MULTIPLE CHOICE:

1. The equilibrium of supply and demand in a market

a. maximizes the total benefits received by buyers and sellers

b. minimizes costs incurred by consumers

c. maximizes the profits of producers

d. minimizes the expenditure of buyers

1. Firms are more likely to face competition when the good they produce is

a. in a market with legal barriers to entry

b. is unique

c. has a close substitute

d. is in a market with natural barriers to entry

MODIFIED TRUE OR FALSE (Provide the correct answer if FALSE)

1. The demand for a good is elastic if an increase in its price results in an increase in total revenue.
2. In the case of perfect competition, market supply and the market price will both remain constant if one firm increases its level of output.
3. For a monopoly, marginal revenue is higher than price.