A monopoly sets a price of $50 per unit for an item that has a marginal cost of $10. Assuming profit maximization, the implicit demand elasticity is A) -0.2. B) -0.8. C) -1.25. D) -5.0. ANSWER C
Date: September 9th, 2020
If a firm is operating at an output level where losses are minimized, the firm A) has no incentive to stay in the industry. B) is better off exiting the industry. C) is maximizing profits. D) will shut down. ANSWER C
Date: September 9th, 2020
The more elastic the demand curve, a monopoly A) will have a larger Lerner Index. B) will face a lower marginal cost. C) will earn more profit. D) will lose more sales as it raises its price. ANSWER D
Date: September 9th, 2020
If transaction costs are high, then it is more likely a firm’s demand curve is downward sloping. Indicate whether the statement is true or false ANSWER True . Transaction costs increase the costs for consumers to find a new firm. Thus, high transaction costs allow a firm to charge more than others.
Date: September 9th, 2020
If a firm makes zero economic profit, then the firm A) has total revenues greater than its economic costs. B) must shut down. C) can be earning positive business profit. D) must have no fixed costs. ANSWER C
Date: September 9th, 2020
In a competitive market where the elasticity of the market demand curve is -2, the elasticity of the supply curve is 1, and an individual firm faces a residual demand curve with an elasticity of -98. What happens to the individual firm’s residual demand curve when the number of firms serving this market declines? A) […]
Date: September 9th, 2020
How can the market demand for a product be inelastic but the demand for a particular firm is elastic? A) There is no advertising. B) There is a sufficiently large number of sellers. C) There is only one or two sellers. D) Buyers do not have complete information. ANSWER B
Date: September 9th, 2020
The model of perfect competition is valuable for A) prediction. B) comparison to other markets. C) Either A or B D) None of the above. ANSWER C
Date: September 9th, 2020
A market is perfectly competitive even if firms have the ability to set their own price as long as the price difference reflects differences in the product. Indicate whether the statement is true or false ANSWER False. If the market is perfectly competitive, there are no differences in the product.
Date: September 9th, 2020
Many auction sites, such as eBay, provide a reputation score by which previous customers can rate a seller. Which of the following characteristics of a competitive market is this policy trying to emulate? A) There is freedom of entry and exit. B) There are very low transaction costs. C) There are only one or two […]
Date: September 9th, 2020
