Econ 11 Mock Quiz #4

Answer Key

1. When MC = minimum AC, the firm has ____ profit.

a) Positive
b) Zero
c) Negative

2. When MC is above AC, the firm has ____ profit.

a) Positive b) Zero profit c) Negative

3. When MC is below minimum AC, the firm has ____ profit.

a) Positive profit b) 0 profit ​c) Negative

4. In the long run of perfect competition, the equilibrium condition becomes P= _____ ?
Minimum AC

5. This is because of:

a. Economic recessions
b. Free entry and exit
c. Inflation

6. In perfect competition, there is "Atomistic" competition among firms. The products that these
firms sell are ________. ​Homogenous.

7. Market structure where a single seller has a complete control over an industry. ​Monopoly

8. In this market structure, the _______ is the only one producing in its industry and there is no
industry producing a close _______. ​Monopolist, substitute

9. In a monopolistic competition, the products sold by different firms that are not identical are
called _______. ​Differentiated products

10. What is the major source of imperfect competition? ​Economies of Scale or Decreasing
Average Costs

11. The Profit Maximization Rule for Imperfect Competition is ___________. ​MR=MC
12. In oligopoly, _______ occurs when each firm's business depends upon the behavior of its
rivals. ​Strategic Interaction

13. The ________ factor of imperfect competition results in the limitation of competitors in an
industry. ​Barriers to Competition

14. The _______ factor of imperfect competition makes it likely for oligopoly to exist on the basis
of profitability. ​Costs

Shown below are the cost and demand curves for a monopoly:

15. What will be the cost per unit of output?

a. P1
b. P2
c. P3
d. P4
16. What will be the formula for the total revenue of the firm?
e. Q1 x P1
f. Q2 x P3
g. Q1 x P2
h. Q1 x P4
17. What will be the formula for the total profits of the firm?
i. Q1(P3) - Q1(P2)
j. Q1(P2) - Q1(P1)
k. Q1(P4) - Q1(P2)
l. Q1(P4) - Q1(P1)

18. Give examples of the important legal restrictions used by the government.
patents, entry restrictions, and foreign-trade tariffs and quotas
19. Firms in an oligopoly engage in _______when they actively cooperate with each other.
collusion
20. Give the 4 characteristics of a cartel
1. Must control a large share of actual and potential output
2. Substitutes for the good sold by the cartel must be relatively poor quality (to keep the demand
inelastic)
3. Few outside factors to disturb cost or demand conditions in the industry
4. Must be easy to identify and punish cartel members who cheat on the agreement by cutting
prices and expanding output.