Question : 17.2   Output and Price Decisions 1) For a monopolistically competitive firm, : 1226272

17.2   Output and Price Decisions

1) For a monopolistically competitive firm, the demand curve

A) is a horizontal line.

B) has a positive slope.

C) is vertical.

D) has a negative slope.

E) is the same as the marginal revenue curve.

2) The marginal revenue curve facing a monopolistically competitive firm

A) lies on its demand curve.

B) lies above its demand curve.

C) lies below its demand curve.

D) is equal to its price curve.

E) is parallel to its demand curve.

3) When a firm maximizes its profit, which of the following is correct for firms in monopolistic competition and perfect competition?

A) P = MC for both types of firms.

B) P = MR = MC for firms in perfect competition and P > MR = MC for firms in monopolistic competition.

C) MR = MC for firms in perfect competition and MR > MC for firms in monopolistic competition.

D) P > MR = MC for firms in both perfect competition and monopolistic competition.

E) P = ATC always for firms in both perfect competition and monopolistic competition.

4) Firms in monopolistic competition determine the profit-maximizing level of output by producing

A) the same output level as rivals do.

B) where average total cost is minimized.

C) at the point of minimum average fixed cost.

D) where marginal revenue equals marginal cost.

E) where price equals average total cost.

5) In monopolistic competition, profit is maximized by producing so that marginal revenue

A) equals price.

B) is negative.

C) equals marginal cost and which are less than price.

D) equals average total cost but not marginal cost.

E) equals marginal cost and equals price.

6) A firm in monopolistic competition makes its decisions on quantity and price by

A) taking price as given from the market and producing where MR = MC.

B) taking both price and quantity as given from the market.

C) producing where MR = MC and setting the price for this quantity from the demand curve.

D) taking quantity as given from the market and setting the price for this quantity from the demand curve.

E) producing where MR = MC and setting the price so that P = MR = MC.

7) To maximize profit, a firm in monopolistic competition will produce the quantity where marginal revenue

A) is greater than marginal cost.

B) equals zero.

C) is less than marginal cost.

D) equals marginal cost.

E) equals average total cost.

8) If a monopolistically competitive seller’s marginal cost is $3.56, the firm will increase its output if

A) its marginal revenue is less than $3.56.

B) its marginal revenue is equal to $3.56.

C) its marginal revenue is more than $3.56.

D) average total cost is less than $3.56.

E) Both answers A and D are correct.

9) If a monopolistically competitive seller’s marginal cost is $3.56, the firm will decrease its output if

A) its marginal revenue is less than $3.56.

B) its marginal revenue is equal to $3.56.

C) its marginal revenue is more than $3.56.

D) its average total cost is equal to $4.00.

E) Both answers B and D are correct.

10) If a monopolistically competitive seller’s marginal cost is $3.56, the firm will not change its output if

A) its marginal revenue is less than $3.56.

B) its marginal revenue is equal to $3.56.

C) its marginal revenue is more than $3.56.

D) its average total cost is equal to $3.56.

E) Both answers B and D are correct.