Managerial Economics: A Problem Solving Approach
5th Edition
ISBN: 9781337106665
Author: Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher: Cengage Learning
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Chapter 9, Problem 2MC
To determine
The shape of the
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These are statements comparing monopoly with perfect competition. Which of the following statements is/are false? Select all that apply.
A. A a perfectly competitive industry faces a horizontal straight line demand curve whereas a monopoly faces a downward sloping demand curve.
B. A perfectly competitive firm faces a small fraction of the industry demand curve whereas a monopoly faces the entire market demand curve.
C. A perfectly competitive firm can only set quantities; a monopoly can set both price and quantity, although once it chooses a price (quantity), the other variable, quantity (price), is determined by the demand curve it faces.
D. A perfectly competitive equilibrium is efficient; a monopoly equilibrium is inefficient.
E. A perfectly competitive firm necessarily earns zero economic profit in a long run equilibrium; a monopoly typically earns a super-normal profit in a long run equilibrium.
Which of the following is true in the long run for both perfect competition and monopoly?
1
Firms cannot earn economic profit in the long run.
2
Individual firms have no ability to control the price of their output but must accept the market price.
3
Firms go out of business in the long run if total revenue cannot cover total cost.
4
Firms can earn economic profit in the long run.
Use the cost and revenue data to answer the questions.
Quantity Price Total Revenue Total Cost
10
90
15
80
20
70
25
60
30
50
35
40
900
1200
1400
1500
1500
1400
675
825
1025
1250
1500
1850
What is marginal revenue when quantity is 25?
What is marginal cost when quantity is 15?
If this firm is a monopoly, at what quantity will profit
be maximized?
If this is a perfectly competitive market, which quantity will
be produced?
$ 20
$
90
Incorrect
quantity: 6
Incorrect
quantity: 8
Incorrect
Chapter 9 Solutions
Managerial Economics: A Problem Solving Approach
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