Question

PART I- TRUE-FALSE QUESTIONS

Following 15 questions are True-False Questions. Write ‘T’ for True and ‘F’ for False in the True / False Answer Box. Each question carries ‘2’ mark.

1. Excess capacity characterizes firms in monopolistically competitive markets, even in situations of long-run equilibrium.

2. A competitive market will typically experience entry and exit until accounting profits are zero

3. A monopolist produces an efficient quantity of output but it is still inefficient because it charges a price that exceeds marginal cost and the resulting profit is a social cost.

4. When oligopolists collude and form a cartel, the outcome in the market is similar to

   that generated by a perfectly competitive market.

5. Cooperation is easily maintained in an oligopoly because cooperation maximizes each

   individual firm's profits.

6. There is a constant tension in an oligopoly between cooperation and self-interest

   because after an agreement to reduce production is reached, it is profitable for each

   individual firm to cheat and produce more.

7. Larger cartels have a greater probability of reaching the monopoly outcome than do

   smaller cartels.

8. A natural monopoly is a monopoly that uses its ownership of natural resources as a

   barrier to entry into its market.

9. If all of the oligopolists in a market collude to form a cartel, total profit for the cartel

   is less than that of a monopolist.

10. The price and quantity generated by Nash equilibrium is closer to the competitive

    solution than the price and quantity generated by a cartel.

11. 3

12. When firms cooperate with one another, it is generally good for society as a whole.

13. Both monopolists and monopolistically competitive firms DO NOT produce the quantity at which marginal revenue equals marginal cost and then use the demand curve facing the firm to determine the price consistent with that quantity.

14. In the long run, a monopolistically competitive firm charges a price that exceeds average total cost.

15. Universities charge different levels of tuition to poor and wealthy students. This is the example of Deadweight loss but not price discrimination.

16. Firms that sell highly differentiated consumer products are more likely to spend a large percentage of their revenue on advertising.

Answer 1

Note: I am solving first four parts. Kindly upload rest part as a separate question