Morehead State University ECON 661 Quiz 9 SP 2015

Test Quiz 9

• Question 1

1 out of 1 points

Which of the following industries is most likely to represent the monopolistic competition market structure?

Answers: automobiles

tobacco products

restaurants

farm equipment

• Question 2

1 out of 1 points

The less elastic is the demand for a monopoly firm's product is, the greater is that firm's market power.

Answers: True

False

• Question 3

1 out of 1 points

An example of a monopoly would be

Answers: one of many U.S. wheat farmers.

one of the few U.S. auto makers.

AT&T cell phone service.

the local water company.

• Question 4

1 out of 1 points

Which market structure is characterized by the following characteristics?

i. a large number of firms compete

ii. each firm produces a differentiated product

iii. firms are free to enter and exit

Answers: perfect competition

oligopoly

monopolistic competition

monopoly

• Question 5

1 out of 1 points

In its effort to maximize economic profit, a firm characterized as a price setter must determine:

Answers: only the price it should charge.

only the quantity it should produce.

both the price it should charge and the quantity it should produce.

neither the price it should charge and the quantity it should produce as these are both determined by forces beyond the firm's control.

• Question 6

1 out of 1 points

A profit-maximizing monopolist will never operate in the portion of the demand curve with price elasticity equal to

Answers: -3.

-1.

-1/3.

None of the above—the price elasticity does not matter.

• Question 7

1 out of 1 points

If the inverse demand curve a monopoly faces is p = 100 - 2Q, and MC is constant at 16, then profit maximization

Answers:

is achieved when 21 units are produced.

is achieved by setting price equal to 21.

is achieved only by shutting down in the short run.

cannot be determined solely from the information provided.

• Question 8

1 out of 1 points

Compared to the purely competitive industry, a pure monopoly is able to use barriers to entry and maintain positive economic profits in the long run

Answers: True

False

• Question 9

1 out of 1 points

The diagram below represents cost conditions of Mary’s veterinary business. Using the information to answer the question below

Mary is the only veterinarian in a small town. To maximize her profit, Mary will choose to treat ________ animals per hour and charge ________ per customer in order to maximize profit.

Answers:

4; $50

4; $20

6; $30

8; $28

• Question 10

1 out of 1 points

What does monopolistic competition have in common with monopoly?

Answers: a large number of firms

a downward-sloping demand curve

the ability to collude with respect to price

mutual interdependence

• Question 11

1 out of 1 points

What happens to an incumbent firm's demand curve in monopolistic competition as new firms enter?

Answers: It shifts right.

It shifts left.

It becomes horizontal.

New entrants will not affect an incumbent firm's demand curve.

• Question 12

1 out of 1 points

In the long run, new firms will enter a monopolistically competitive industry:

Answers: provided economies of scale are being realized.

even though losses are incurred in the short run.

until minimum average total cost is achieved.

until economic profits are zero.