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5 Written questions

5 Matching questions

  1. Why does a monopoly continue to make profits in the long run while an industry in perfect competition cannot?
  2. In a perfectly competitive market where is equilibrium?
  3. Why is allocative efficiency not achieved in a monopoly?
  4. At what poin in a perfectly competitive mkt. are profits maximized in the shortrun?
  5. What are the four market models (structures?
  1. a Where marginal revenue is equal to marginal costs.
  2. b perfect (pure) competition, monopoly,monopolistic competition, oligopoly
  3. c In perfect competition if profits are being made other firms will enter the industry bringing prices down. In a monoply no new firms can enter due to barriers, therefore the monoply will continue to make profits.
  4. d P(what product is worth to consumers) > MC (what the resources used to make the product are worth)
  5. e Zero economic profits (normal rate of return) this is where MR=MC

5 Multiple choice questions

  1. the firm is earning zero economic profits and is covering explicit and implicit costs
  2. economies of scale, x-inefficiency, the need for monopoly preserving expenditures, and the VERY long-run prespective
  3. Normal rate of return
  4. shut down now
  5. Yes

5 True/False questions

  1. What does price regulation of natural monopolies NOT lead to?does not lead to shortages as long as price is above marginal cost


  2. In a perfectly competitive mkt. if (price)AR >AVC or equal to what should the firm do?continue business


  3. At what point on the ATC curve is equilibrium?At the lowest point on the ATC curve.


  4. If the monopolists reduces output, what will the price do?The price will fall.


  5. Where do monoplys set price?NO, because the monopoly will produce less so they can charge a higher price.


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