Question

Which of the following statements is true?

The motivation for rent seeking is not the same as the motivation for profit seeking.

Economic rent is a payment in excess of opportunity cost.

The deadweight loss triangle is not considered the graphic representation of one of the costs of monopoly; instead, it is one of the costs of not having a monopoly.

Rent seeking is almost always an irrational activity as far as the rent seekers are concerned.

a and d

The relationship between a monopolistic competitor's marginal revenue curve and its demand curve is that the

two curves coincide and are horizontal at the market price.

marginal revenue curve lies above the demand curve and the demand curve is horizontal at the market price.

marginal revenue curve lies below the demand curve and both are downward sloping.

two curves coincide and are downward sloping to the right.

marginal revenue curve lies above the demand curve and both are downward sloping.

The profit-maximizing monopolistic competitor produces where

price equals marginal cost and marginal revenue.

marginal cost equals marginal revenue, but not price.

price equals marginal revenue, but not marginal cost.

price equals marginal cost, but not marginal revenue.

The monopolistic competitive firm will most likely earn a normal profit in the long run because of

product differentiation.

many buyers and sellers.

easy entry and exit.

b and c

As a result of easy entry and exit in the monopolistic competitive market, in the long run one may find that

price equals minimum average total cost.

price equals average total cost.

price equals marginal cost.

price equals marginal revenue.

demand and marginal revenue are the same.

Answer 1

1. Economic rent is a payment in excess of opportunity cost
(It is a payment in excess of opportunity cost or transfer earnings.)

2. marginal revenue curve lies below the demand curve and both are downward sloping.
(Both are downward sloping and MR lies below D.)

3. marginal cost equals marginal revenue, but not price.
(It produces where MR = MC.)

4. b and c
(There are many buyers and sellers with free entry and exit.)

5. price equals average total cost.
(P = ATC in the long run.)