A profit-maximizing monopolist will never produce at an output level where:
a. demand is elastic.
b. it suffers economic losses in the short run.
c. demand is inelastic.
d. marginal cost is less than average total cost.
QUESTION 2Protection provided to the infant industries is rarely withdrawn because:
a. the costs of withdrawing protection outweigh the benefits.
b. the industries begin to experience diseconomies of scale.
c. it leads to a loss of government revenue.
d. the industries produce goods which are close substitutes of the imported goods.
e. the larger and more successful the industry becomes, the more political power it wields.
QUESTION 3Firms in a perfectly competitive market usually enter or leave an industry in the short-run and not in the long-run.
Indicate whether the statement is true or false
QUESTION 4When revenue is less than total cost but more than variable cost it implies that:
a. the firm is enjoying positive economic profits.
b. the firm is earning normal profits.
c. the firm can cover its variable cost and a part of its fixed costs.
d. the firm is unable to cover its costs and should shut down.
e. the firm is able to cover both its fixed and variable costs.
QUESTION 5If a monopolist's marginal revenue is less than zero over a range of output, then price elasticity of demand must be:
a. greater than one.
b. equal to one.
c. less than one.
d. equal to zero.
QUESTION 6In the light of the infant industry argument, identify the industry which is likely to have substantially high initial costs.
a. Fashion designing
b. Retail industry
c. Iron and steel industry
d. Dairy industry
e. Software industry
QUESTION 7In the long run, producers do not incur any fixed cost as all inputs are variable.
Indicate whether the statement is true or false
QUESTION 8Since the beginning of the millennium, the United States has witnessed closure of many Internet start-up companies. According to the model of perfect competition, these companies must have shut down in the short run because:
a. the price they were charging was too high to attract customers.
b. the price they were charging was too low to provide sufficient revenues.
c. they were not earning enough revenue to cover their total costs.
d. they were not earning enough revenue to cover their total variable costs.
e. they were not earning enough revenue to cover their total fixed costs.
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