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:
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.