage competition in the market for product X and offers a significant per-unit subsidy. However, it fails to incentivize an increase in competition. Which of the following could explain this scenario? (2 points)

	The price elasticity of demand is very high.
	A per-unit subsidy does not change output decisions.
	No firm in the industry has market power.
	The firms in the market are selling indistinguishable units of product X.
	There are insurmountable barriers to entry into the market.

2.

(04.01 MC) Verslas is a firm operating in a monopolistically competitive market. It is currently maximizing profit with an output of 1,200 units and a price of $5. Based on this information, which of the following statements must be true? (2 points)

	Verslas could not sell more units by lowering its price.
	Verslas is earning normal profit.
	Verslas is earning $3,600 in profit.
	Verslas has a marginal revenue less than $5.
	Verslas has a marginal revenue greater than $5.

3.

(04.02 MC) A monopolist is forced to lower its price in order to sell another unit of its product. This describes the problem of (2 points)

	persistent economic profits
	market power
	diseconomies of scale
	economies of scale
	market discrimination

4.

\f$22 MC $20 $18 $16 $14 $12 Price $10 $6 $4 Demand $2 MR 10 20 30 40 50 60 70 80 90 Quantity 100Price MC ATC MR Q1 Quantity