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