A market’s structure is described by A) the number of firms in the market. B) the ease with which firms can enter and exit the market. C) the ability of firms to differentiate their product. D) All of the above. ANSWER D
A horizontal demand curve for a firm implies that A) the firm is a monopoly. B) the market the firm is operating in is not competitive. C) the firm is selling in a competitive market. D) the products of that firm are very different from other firms’ products. ANSWER C
In a perfectly competitive market, A) firms can freely enter and exit. B) firms sell a differentiated product. C) transaction costs are high. D) All of the above. ANSWER A
If all conditions for a perfectly competitive market are met, A) firms face sunk cost when entering the market. B) firms’ demand curves are horizontal. C) the market demand curve is horizontal. D) the firms’ demand curves are downward-sloping. ANSWER B
A profit-maximizing monopolist A) is guaranteed to lose money because of a lack of competition. B) is not guaranteed to make a positive profit. C) is guaranteed to make a positive profit, hence the desire to be a monopolist. D) is guaranteed to make a non-negative profit, otherwise government would step in to assist. […]
Explain why in the case of economies of scope the production possibility frontier is bowed outward. What will be an ideal response? ANSWER With economies of scope a firm uses less resources if it produces 2 goods jointly instead of producing the 2 goods in two firms separately. This means that the firm can […]
Economists define a market to be competitive when the firms A) spend large amounts of money on advertising to lure customers away from the competition. B) watch each other’s behavior closely. C) are price takers. D) All of the above. ANSWER C
If the inverse demand function for a monopoly’s product is p = 100 – 2Q, then the firm’s marginal revenue function is A) -2. B) 100 – 4Q. C) 200 – 4Q. D) 200 – 2Q. ANSWER B
If the inverse demand curve a monopoly faces is p = 100 – 2Q, then profit maximization A) is achieved when 25 units are produced. B) is achieved by setting price equal to 25. C) is achieved only by shutting down in the short run. D) cannot be determined solely from the information provided. […]
If a pharmaceutical firm is researching ways to improve its heartburn medicine and discovers a technique that will improve its allergy medicine, one could conclude that economies of scope exist in that industry. Indicate whether the statement is true or false ANSWER True . Economies of scope imply that the cost of producing two […]