Label each of the following statements as true/false.

1) Economies of scale is a source of monopoly price setting power.
2) In a monopoly market there are high barriers to entry, but in a competitive and oligopoly market there are low barriers to entry.
3) In a competitive market and an oligopoly market firms sell differentiated products.
4) At the long-run market equilibrium, firms in monopoly market can earn positive profit and firms in a competitive market must earn zero profit.
5) A firm in any market will maximize profits by setting quantity such that marginal cost is equal to marginal revenue.
6) Firms in monopoly and oligopoly markets have price-setting power.


Ans: 1) Natural monopoly is when it is good to have single seller. As only single seller can provide goods and services at lower prices due to economies of scale.
True.
2) There arr less or no barrier to entry in perfect competition and monopolistic competition. But there are high barrier to entry in oligopoly and monopoly.
False.
3) In perfect competition and oligopoly, firms sell homogeneous products.
False.
4) There is ease of entry and exit in competitive markets, so, firms will always earn zero economic profit in long run. But there are very high barriers in monopoly, so it can earn positive economic profit in long run.
True.
5) Firms in any market structure maximises profit by selling quantity where MR and MC are equal.
True.
6) Only competitive market firm is price taker, others are price makers.
True.

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