Multiple Choice Answers

The least competitive industry would be one that has:
A. price leadership.
B. covert collusion.
C. overt collusion.
D. a cartel.

Which statement is true?
A. The monopolistic competitor always makes a profit in the short run.
B. The monopolistic competitor operates at peak efficiency.
C. Product differentiation takes place in the minds of the buyers.
D. Most consumers would prefer lower prices and less product differentiation.

Monopolistic competition differs from perfect competition only with respect to:
A. the number of firms in the industry.
B. product differentiation.
C. barriers to entry.
D. economies of scale.

In the long run in monopolistic competition:
A. most firms are making a profit.
B. the absence of entry barriers ensures that there are no profits.
C. economies of scale ensure that there are no profits.
D. most firms are losing money.
Which statement is true?
A. Most firms in the United States are monopolistic competitors.
B. Most firms in the United States are perfect competitors.
C. Most consumers would prefer lower prices and less product differentiation.
D. The monopolistic competitor always makes a profit in the short run.

The closer the industry concentration ratio is to 100, the more likely it is that:
A. there are a reasonably large number of medium-sized firms.
B. this is an industry approaching perfect competition.
C. there is a small number of large firms.
D. price competition is being practiced.
Which is the least competitive?
A. Overt collusion
B. Covert collusion
C. Price leadership
D. All are equally competitive
The basis for monopolistic competition is:
A. product differentiation.
B. price.
C. economies of scale.
D. reaching a break-even point.

__________ is (are) legal in the United States.
A. Convert collusion
B. Cut throat competition
C. Cartels
D. Price fixing

A Herfindahl-Hirschman Index of 10,000 would mean there is (are) how many firm(s) in the industry?
A. 1
B. 10
C. 100
D. 1000
A firm produces at that output at which marginal cost = marginal revenue:
A. all of the time.
B. most of the time.
C. some of the time.
D. on rare occasions.

Which statement is true?
A. The marginal cost curve is used to determine if a firm is operating at peak efficiency.
B. A firm will always try to maximize its total revenue.
C. A firm’s long-run supply curve is identical to its entire marginal cost curve.
D. A firm is operating most efficiently when it is at its break-even point.

Which statement is true?
A. Price is calculated by dividing output by total revenue.
B. The lowest point on the short-run supply curve is at the break-even point.
C. When price exceeds marginal cost, a profit-maximizing firm will decrease production.
D. The marginal cost curve intersects the average total cost curve at the break-even point

To find the output at which the firm maximizes its profits you must know the firm’s:
A. ATC.
B. AVC.
C. AFC.
D. MC.

The monopolist and the perfect competitor differ in that:
A. they face different demand curves.
B. the monopolist does not always produce at an output in which MC = MR.
C. the monopolist is always a large firm.
D. the monopolist is more efficient.

Which statement is true?
A. The monopolist operates at the minimum point of her average total cost curve.
B. Once a monopoly is set up, it is impossible to dislodge it.
C. Monopolies are always large firms.
D. Price is always read off the demand curve.

Which statement is true?
A. All monopolists’ products have close substitutes.
B. Most firms in the United States are monopolies.
C. There are no monopolies in the United States.
D. A monopoly is a firm that produces all the output in an industry.

The monopolist is a(n):
A. imperfect competitor and has a horizontal demand curve.
B. imperfect competitor and has a downward-sloping demand curve.
C. perfect competitor and has a horizontal demand curve.
D. perfect competitor and has a downward-sloping demand curve.

Price is always read off the __________ curve.
A. MC
B. MR
C. ATC
D. demand

The most efficient output is found:
A. where MC and MR cross.
B. at the bottom of the ATC curve.
C. when the demand and MR curves are equal.
D. where the ATC and demand curves cross.