Questions:
Question 1. The marginal cost curve above the minimum average variable cost indicates points where the firm will realize an economic profit.
covers the area where a firm should shut down.
is equal to the firm's marginal revenue curve.
is the firm's short-run supply curve.
Question 2. All but which one of the following are characteristics of monopolistic competition?
a large number of sellers
a homogeneous product
easy entry
a large number of close substitutes
easy exit
Question 3. Anna Lopez sells timber in a perfectly competitive market. Incomes increase, and many people buy new homes; the market demand curve shifts to the right. In the short run, she should expect
the price of timber to remain unchanged.
profits to fall.
the price of timber to rise.
firms to leave the timber business.
Question 4. A firm in a monopolistically competitive industry faces a downward-sloping demand curve because the product is homogeneous.
the product is differentiated.
nonprice competition is missing.
barriers to entry are high.
Question 5. A firm in perfect competition is assumed to be a price leader.
a developer of new inventions.
small in size, relative to the size of the industry.
large in size, relative to the size of the industry.
Question 6. The greater the price elasticity of the demand curve that the firm faces in monopolistic competition, the higher the degree of competition in the industry.
the lower the degree of competition in the industry.
the fewer substitutes for the good produced.
the easier it is for the firm to raise its price.
the less sales the firm will gain from a price decrease.