C211 Practice Questions

What are the 2 types of imperfectly competitive markets?

Monopolistic competition and Oligopoly

What is unique to a monopolistically competitive firm?

Monopolistic competition features many sellers

What is a characteristic of a monopolistically competitive firm in short-run equilibrium?

P = AR

What is a characteristic of a monopolistically competitive firm in both the short run and long run?

Price > Marginal Cost

What happens when a monopoly firm sells an additional unit of output?

Revenue increases by an amount less than the price

Average total cost is very high when a small amount of output is produced because

average fixed cost is high

Marginal Cost is equal to average total cost when

average total cost is at its minimum

When marginal cost is less than average total cost,

average total cost is falling

Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In this market, an increase in demand will

increase price in the short run but not the long run

If a profit-maximizing monopolist faces a downward sloping market demand curve, its

marginal revenue is less than the price of the product

The short-run supply curve for a firm in a perfectly competitive market is

the portion of its marginal cost curve that lies above its average variable cost