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Economics, 7/e
David Begg, Birkbeck College, University of London
Rudiger Dornbusch
Stanley Fischer
Perfect competition and pure monopoly

Self-test Questions

Select the radio button corresponding to your choice of answer for each question, and then click on "Submit Answers" to find out how many you answered correctly.

1

In a competitive industry each buyer and seller _____________
A)is a price taker
B)produces different products
C)believes that they can influence price
D)prevents the entry of competitors
2

For a competitive firm, its short run supply curve is ________ and its long run supply curve is __________
A)SMC, LMC
B)SMC above SAVC, LMC above LAC
C)SMC below SAVC, LMC above LAC
D)SMC below SAVC, LMC below LAC
3

For perfect competition to work there must be
A)many buyers and sellers
B)a standard product
C)free entry and exit
D)perfect information
E)all of the above
4

A competitive firm's demand curve is
A)horizontal
B)vertical
C)downward sloping
D)fairly elastic
5

A competitive firm produces a level of output at which _________
A)price is greater than marginal cost
B)price equals marginal cost
C)price is less than marginal cost
D)none of the above
6

Comparing a monopoly and a competitive firm, the monopolist will _______________
A)produce less at a lower price
B)produce more at a lower price
C)produce less at a higher price
D)produce less at a lower price
7

A natural monopoly has a declining ________ over a large range of output
A)long run marginal cost
B)short run marginal cost
C)long run average cost
D)short run average cost
8

Perfect price discrimination means that every customer ____________
A)buys the same amount
B)pays the same price
C)contributes the same revenue
D)pays what she thinks the product is worth
9

A monopoly may be self-perpetuating because profits may be used for
A)research
B)cost-saving
C)technical advance
D)all of the above
10

The supply rule of the profit maximising monopolist is different from that of a competitive firm
A)TRUE
B)FALSE
11

A discriminating monopolist will charge a higher price to groups with elastic demand
A)TRUE
B)FALSE






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