1.  An industry comprises of four firms that produce an easily replicable product. The barriers to entry are low. This industry is best characterized as:

A. an oligopoly.
B. monopolistic competition.
C. perfect competition.


2. The demand schedule in a perfectly competitive market is given by P = 65 – 2.2Q (for Q ≤ 55). The long-run cost structure of each company is:

Total cost:  243 + 3Q + 6Q2
Average cost:   243/Q + 3 + 6Q
Marginal cost:   3 + 9Q

New companies will enter the market at any price greater than:

A. 55.
B. 74.
C. 84.


3. A firm in a monopolistic competition will most likely maximize profits when its output quantity
is set such that the:

A. Average cost is minimized.
B. Marginal revenue equals marginal cost.
C. Total cost is minimized.


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