Question

Answer the next question(s) on the basis of the following demand and cost data for a specific firm

Demand Data			Cost Data
(1)Price	(2) Price	(3)Price	Total Output	Total Cost
$50	$35	2	2	$45
45	30	3	3	55
40	25	4	4	70
35	20	5	5	90
30	15	6	6	116
25	10	7	7	145
20	5	8	8	180

59. Refer to the above data. If columns 1 and 3 are this firm's demand schedule, the profit-maximizing price will be:

A. $30

B. $35

C. $40

D. $45

60. Which is true of pure competition but not of monopolistic competition?

A. There are barriers to entry

B. Long-run economic profits are zero

C. There are a large number of firms in the market

D. Long-run equilibrium occurs at the minimum point on the ATC curve

61. Which statement is true?

A. Monopoly will result in a higher price and a larger output than pure competition

B. Monopoly will result in a higher price and a larger output than monopolistic competition

C. Pure competition will result in a lower price and a higher output than monopolistic competition

D. Monopolistic competition will result in a lower price and a lower output than pure competition

64. The market structure in the local arts and crafts market example is:

A. Monopolistic

B. Oligopolistic

C. Purely competitive

D. Monopolistically competitive

65. Refer to the above graph. It best represents cost and demand conditions for a:

A. Monopolistically competitive firm in the short-run equilibrium

B. Monopolistically competitive firm in the long-run equilibrium

C. Purely competitive firm in the short run

D. Purely competitive firm in the long run

Answer 1

59.

C

Working note:

When price is 40,

Then,

MR = 40*4 - 45*3 = $25

MC = 70-55 = $15

Afterwards, the MR is less than MC, so profit maximizing price is $40.

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60.

B

In perfect competition, economic profit is zero in the long run, but it is the case of monopoly market.

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61.

C

Perfect competition has price and output at efficient level than in monopolistic market. So, price is low and quantity is high in perfect competition.

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64.

A

these local art and craft are differentiated products, So, it belongs to the monopolistic market.

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65.

A

It is a case of monopolistic competition in the short run, because firm is not producing at the lowest of ATC. It means that excess capacity left in the industry.