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Homework 3
EC 2306
Section 1 Multiple choice. (4 points each)
1.
a.
b.
c.
d.
Which of the following is true about a monopolistically competitive firm?
They face a perfectly inelastic demand curve.
Their marginal revenue curve rises as they produce increasing amounts of a product.
They have a unique cost structure as compared to all other firms.
If they are profit maximizing they will produce where marginal revenue equals
marginal cost.
e. There marginal revenue curve is the same curve as their demand curve.
2. Which of the following will cause a monopolistically competitive firm’s supply curve
to shift?
a. Changes in technology.
b. Changes in input costs.
c. A change in the demand for the product the firm is making.
d. All of the above.
e. None of the above.
3.
a.
b.
c.
d.
e.
Which of the following conditions is essential to maintain long run profits?
Single seller.
Differentiated product.
Price maker.
Blocked entry.
All of the above.
4. Which of the following is a positive aspect resulting from the monopolistically
competitive market structure?
a. Increased international competitiveness.
b. Increased technological advancement.
c. Greater product variety.
d. Limit pricing keeping the price low.
e. All of the above.
5. Which of the following is true?
a. The revenue structures for pure competition and monopolistic competition are
identical.
b. A Monopolistically competitive firm can make a profit in the long run.
c. An Oligopoly can make a profit in the long run.
d. Oligopolies will always collude.
e. Oligopolies are productively efficient.
6. In a specific industry the concentration ratio is 100%. What can we say for sure about
this industry?
a. It is a monopoly.
b. It is less competitive than an industry with a concentration ratio of 95%.
c. This industry is clearly monopolistically competitive.
d. This industry may be an oligopoly.
e. This industry is purely competitive.
7. Which of the following is true?
a. When we discuss wages in this class we only are talking about the money workers
take home in paychecks.
b. If nominal wages increase then workers can buy more goods and services.
c. The demand for a resource is derived from what the resource can produce.
d. Marginal Revenue Product is essential in determining resource supply.
e. All of the above are true.
8. When you have one buyer in the market for labor and one seller this is called?
a. A monoposony.
b. A union.
c. A inclusive industrial model.
d. A bilateral monopoly.
e. none of the above
9.
a.
b.
c.
d.
e.
Which of the following is a compensating differential causing wage differences?
Differing pay due to a job’s level of risk.
Differing pay due to lack of information by some workers.
Differing pay between union and non union workers doing the job.
Differing levels of pay between doctors and exterminators.
Differing pay resulting from racial discrimination.
10. Which of the following receives the largest amount of GDP in payment?
a. Wages.
b. Rents.
c. Interest.
d. Corporate profits.
e. Proprietor income.
Short answer
1. Please draw the graph for an oligopoly. Explain why this graph looks the way it
does. Please explain why such an oligopoly will have very stable prices and
quantities even as marginal costs change. (10 pts.)