1. the Primary Goal of a Firm in a Capitalistic Market Is To
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Quiz 6 – KEY
1. The primary goal of a firm in a capitalistic market is to maximize profits.
2. The monopolist's marginal revenue curve is downward sloping and twice as steep as demand.
3. A firm will shut down if price is everywhere less than average variable cost
4. From the graph above, the amount of positive economic profits earned by this monopolist is illustrated by the area outlined by points
P2CFP3.
5. Which of the following is NOT a characteristic of a monopoly? A monopolist is a price-taker.
6. Which of the following conditions would prevent price discrimination? the inability to identify those customers willing to pay more
7. In the short run, a typically monopolistically competitive firm will earn all of the above are possible
8. The monopolistic competitor faces a downward-sloping demand curve and therefore is a price searcher.
9. A monopolistically competitive firm is producing at an output level in the short run where average total cost is $3.50, price is $3.00, marginal revenue is $1.50, and marginal cost is $1.50. This firm is operating with an economic loss in the short run.
10. The economic inefficiency of a monopolist can be measured by the deadweight loss.
11. Competition is legally prohibited when barriers to entry are artificial barriers.
12. From the above table, the profit-maximizing single-price monopolist should produce (this question requires some calculations) 5 units.
13. From the above table, the profit-maximizing single-price monopolist's maximum profit is (this question requires some calculations) $145.
14. In maximizing profits, a monopolist will charge a price that is less than marginal cost.
15. Which of the assumptions in the theory of perfect competition assures us that economic profit will be zero in the long-run? free entry and exit of firms in the market
16. The perfectly competitive firm produces at the output level where price equals marginal cost.
17. The firm may earn positive economic profits in the long-run if there are barriers to entry.
18. You notice that the price of butter rises and then falls. The best explanation for this is that: demand for butter increased causing price to rise, which attracted other firms to enter the market causing supply to increase, which caused the price to go back down.
19. A monopolistically competitive firm maximizes profits by producing at the point where marginal revenue equals marginal cost.