1.A firm in monopolistic competition with a down-sloping demand curve

Multiple Choice

• does not have to worry about price competition, due to the nature of its demand curve.

• can use marginal analysis to help it maximize profits.

• will have to charge the market price, which is set by the intersection of industry supply and demand.

• could use marginal analysis to compare alternativesbut this would not help in pricing because this method focuses on selling one more unit and therefore ignores total profitability.

• could use average-cost pricing to consider a range of profitable prices.

2.Which of the following is an example of a variable cost for a producer?

Multiple Choice

• depreciation

• managers' salaries

• rent

• packaging materials

• property taxes

3.Break-even analysis can be useful for

Multiple Choice

• estimating future sales.

• setting the most profitable price.

• comparing pricing alternatives.

• relating assumed prices to demand estimates.

• creating a pricing solution.

4.What is one disadvantage of break-even analysis?

Multiple Choice

• It cannot be used to determine the break-even point in dollars.

• It is not helpful for evaluating what might happen to profits in different market environments.

• It does not consider the effect of price on the quantity that consumers will want.

• It is not helpful for evaluating alternatives.

• It is an extremely complicated method.