QUIZ 6B
1. A one-firm industry is known as:
A) monopolistic competition
B) oligopoly
C) pure monopoly
D) pure competition
2. A purely competitive seller is:
A) both a "price maker" and a "price taker."
B) neither a "price maker" nor a "price taker."
C) a "price taker."
D) a "price maker."
3. Price is constant or given to the individual
firm selling in a purely competitive market
because:
A) the firm's demand curve is downsloping.
B) of product differentiation reinforced by
extensive advertising.
C) each seller supplies a negligible fraction of
total supply.
D) there are no good substitutes for its product.
4. Marginal revenue is the:
A) change in product price associated with the
sale of one more unit of output.
B) change in average revenue associated with
the sale of one more unit of output.
C) difference between product price and
average total cost.
D) change in total revenue associated with the
sale of one more unit of output.
5. Pure monopolists may obtain economic
profits in the long run because:
A) of advertising.
B) marginal revenue is constant as sales
increase.
C) of barriers to entry.
D) of rising average fixed costs.
6. Patents:
A) give firms the exclusive right to produce or
control a product for 100 years.
B) discourage research and innovation.
C) are a source of monopoly.
D) are also called trademarks.
7. When a firm is on the inelastic segment of
its demand curve, it can:
A) increase total revenue by reducing price.
B) decrease total costs by decreasing price.
C) increase profits by increasing price.
D) increase total revenue by more than the
increase in total cost by increasing price.
8. Refer to the above two diagrams for
individual firms. Figure pertains to:
A) an imperfectly competitive firm.
B) a purely competitive firm.
C) an oligopolist.
D) a pure monopolist.
9. Refer to the above two diagrams for
individual firms. In Figure 1 line B represents
the firm's:
A) demand and marginal revenue curves.
B) demand curve only.
C) marginal revenue curve only.
D) average revenue curve only.
10. Refer to the above two diagrams for
individual firms. In Figure, line A represents
the firm's:
A) demand and marginal revenue curves.
B) demand curve only.
C) marginal revenue curve only.
D) total revenue curve only.
11. With respect to the pure monopolist's
demand curve it can be said that:
A) the stronger the barriers to entry, the more
elastic is the monopolist's demand curve.
B) price exceeds marginal revenue at all outputs
greater than 1.
C) demand is perfectly inelastic.
D) marginal revenue equals price at all outputs.
12. Suppose a firm in a purely competitive
market discovers that the price of its product
is above its minimum AVC point but
everywhere below ATC. Given this, the firm:
A) minimizes losses by producing at the
minimum point of its AVC curve.
B) maximizes profits by producing where MR =
ATC.
C) should close down immediately.
D) should continue producing in the short run,
but leave the industry in the long run.
Use the following to answer questions 13-14: 17. An increasing-cost industry is the result
Answer the next question(s) on the basis of the of:
following demand and cost data for a pure A) higher resource prices which occur as the
monopolist: industry expands.
B) a change in the industry's minimum efficient
scale.
C) X-inefficiency.
D) the law of diminishing returns.

18. The MR = MC rule:

A) applies only to pure competition.
B) applies only to pure monopoly.
C) does not apply to pure monopoly because
price exceeds marginal revenue.
D) applies both to pure monopoly and pure
competition.
13. Refer to the above data. The equilibrium
level of output will be: 19. An unregulated pure monopolist will
A) 4 units. maximize profits by producing that output at
B) 7 units. which:
C) 6 units. A) P = MC. B) P = ATC. C) MR = MC. D) MC =
D) 5 units. AC.

14. Refer to the above data. The monopolist 20. Economic profit in the long run is:
will realize a: A) possible for both a pure monopoly and a pure
A) profit of $8.50. competitor.
B) profit of $7.50. B) possible for a pure monopoly, but not for a
C) profit of $16. pure competitor.
D) loss of $14. C) impossible for both a pure monopolist and a
pure competitor.
15. A pure monopolist is producing an D) only possible when barriers to entry are
output such that ATC = $4, P = $5, MC = $2, nonexistent.
and MR = $3. This firm is realizing:
A) a loss that could be reduced by producing
more output.
B) a loss that could be reduced by producing
less output.
C) an economic profit that could be increased by
producing more output.
D) an economic profit that could be increased by
producing less output.

16. Which of the following statements is

correct?
A) The long-run supply curve for a purely
competitive increasing-cost industry will be
upsloping.
B) The long-run supply curve for a purely
competitive increasing-cost industry will be
perfectly elastic.
C) The long-run supply curve for a purely
competitive industry will be less elastic than the
industry's short-run supply curve.
D) The long-run supply curve for a purely
competitive decreasing-cost industry will be
upsloping.