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Micro: Imperfect Competition Review
Test Description: A unit review of Imperfect Competition
Instructions: Answer all questions to get your test result.
1) Non-price competition refers to:
A
Price increases by a firm that is ignored by its rivals.
B
Competition between products of different industries, for example, competition between aluminum and steel in the manufacture
C
Advertising, product promotion, and changes in the real or perceived characteristics of a product.
D
Price wars resulting from a breakdown in price leadership.
2) Economic analysis of a monopolistically competitive industry is more complicated than that of pure competition because:
A
The number of firms in a monopolistic competitive industry is larger.
B
Of product differentiation and consequent advertising activities.
C
Monopolistically competitive producers use strategic pricing strategies to combat rivals.
D
Monopolistically competitive firms realize economic profits in the long run.
3) Excess capacity refers to the:
A
Fact that most monopolistically competitive firms encounter diseconomies of scale.
B
Amount by which actual production falls short of the minimum ATC output.
C
Fact that entry barriers artificially reduce the number of firms in an industry.
D
Fact that firms produce more than the socially optimal output.
4) A perfectly price discriminating pure monopolist:
A
Produces where MR=MC.
B
Produces less output than a non-price discriminating monopoly.
C
Charges a price which equals the buyer's marginal cost.
D
Produces the same output as a perfectly competitive industry.
5) Product differentiation is a key characteristic of:
A
All firms that make economic profit in the long run.
B
Monopolistically competitive markets only.
C
Purely competitive markets only.
D
Monopoly markets only.
6) The pure monopolist's demand curve is relatively elastic:
A
At all points where the demand curve lies above the horizontal axis.
B
In the price range where total revenue is declining.
C
In the price range where marginal revenue is negative.
D
In the price range where marginal revenue is positive.
7) When a monopolistically competitive firm is in long-run equilibrium:
A
Marginal revenue equals marginal cost and price equals average total cost.
B
They are productively efficient.
C
Production takes place at minimum ATC.
D
There is normal profit and price equals marginal cost.
8) 24. The demand curve in a perfectly competitive firm is ________; while the demand curve for a monopoly is ________.
A
Perfectly inelastic; perfectly elastic
B
Relatively inelastic; relatively inelastic
C
Down sloping; perfectly inelastic
D
Perfectly elastic; down sloping
9) 20. Suppose you find that the price of your product is less than minimum AVC. You should:
A
Close down because, by producing, your losses will exceed your total variable costs.
B
Minimize your losses by producing where P = MC.
C
Maximize your profits by producing where P = MC.
D
Close down because total revenue exceeds total variable cost.
10) 3. The marginal cost curve for a firm is representative of which curve for an industry?
A
Diseconomies of scale.
B
Demand.
C
Supply
D
Equilibrium.
*select an answer for all questions
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