Question

1. A firm in any market structure will shut down production, producing zero output, if the market price: a)falls below the average variable cost. b)rises above the average variable cost. c)is greater than zero. d)is equal to average cost.

2. Which is a feature of the purely competitive market model? a)a very large number of small-sized firms exist in the relevant industry. b)firms are blocked from entering the market by laws, patents or high initial, start-up capital costs or past mergers and acquisitions. c)prices are set by a firm’s action, since prices get determined by producers not consumers. d)firms’ aim is mainly to maximize costs so as to understate their profits.

3. Barriers to entry: A)are absent or very low in perfectly competitive markets, any firm can enter and survive in the market. B)are very low for firms trying to break into oligopoly markets, since it is easy for new, small firms to enter and survive in the market. C)means firms are not allowed to exit from any market. D)are low in markets where production cost reflects large economies of scale.

4. Which is a feature of the monopoly market model? A)firms’ aim is mainly to maximize their costs so as to understate their profits. B)prices are unaffected by a monopoly firm’s action, since prices get determined by market (consumer) demand. C)other firms are somehow blocked from entering the market by laws, patents or high initial, start-up capital costs or past mergers and acquisitions. D)a very large number of small-sized firms exist in the industry.

5. Monopoly market structures tend to form if or when: A)the product, service or production processes have patents or exclusively licensing. B)there are no production cost advantages when firms produce a large volume, in other words, no economies of scale. C)there are very low barriers to entry into an industry. D)the industry has very low capital capacity requirements.

Answer 1

a) A firm in any market will shut down the production only when the market price falls below the Average variable cost, the answer is "A".

b) "A"

in a perfectly competitive market there are a number of firms in the market that produce small amount and cannot influence the market.

c) "A"

Barrier to entry are very low in the market and any firm can enter the market.

d) In a monopoly market, other firms are somehow blocked from entering the market by laws, patents or high initial, start-up capital costs or past mergers and acquisitions. The answer is "C".

e) "A"

The product, service or production processes have patents or exclusively licensing. It stops the other firms in the market to enter it.