Question

1. (Choose the best answer) In the long run a company will

A. Exit the market if price is below ATC

B. Enter the market if price is below AVC

C. Shutdown temporarily if price is below ATC

D. Shutdown temporarily if price is below AVC

2. In a competitive market which is true

A. p=mr=ar

B. p>mr

C. p<mr

D. p>ar

3. Patent and copyright laws are major sources of

A. government-created monopolies.

B. natural monopolies.

C. resource monopolies.

D. antitrust regulation.

4. Which is true in a monopoly

A. p>mc

B. p=mc

C. mr>mc

D. p<mr

Answer 1

1) Answer is A.

In long run if price is below ATC firm have to exit the industry because firm will be facing losses and can not sustain in long run with losses. in short run firm may continue if prices are above AVC. If price is less than AVC, firm will shut down temporarily in short run.

2) Answer is A. Price = MR = AR.

In perfect competition price , marginal revenue and average revenue will be equal all the time.

3) Answer is A. Government created monopolies.

Because government gives patents and copyrights and other companies can not produce those goods in which patents are issued. So it creates monopoly.

4) Answer is A. Price > Marginal cost

For monopolist price will be higher than both marginal revenue and marginal cost. And marginal cost and marginal revenue will be equal at profit maximising output.

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