Why do the perfectly competitive firms earn only normal profits in the long run?
a. Entry or exit is barred
b. Firms produce identical products
c. A large number of buyers and sellers exist in the market
d. Aggregate demand remains constant
e. There is free entry and exit of firms
QUESTION 2Which of the following is (are) true of a monopoly? (i) A monopoly has the ability to set its price. (ii) A monopolists marginal revenue will always increase when it lowers the price of its product. (iii) A monopoly can never experience an economic loss.
a. (i) only
b. (ii) only
c. (i) and (ii) only
d. (ii) and (iii) only
QUESTION 3Which of the following is true of a tariff?
a. It is a tax levied by the government on domestic production of goods and services.
b. It is a quantitative restriction on imports imposed by the government.
c. It is a monetary benefit received by exporters from the government.
d. It is a monetary benefit received by importers from the government.
e. It is a tax on import and export levied by the government.
QUESTION 4A set of producers is competitive if:
a. the good produced by one can be differentiated from the other.
b. each supplies a complement of what the others produce.
c. each supplies a substitute for what the others produce.
d. the good produced by one can be used as an input by other producers.
QUESTION 5What causes the market supply curve to shift rightward?
a. Increase in the aggregate demand
b. Decrease in the number of existing firms
c. Decrease in the price level
d. Increase in the cost of production
e. Entry of new firms
QUESTION 6Which of the following is true of monopoly but not true of perfect competition?
a. Firms can potentially earn economic profits in the short run.
b. Total revenue is the product of price times the quantity sold.
c. Firms can potentially earn economic profits in the long run.
d. A profit-maximizing firm will shut down if price falls below the average variable cost.
QUESTION 7One of the primary objectives of the WTO is:
a. to create trade restrictions across the countries.
b. to reduce trade barriers created by the different countries.
c. to enable certain countries to maintain their autarkic conditions.
d. to enable the western countries to emerge as major players in the international trade.
e. to redistribute wealth from the first world to the third world countries.
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