Both a perfectly competitive firm and a monopolist:
a. always earn an economic profit.
b. maximize profit by setting marginal cost equal to marginal revenue.
c. maximize profit by setting marginal cost equal to average total cost.
d. are price takers.
QUESTION 2Total utility is maximized in the consumption of two goods by equating the:
a. prices of both goods for the last dollar spent on each good.
b. marginal utilities of both goods for the last dollar spent on each good.
c. ratios of marginal utility to the price of both goods for the last dollar spent on each good.
d. marginal utility of one good to the price of the other.
QUESTION 3Under monopoly, a firm:
a. is a price taker.
b. maximizes profit by setting marginal cost equal to marginal revenue.
c. will shut down in the short-run if price falls short of average total cost.
d. always earns a pure economic profit.
QUESTION 4Suppose that an individual consumes just two goods: Big Macs and milkshakes. In order to reach consumer equilibrium, the individual must arrange the consumption of Big Macs and milkshakes so that the:
a. marginal utility of the two goods is equal for the last dollar spent on each good.
b. ratio of marginal utility to price is the same for both goods for the last dollar spent on each good.
c. ratio of marginal utility of milkshakes to the marginal utility of Big Macs is 1 for the last dollar spent on each good.
d. price paid for the two goods is the same.
QUESTION 5A monopolist will maximize profits by:
a. setting his price as high as possible.
b. setting his price at the level that will maximize per-unit profit.
c. producing the output where marginal revenue equals marginal cost.
d. producing the output where price equals marginal cost.
QUESTION 6The consumer equilibrium condition for two goods is achieved by equating the:
a. marginal utility of one to the price of the other for the last dollar spent on each good.
b. prices of both goods for the last dollar spent on each good.
c. marginal utilities of both goods for the last dollar spent on each good.
d. ratios of marginal utility to the price of both goods for the last dollar spent on each good.
QUESTION 7A monopolist will earn economic profits as long as his price exceeds:
a. marginal revenue.
b. average fixed cost.
c. average variable cost.
d. average total cost.
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