test 3

Question 1

The requirement for profit maximization under perfect competition is

None of these is correct

Marginal Revenue should be greater than marginal cost

Marginal revenue should be equal to marginal cost

Marginal revenue should be less than marginal cost

Answer 1

Marginal revenue should be equal to marginal cost

Question 2

In the long run, a perfectly competitive firm will always have

None of these are correct.

negative above normal profits

Positive above normal profits

zero above normal profits

Answer 2

zero above normal profits

Question 3

If marginal revenue is greater than marginal cost, increasing output will

All of the above

Increase profits

reduce profits

have no impact on profits

Answer 3

Increase profits

Question 4

A monopolist’s marginal revenue curve is always

upward sloping

below its demand curve

above its demand curve

the same as its demand curve

Answer 4

below its demand curve

Question 5

The models of perfect competition and monopoly

are useful for establishing benchmarks to evaluate real world situations

all of the above

describe most real world markets

provide few insights into the real world

Answer 5

are useful for establishing benchmarks to evaluate real world situations

Question 6

The behaviour of decision makers in perfectly competitive and monopoly firms in similar in the following respect?

In both cases, profits are maximized by setting price equal to marginal cost

In both cases, profits are maximized by setting price equal to average cost

In both cases, profits are maximized by setting marginal cost equal to marginal revenue

All of the above

Answer 6

In both cases, profits are maximized by setting marginal cost equal to marginal revenue

Question 7

Compared to perfect competition, with a monopoly

price is greater and output is less

price and output are greater

price is less and output is greater

price and output are less

Answer 7

price is greater and output is less