Question

1. MR = MC=P holds for
A. all firms
B. monopoly       
C. monopolistic competition       
D. perfect competition

2. Consumer's surplus is      
A. demand price plus equilibrium price       
B. supply price above market price      
C. demand price plus supply price       
D. demand price less equilibrium price

3. In the short run, a monopolist may
a. attract other firms into the industry
b. upgrade technology      
c. incur loss
d. charge the lowest price possible to attract buyers

4. In both monopolistic competition and oligopoly market structures
a. firms may enter and exit the industry easily
b. consumers perceive differences among the products of various competitors
c. economic profits may be earned in the short run and long run
d. producers collude tacitly

Answer 1

1.Ans: D. perfect competition

Explanation:

Under perfect competition , the profit maximizing condition is where P = MR = MC.

In perfect competition , there is an unique price determined by the industry.

This condition is not applicable in other market structur becuase there is no unique price in these markets .

2.Ans:D) demand price less equilibrium price

Explanation:

Consumer surplus = Consumer's willingness to pay - Actual price paid by the consumer

Consumer surplus is represented by the area below the demand curve and above the equilibrium price.

3.Ans: d ) charge the lowest price possible to attract buyers.

Explanation:

In the short run, a monopolist may increase total revenue by charging lower price.

4.Ans: b) consumers perceive differences among the products of various competitors

Explanation:

In both monopolistic competition and oligopoly market structures , all firms are producing or selling differentiated products which have close substitutes. So consumers perceive differences among the products of various competitors in these market structure.