1) Suppose two firms operate a duopoly-cartel. They decide they do not trust each other enough to form a cartel and act like a monopoly. They agree actingonlyin their self-interest is harms them both. By compromising, the price they sell their product as will be

Select one:

a.equal to the monopoly price

b.less than the monopoly price

c.equal to the perfectly competitive market price

d.more than the monopoly price

2) When total revenue is greater than total variable cost, a firm in a competitive market will

Select one:

a.shut down if average revenue exceeds marginal cost

b.shut down

c.continue to operate at a loss

d.continue to operate as long as average revenue exceeds average fixed cost

3) Profit-maximising firms enter a competitive market when:

Select one:

a.total revenue for existing firms in the market exceeds their total fixed costs

b.price exceeds average total cost for existing firms in the market

c.total revenue for existing firms in the market exceeds their total variable costs

d.average revenue is less than average total cost for existing firms in the market

4) Suppose a competitive market experiences an increase in demand. This induces an increase in producer costs. Which of the following is most likely to occur?

Select one:

a.The condition of free entry into the market will be violated

b.The long-run market supply curve will be upward sloping

c.Some firms will not be price-takers

d.Producer profits must fall in the long run

5) An important difference between natural monopolies and other forms of monopoly,is they are

Select one:

a.unable to make a profit without a government subsidy

b.not subject to regulations by the government

c.typically unconcerned about competition eroding their monopoly position

d.not subject to barriers to entry

6) Suppose a monopoly changes changes its pricing strategy. It now uses a price-discrimination strategy. This will cause

Select one:

a.the consumer surplus to increase

b.the output sold to increase

c.the deadweight loss to increase

d.the profit to decrease

7) Economic losses in a monopolistically competitive market are

Select one:

a.only possible of collusion between firms cannot be maintained

b.a signal to some incumbent firms to exit the market

c.a signal for new firms to enter the market

d.are never possible in the short run

8) The only way a cartel is able to maintain its market power is if:

Select one:

a.the government uses competition laws to break-up the cartel

b.the product has an inelastic demand curve

c.the product has a horizontal demand curve

d.all the cartel members continue to cooperate