Question:

The demand faced by a monopolistically competitive firm is

A.

perfectly elastic

B.

elastic

C.

unit elastic

D.

inelastic

Answer» b. elastic

Question:

For a firm with monopoly power

A.

Price equals MC

B.

Price is less than MC

C.

Price exceeds MC

D.

None

Answer» c. Price exceeds MC

Question:

A major source of monopoly power in a market is

A.

a low market elasticity of demand

B.

a high market price elasticity of demand

C.

aggressive rivalry between firms in a market

D.

the presence of many firms in a market

Answer» a. a low market elasticity of demand

Question:

At the shut-down point,

A.

P =AVC

B.

TR = TVC

C.

the total losses of the firm equal TFC

D.

all of the above.

Answer» d. all of the above.

Question:

The most liquid form of all assets is

A.

Bonds

B.

. Debentures

C.

Bill of exchange

D.

Currency notes

Answer» d. Currency notes

Question:

In the short-run, a competitive firm can earn

A.

Normal profit

B.

Super normal profit

C.

Loss

D.

Either A or B or C depending

Answer» d. Either A or B or C depending

Question:

Which of the following types of firms is likely to be a monopolistic competitor?

A.

A local telephone company

B.

An automobile manufacturer

C.

A restaurant

D.

All of the above

Answer» c. A restaurant

Question:

If P = Rs.10 at the point on the D curve where e = 0.5, MR is

A.

Rs.5

B.

Rs.0

C.

2Rs.1

D.

2Rs.10.

Answer» d. 2Rs.10.

Question:

Increase or decrease in the level of production by a monopolistically competitive firm have ——- impact on price and output decisionsof other firms

A.

Very significant

B.

Significant

C.

Small

D.

Negligible

Answer» d. Negligible

Question:

Suppose a competitive firm produces 100 units of X for a price of Rs.10 a unit. The firmis employing labour and capital such that the marginal physical product of labour and capital is 20 and 5 and the prices paid to labour and capital are Rs. 60 and Rs. 40 respectively. How would you characterize the firm

A.

the firm is in long-run equilibrium

B.

the firm is earning excess profits

C.

the firm should expand production

D.

the firm should contract production

Answer» c. the firm should expand production