Question 1
 
At its profit-maximizing output, the firm in the above figure incurs a total cost of production of
Answer

a.
$7,000.
 

b.
$9,000.
 

c.
$6,300.
 

d.
$3,900.
 
4 points
Question 2
 
Product differentiation always exists in
Answer

a.
perfect competition.
 

b.
monopolistic competition.
 

c.
oligopoly.
 

d.
monopoly.
 
4 points
Question 3
 
Suppose Chase Manhattan Bank announces an increase in the prime rate it charges, and by the end of the day, all the other banks in New York have matched the increase. This is an example of
Answer

a.
entry-deterring pricing.
 

b.
price leadership.
 

c.
overt collusion.
 

d.
government-inspired cartelization.
 
4 points
Question 4
 
A monopolistically competitive firm finds its profit-maximizing rate of output by equating
Answer

a.
the marginal revenue of advertising with the marginal cost of advertising.
 

b.
average revenue and average total cost.
 

c.
price and marginal cost.
 

d.
marginal revenue and marginal cost.
 
4 points
Question 5
 
The market structure of perfect competition is when
Answer

a.
there are a small number of interdependent firms that constitute the entire market.
 

b.
there is a single producer of a product.
 

c.
there are many producers of a differentiated product.
 

d.
there are many producers of a homogeneous product.
 
4 points
Question 6
 
In which market structures does a firm have at least some ability to set the market price?
Answer

a.
Perfect competition and monopolistic competition.
 

b.
Monopolistic competition and oligopoly.
 

c.
Oligopoly and monopoly.
 

d.
Monopolistic competition, oligopoly and monopoly.
 
4 points
Question 7
 
The percentage of all sales contributed by the leading four or leading eight firms in an industry is known as
Answer

a.
a horizontal merger.
 

b.
a vertical merger.
 
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