Homework ( Microeconomics)

Microeconomics

1- For a monopolistically competitive firm, marginal revenue 

A) and price are unrelated.

B) is less than the price.

C) equals the price.

D) is greater than the price.

 

 

2- Which of the following characteristics is not common to monopolistic competition and perfect competition? 

A) Entry barriers into the industry are low.

B) Firms take market prices as given.

C) Firms act to maximize profit.

D) The market demand curve is downward –sloping.

 

3-If price exceeds average variable cost but is less than average

total cost, a firm?

A) should further differentiate its product.

B) is making some profit but less than maximum profit.

C) should stay in business for a while longer until its fixed costs expire.

D) should shut down.

 

4- Assume price exceeds average variable cost over the relevant

range of demand. If a monopolistically competitive firm is producing at an output where marginal revenue is $23 and marginal cost is $19, then to maximize profits the firm should 

A) shutdown

B) increase output.

C) continue to produce the same quantity.

D) decrease output.

 

5- Brand management refers to

A) the efforts to maintain the differentiation of a product over time.

B) selling the right to use a brand name in a particular market

C) efforts to reduce the cost of production.

D) picking a brand name for a new product that will attract attention

6 – If buyers of a monopolistically competitive product feel the products of different sellers are strongly differentiated, then the demand for each seller’s product is 

A) perfectly inelastic.

B) relatively elastic.

C) relatively inelastic.

D) perfectly elastic.

 

7-

 

 

Above figure shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches. If the firm represented in the diagram is currently producing and selling Qa units, what is the price charged?

A) P0

B) P1

C) P2

D) P3

 

 

 

 

 

8- Above figure shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.. What is the area that represents the loss made by the firm? 

A) the area P2cdP3

B) the area P0adP3

C) the area P1bcP2

D) the area P0acP2

 

9- You have just opened a new Italian restaurant in your hometown where there are three other Italian restaurants. Your restaurant is doing a brisk business and you attribute your success to your distinctive northern Italian cuisine using locally grown organic produce. What is likely to happen to your business in the long run?

A) Your competitors are likely to change their menus to make their products more similar to yours.

B) If you continue to maintain consistent quality, you will be able to earn profits indefinitely.

C) Your success will invite others to open competing restaurants and ultimately your profits will be driven to zero.

D) If your success continues, you will be likely to establish a franchise and expand your market size.

 

10- In the long run, what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits?   

A) The demand curve will shift to the right and became more elastic.

B) The demand curve will shift to the right and became less elastic.

C) The demand curve will shift to the left and became less elastic.

D) The demand curve will shift to the left and became more elastic.