1 Saturn Unlimited sells vials of asteroid dust. At its current production level, its marginal revenue is lower than the demand curve. This means that 1) the firm is experiencing economic losses 2) the firm has market power 3) the firm is not producing at its profit-maximizing quantity 4) an increase in the firm's output will increase its profits 5) the firm is productively efficient Question 2 Koel is the single producer of home air conditioners in its rural market. The firm's monthly demand is described by the equation P = 5000 - 5Q, where P is the price and Q is the quantity of units sold. Which of the following must be true of Koel? 1) An increase in price decreases the quantity sold. 2) It is a natural monopoly. 3) A decrease in price decreases the quantity sold. 4) Higher levels of output bring in increasingly lower total revenue if demand is elastic. 5) Maintaining the current price decreases the quantity sold over time. Question 3 Which of the following characteristics are unique to the monopoly market structure? 1) Market power 2) Persistent economic profits 3) Marginal revenue beneath demand 4) Economies of scale 5) An insurmountable barrier to entry Question 4 A firm is the only supplier of sprockets. The allocatively efficient output of sprockets is 40 million units. Consumers would pay $6 per sprocket at that price level. The firm is producing 30 million sprockets. Which of the following statements must be true? 1) The firm is producing too much output. 2) The firm is charging more than the competitive price. 3) The firm is operating in a monopolistically competitive market. 4) The firm's marginal revenue is higher than its market demand. 5) The firm's average total cost is equal to price at its current output level. Question 5 A monopolist begins to engage in perfect price discrimination where previously it charged a single price for all its customers. Its profit would ________ quantity produced would ________, and deadweight loss would ________. 1) Increase; stay constant; disappear 2) Increase; increase; disappear 3) Increase; increase; increase 4) Decrease; decrease; increase 5) Decrease; decrease; decrease Question 6 A monopolistically competitive firm is in long-run equilibrium. Which of the following must be true? 1) The firm is earning positive economic profits. 2) The firm is allocatively efficient. 3) The firm is productively efficient. 4) The output quantity is where MC = D. 5) The product price = ATC. Question 7 A firm operating in monopolistic competition is maximizing its profit and earning negative economic profits. Which of the following must be true of its production? 1) The price is equal to average total cost at the quantity where marginal revenue equals marginal cost. 2) The price is less than average total cost at the quantity where marginal revenue equals marginal cost. 3) The price is equal to average total cost, and marginal revenue is less than marginal cost. 4) The price is greater than average total cost at the quantity where marginal revenue is equal to marginal cost. 5) The price is greater than average total cost at the quantity where marginal revenue is less than marginal cost. Question 8 What is the key difference between monopolistic competition and an oligopoly market? 1) In an oligopoly, the number of firms is so small they strategize their production interdependently. 2) In monopolistic competition, the marginal revenue is beneath the demand curve because of market power. 3) Oligopolies generally have a lower market concentration and a lower minimum efficient scale. 4) Monopolistically competitive markets have more significant barriers to entry into and exit from the industry. 5) Oligopolies see consistent economies of scale across their entire product demand. Question 9 In an oligopoly market, barriers to entry are ________ and the number of firms is relatively ________. 1) low; low 2) low; high 3) high; low 4) high; high 5) irrelevant; high