QUESTION 1 Price discrimination refers to O selling a product at different prices, with the price difference being unrelated to differences in marginal cost. O selling a product at different prices according to the differences in marginal cost of providing it to different consumers. O charging the same prices to all consumers but selling them different quantities. O a deliberate effort on the part of a monopoly producer to confuse consumers. QUESTION 2 Price MC 0' 02 03 Quantity/time Refer to the above figure. The firm is currently producing at Q 2. The firm should O shut down. O reduce production. O increase production. O leave production as it is. QUESTION 3 If the marginal cost curve of all identical firms in a perfectly competitive industry are horizontal at the same per-unit cost, then the market's consumer surplus equals the area O above the demand curve and beneath the marginal cost curve. O above the demand curve. O below the marginal cost curve. C) beneath the demand curve and above the marginal cost curve. QUESTION 4 Legal or governmental restrictions that give monopolistic advantages to a firm include all ofthe following EXCEPT O environmental protection. O franchises. O patents. O exclusive ownership of an unimportant resource. QUESTION 5 Quantity of Output The profit-maximizing price and quantity established by a perfectly competitive firm in the above gure are C) Q1 units of output and a price of P5. O Q4 units of output and a price of P4. O Q1 units of output and a price of P1. O 03 units of output and a price of P3. QUESTION 6 If a monopolist produces to a point at which marginal revenue is less than marginal cost then C) the firm should increase output. O the firm should reduce output. 0 the firm is maximizing prots. 0 we do not know if the firm should increase or reduce without more information. QUESTION 7 A patent on a product gives a firm 0 protection from having the invention copied or stolen for a period of 20 years. O the power to impose a tariff on a competing product. O excessive profits in the long run. O economies of scale in producing the product. QUESTION 8 Which of the following conditions is TRUE for a monopolist? 0 MR MR. 0 P > MC. 0 MR = MC. QUESTION 15 Which of the following is LEAST likely to be able to regularly engage in price discrimination? O a farmer 0 an airline O a producer of copyrighted computer software O a university QUESTION 16 A price-discriminating monopolist with two markets will equate O price and marginal revenue in each of the two markets. 0 marginal revenue and marginal cost in each of the two markets. 0 the prices of two markets. 0 average revenue and marginal revenue between the two markets. QUESTION 17 A monopolist is producing at an output level at which ATC = $5, P = $6, MC = $4, and MR = $3. We can conclude that O economic profit could be increased by producing more. O the firm is earning $10 in economic prots. O economic profit could be increased by producing less. O economic profit cannot be increased. QUESTION 18 If marginal cost is constant, what happens to a market if it alters from perfect competition to monopoly without any change in the position of the market demand curve or any variation in costs? O Consumer surplus increases, and the previously existing deadweight loss increases. 0 Consumer surplus decreases in size, and a deadweight loss is created. O Consumer surplus increases, and the previously existing deadweight loss decreases. 0 Consumer surplus is eliminated, and an equalsized deadweight loss is created. QUESTION 19 A monopolist faces O the market demand curve. C) a perfectly elastic demand curve. O a two-tiered demand curve. C) a perfectly inelastic demand curve. QUESTION 20 l2 I4 16I7 Quantity In the above gure, the break-even output and price is O $10 and 17. O $11 and 16. O $13 and 14. O $9 and 14. QUESTION 21 If different markets for a product produced by a monopolist can be separated and if the elasticity of demand differs between the two markets, then the monopolist will O sell the product in only one of the markets with inelastic demand curves. Q be able to make higher prots by using price discrimination. O go out of business. O charge a single price in all markets. QUESTION 22 lfthe price elasticity of demand for US. automobiles is higher in Europe than it is in China, and transport costs are zero, a price- discriminating monopolist would charge O a higher price for autos in China than in Europe. O a less profitable price for autos in China than in Europe. O a lower price for autos in China than in Europe. O the same price for autos in China as in Europe. QUESTION 23 Price Quantityr $19 11 18 12 17 13 16 1-1 15 15 14 16 Given the data in the above table, what is the marginal revenue when the 13th unit is sold? C) $7.00 C) $5.00 C) $1.00 C) $3.00 QUESTION 24 Which of the following is NOT an example of price discrimination? O Pharmaceutical companies charge customers living in wealthier countries higher prices than for identical drugs in poorer nations. O breakfast cereal makers sending coupons to select buyers O a hard cover book selling for more than the same book in electronic form O student discount at a local movie theater QUESTION 25 The price elasticity of demand for a good produced by a monopolist O is always inelastic since the demand curve slopes down. O does not equal zero because there will always be some substitutes, however imperfect they may be. O equals zero as long as the good has no close substitutes. C) does not equal zero because every good has at least one good substitute for it. QUESTION 26 All ofthe following are advertisement methods EXCEPT O direct marketing. O mass marketing. O indirect marketing. O interactive marketing. QUESTION 27 If a monopolistically competitive firm selling an information product engages in marginal cost pricing, it will O lower costs. O fail to earn sufficient revenues to cover its xed costs. O break even. O earn additional profits. QUESTION 28 Which is NOT a characteristic of monopolistic competition? 0 small share of market to each firm 0 independence of each firm's decisions 0 lack of collusion among firms O few firms in the industry QUESTION 29 MC 14 ATC D - N W A U O N OOOO-NO MR 0 00 1300 1400 1200 In the above figure, this profit-maximizing monopolistic competitive firm will realize an economic profit of O $2, 100. O -$1,400. O $700. O $1,400.QUESTION 30 In the long run, both monopolistically competitive and perfectly competitive firms attain O zero economic profits. O lowest cost production. O productive efficiency. O positive economic profits. QUESTION 31 In the short run, the ATC curve and the AFC curve for information products are O downward sloping. O vertical. O upward sloping. O horizontal.QUESTION 32 Price ATC Quanlilynime Refer to the above figure. Economic prots for this firm are O negative. O zero. O positive. O undetermined without more information. QUESTION 33 In long-run equilibrium in a monopolistically competitive industry, a firm will O produce at a point to the left of the minimum point on its average total cost curve. O have a perfectly elastic demand curve. C) produce an output rate at which P = MC. O always earn an economic profit. QUESTION 34 A very high fixed cost and a relatively low marginal cost is associated with O every type of good or product. C) an experience good. O a persuasive good. O an information product. QUESTION 35 Direct marketing is O advertising targeted at specic consumers. O advertising that permits a consumer to follow up directly by searching for more information and placing direct product orders. O advertising intended to reach as many consumers as possible. Q advertising that targets a specific audience and allows the consumer to follow up directly by placing direct product orders usually through television or radio. QUESTION 36 Interactive marketing is O advertising intended to reach as many consumers as possible. Q advertising that targets a specific audience and allows the consumer to follow up directly by placing direct product orders usually through television or radio. O advertising that permits a consumer to follow up directly by searching for more information and placing direct product orders. O advertising targeted at specic consumers. QUESTION 37 Which of the following is the long-run outcome for monopolistic competition? O MR > MC. O P > ATC > MC. O P > ATC. O P = ATC. QUESTION 38 All of the following are assumptions of monopolistic competition EXCEPT O homogeneous product. O profit-maximizing behavior. O easy entry of new firms in the long run. O many buyers and sellers.QUESTION 39 Price Price MC MC ATC ATC D MR Quantity/time Quantity/time Panel A Panel B Price Price MC ATC D MR Quantity/time Quantity/time MR Panel C Panel D Refer to the above figure. Which panel does NOT represent a possible short-run situation for a monopolistically competitive firm? O Panel A O Panel B O Panel C O Panel DQUESTION 40 If firms in a monopolistically competitive industry are operating with positive economic profit, over time we would see 0 firms alter their advertising rates until they made at least normal profits. O some firms entering the industry, causing the market supply curve to shift to the right, lowering price. O some firms entering the industry, causing the demand curves of the existing firms to shift to the right. O some firms entering the industry, causing the demand curves of the existing firms to shift to the left. QUESTION 41 A monopolistically competitive firm maximizes profits when it 0 produces the quantity at which marginal cost equals marginal revenue and sets the price equal to the marginal revenue. O produces the quantity at which marginal cost equals the market price. O produces the quantity at which marginal cost equals marginal revenue and sets the price equal to the marginal cost. O produces the quantity at which marginal cost equals marginal revenue and uses the demand curve to determine the market price. QUESTION 42 In the long run, in a monopolistically competitive market, price will be O equal to MR. 0 equal to ATC. O greaterATC. O equal to MC. QUESTION 43 The above figure shows the situation ofa monopolistic competitor in the short run. The maximum economic prots ofthe firm equal 0 $50,000. 0 $30,000. O zero. 0 15,000. QUESTION 44 By promoting its brand name heavily, the monopolistically competitive firm O guarantees a short run prot. 0 signals its long-term intention to stay in the industry. 0 signals its intention to leave the industry. O earns more profit in the long run. QUESTION 45 a F' 1 At its profit-maximizing output, the firm in the above figure incurs a total cost of production of O $7,000. 0 $6,300. O $3,900. 0 $9,000. QUESTION 46 Compared to perfect competition, a monopolistically competitive market will produce output and charge a price. O more; higher 0 more; lower O less; higher 0 less; lower QUESTION 47 If a firm produces an experience good, its mode of advertising will be 0 persuasive advertising. O direct advertising. 0 not to advertise. O None of these. QUESTION 48 All ofthe following are characteristics of a monopolistically competitive industry EXCEPT 0 sales promotion and advertising. O many firms. 0 homogeneous products. O low barriers to entry and exit. QUESTION 49 The major similarity between monopolistic competition and perfect competition is O price equals marginal revenue in each. C) both assume products are differentiated. O that both assume many buyers and sellers. O the shape of the demand curve. QUESTION 50 In the long run, monopolistic competitive firms are considered to be operating inefficiently because their O economic profits are positive. O marginal costs are rising. O economic profits are zero. O average total costs are not at a minimum