Managerial Economics Questions

Suppose a monopoly is producing at a level of output where marginal revenue equals marginal cost. If the monopolist reduces output, it: a. will increase profitsb. can charge a higher price and it will increase profitsc. can charge a higher priced. will decrease marginal revenue

The profit-maximizing rule MR=MC isa. not followed by a monopoly because it would reduce economic profit to zerob. followed by all types of firmsc. followed by a monopoly but not a perfectly competitive firmd. followed by a perfectly competitive firm but not by a monopoly

Microsoft and its operating system are often cited as an example of a company that grew into a monopolist through:a. patentsb. large economies of scalec. network externalitiesd. ownership of a resource

A firm that faces a downward-sloping demand curve is a a. price-setterb. quantity-maximizerc. price-takerd. quantity-taker

The model of monopolistic competition can characterize the market for plumbing services in a city. This market is initially in long-run equilibrium, but there is an increase in demand for plumbing services. We expect that in the long run:A. New firms will enter the plumbing marketB. There will be a short-run increase in the number of firms, but then the number will return to its original level.C. Firms will shut down, but they will not leave the industryD. Firms will leave the plumbing market

The main characteristic that distinguishes monopolistic competition from perfect competition is:A. Many firmsB. Differentiated productsC. Easy entry and exitD. That in perfect competition, to maximize profits, a firm will produce where MR=MC

In the short run, a monopolistically competitive firm produces at the optimal level of output and is earning positive economic profits. Which of the following describes how the firm will adjust in the long run? A. The entry of new firms shifts the firm's marginal cost and average cost curves downward, decreasing the firm's level of output and the price the firm can charge until price equals average total cost.B.The exit of firms shifts the firm's demand and marginal revenue curves rightward, increasing the firm's level of output and the price the firm can charge until price equals average total cost.C.The entry of new firms shifts the firm's demand and marginal revenue curves leftward, decreasing the firm's level of output and increasing the price the firm can charge until price equals average total cost.D. The entry of new firms shifts the firm's demand and marginal revenue curves leftward, decreasing the firm's level of output and the price the firm can charge until price equals average total cost.

Industries that are made up of many competing producers, each selling a differentiated product, and whose firms eventually earn zero economic profits in the long run areA. Perfectly competitiveB. OligopoliesC. Monopolistically competitiveD. Monopolies

Suppose a monopolistically competitive firm is producing the profit-maximizing level of output and is earning an economic profit in the short run. Then:A. Marginal revenue equals marginal costB. Price is less than average total costsC. Price is less than marginal costD. Marginal revenue is less than marginal cost

If monopolistically competitive firms are earning positive economic profits in the short run, then in the long run: A. Economic profits will be reduced to zeroB. Firms will leave the industryC. Economic profits will increaseD. The demand curves faced by existing firms will move to the right

A common example of monopolistic competition is the market for: A. Gas stationsB. Automobiles C. One-inch nails D. Oranges

For the monopolistically competitive wild-caught seafood market, the demand curve for any individual firm is ___, and there are ___ producers of seafood.A. Downward sloping; FewB. Upward sloping; ManyC. Downward sloping; ManyD. Vertical; Few

In monopolistic competition:A. There is free entry and exit in the long runB. Each firm produces a standardized productC. There are barriers to entryD. There are few producers

A monopolistically competitive firm has a downward-sloping demand curve for its product, primarily because: A. There are many sellers in the industryB. The firm sells a product distinct from products sold by competing firms.C. There exits no barriers to entry and exit in the long runD. The price is greater than the marginal revenue

Monopolistic competitors often hire a celebrity spokesperson to advertise their product. One explanation for why such advertising works is that:A. Celebrities encourage other firms to enter the industryB. The fact that the firm is willing to pay the large fees associated with celebrity advertising signals consumers that it is a major company and that it is therefore likely to have a reliable product.C. consumers assume that the celebrity has researched the product and that the claims being made on his or her behalf are true.D.celebrities are better informed about the relative merits of different products than the rest of us.

A monopolistically competitive firm's demand for its product is equal to Q = 160 - P, and its MC curve is equal to MC = 20 + 2Q. Its TC curve is as follows: TC = 20Q + Q2 + 20.A. Its demand curve will become more elastic as it dominates the market more. B. Its losses will fall and eventually become a positive economic profitC. Its economic profits will decrease to zero D. Other firms will not enter or exit the industry

In a long-run equilibrium , firms in a monopolistically competitive industry sell at priceA. Less than marginal costB. Greater than marginal costC. Less than marginal revenueD. Equal to marginal cost

Those who are critical of advertising argue that ita. Encourages competition through price comparisonb. Tends to make markets behave more like perfectly competitive marketsc. results in higher prices to consumersd. leads to a shortage of high-cost, high-quality goods

In a monopolistically competitive industry:A. To maximize profits, firms set MR=MC and people would be better off it output was reducedB. A firm maximizes profits when MR=MC yet P>MCC. Output could be increased without an increase in total costD. People would be better off if output was reduced

If a firm operating within monopolistic competition is producing a quantity that generates MC<MR, then the marginal decision rule tells us that profit A. Can be increased without decreasing productionB. Is maximized only if MC=PC. Can be increased by increasing productionD. Can be increased by increasing price