GMS 402 Practice Questions 6 - Competition Vs. Monopoly PDF

Global Management Studies GMS 402 (Introduction to Managerial Economics) Practice Questions 6 – Competition Vs. Monopoly Section A: 1. Which of the following industries most closely approximates the perfectly competitive model? (a) Automobile, (b) cigarette, (c) newspaper, or (d) wheat...

Global Management Studies GMS 402 (Introduction to Managerial Economics) Practice Questions 6 – Competition Vs. Monopoly Section A: 1. Which of the following industries most closely approximates the perfectly competitive model? (a) Automobile, (b) cigarette, (c) newspaper, or (d) wheat farming. 2. Given the supply of a commodity in the market period, the price of the commodity is determined by (a) the market demand curve alone, (b) the market supply curve alone, (c) the market demand curve and the market supply curve, or (d) none of the above. 3. Total profits are maximized where (a) TR equals TC, (b) the TR curve and the TC curve are parallel, (c) the TR curve and the TC curve are parallel and TC exceeds TR, or (d) the TR curve and the TC curve are parallel and the TR exceeds TC. 4. The best, or optimum, level of output for a perfectly competitive firm is given by the point where (a) MR equals AC, (b) MR equals MC, (c) MR exceeds MC by the greatest amount, or (d) MR equals MC and MC is rising. 5. At the shutdown point, (a) P= AVC, (b) TR = TVC, (c) the total losses of the firm equal TFC, or (d) all of the above. 6. The short-run supply curve of the perfectly competitive firm is given by (a) the rising portion of its MC curve over and above the shut-down point, (b) the rising portion of its MC curve over and above the break-even point, (c) the rising portion of its MC curve over and above the AC curve, or (d) the rising portion of its MC curve 7. When the perfectly competitive firm and industry are both in the long-run equilibrium (a) P = MR = SMC = LMC, (b) P = MR = SAC = LAC, (c) P = MR = lowest point on the LAC curve, or (d) all of the above. 8. When the Demand curve is elastic, MR is (a) 1, (b) 0, (c) positive, or (d) negative 9. The best, or optimum, level of output for the pure monopolist occurs at the point where (a) STC is minimum, (b) TR = STC, (c) TR is maximum, or (d) the TR and STC curves are parallel. 10. At the best, or optimum, level of output for the pure monopolist, (a) MR = SMC, (b) P= SMC, (c) P = lowest SAC, or (d) P is highest. 11. In the short run, the monopolist (a) breaks even, (b) incurs a loss, (c) makes a profit, or (d) any of the above. 12. If the monopolist incurs losses in the short run, then in the long run (a) the monopolist will go out of business, (b) the monopolist will stay in business, (c) the monopolist will break even, or (d) any of the above is possible. 13. The monopolist who is in (a) Short run equilibrium will also be in a long run equilibrium, (b) Long run equilibrium will also be in short run equilibrium, (c) Long run equilibrium may or may not be in short run equilibrium, or 1  (d) None of the above. 14. In the long run equilibrium, the pure monopolist (as opposed to the perfectly competitive firm) can make pure profits because of (a) blocked entry, (b) high selling prices, (c) low LAC costs, or (d) advertising. 15. The imposition of a maximum price at the point where the monopolist’s SMC curve intersects the D curve causes the monopolist to (a) break even, (b) incur losses, (c) make profits, or (d) any of the above. 16. The imposition of a per unit tax causes the monopolist’s (a) SAC curve alone to shift up, (b) SAC and SMC curves to shift up, because the per unit tax is like a fixed cost; (c) SAC and SMC curves to shift up, because the per unit tax is like a variable cost: or (d) none of the above. 17. Which form of monopoly regulation is most advantageous for the consumer? (a) price control, (b) lump-sum tax, (c) per unit tax, (d) all of the above three forms are equally advantageous. Section B: 18. A firm sells its product in a perfectly competitive market where other firms charge a price of $80 per unit. The firm’s total costs are C(Q) = 40 + 8Q + 2Q 2. (a) How much output should be firm produce in the short run? (b) What price should the firm charge in the short run? (c) What are the firm’s short run profits? (d) What adjustments should be anticipated in the long run? 19. You are manager of a firm that produces a product according to the cost function C(qi) = 100 + 50qi – 4qi2 + qi3. Determine the short run supply function if: (a) You operate a perfectly competitive business. (b) You operate a monopoly 2