Question 1: Which of the following is true of a profit-maximizing monopolist firm?

1) It has no incentive to minimize its costs

2) It sets price equal to marginal cost

3) It chooses a production level higher than that which is socially optimal

4) It chooses a production level on the elastic portion of the demand curve

5) It chooses a production level such that marginal revenue is greater than marginal cost

Question 2: In which of the following market structures do firms maximize profits by producing at the point where price is equal to marginal cost?

I. Perfect competition

II. Monopoly

III. Oligopoly

IV. Monopolistic competition

1) I

2) II

3) II and III

4) I and IV

5) I, II, III, and IV