In a monopolistically competitive industry,
A. firms are small relative to the total market.
B. firms are large relative to the total market.
C. there is only one firm.
D. firms can be either large or small relative to the total market.
Answer: A
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Which of the following statements about a monopolistically competitive firm is TRUE?
A) A monopolistically competitive firm does not always equate marginal cost to marginal revenue because it uses other means to maximize profits. B) A monopolistically competitive firm maximizes profits by charging a price equal to marginal cost. C) A monopolistically competitive firm produces the quantity at the point at which the demand curve crosses the marginal cost curve. D) A monopolistically competitive firm maximizes profits when it produces the quantity at which marginal cost equals marginal revenue.
The market structure of oligopoly is when
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.
A newspaper story on the effect of higher milk prices on the market for ice cream contained the following:
"As a result [of the increase in milk prices], retail prices for ice cream are up 4 percent from last year. . . . And ice cream consumption is down 3 percent." Source: John Curran, "Ice Cream, They Scream: Milk Fat Costs Drive Up Ice Cream Prices," Associated Press, July 23, 2001. Based on the information given, what is the price elasticity of demand for ice cream? A) 0.75 (in absolute value) B) 1.33 (in absolute value) C) 12% D) We do not have enough information to calculate the elasticity.
Consider an output beyond the minimum point of a firm's short run average total cost curve. At this level of output the firm can use its ________ input at a lower average cost but only by using its ________ input at a higher average cost.
A. variable capital; fixed labor B. fixed capital; variable labor C. variable labor; fixed capital D. fixed labor; variable capital