Multiple-Choice Questions
1. At the individual firm level, which of the following types of firms faces a downward-sloping demand curve?
a. Both a perfectly competitive firm and a monopoly
b. Neither a perfectly competitive firm nor a monopoly
c. A perfectly competitive firm but not a monopoly
d. A monopoly but not a perfectly competitive firm
2. Which of the following types of firms are guaranteed to make positive economic profit?
a. Both a perfectly competitive firm and a monopoly
b. Neither a perfectly competitive firm nor a monopoly
c. A perfectly competitive firm but not a monopoly
d. A monopoly but not a perfectly competitive firm
3. What is the main difference between a competitive firm and a monopoly firm?
a. The number of customers served by the firm
b. Monopoly firms are more efficient and therefore have lower costs.
c. Monopoly firms can generally earn positive profits over a longer period of time.
d. Monopoly firms enjoy government protection from competition.
4. A firm in a perfectly competitive market (a price taker) faces what type of demand curve?
a. Unit elastic
b. Perfectly inelastic
c. Perfectly elastic
d. None of the above
5. What would happen to revenues if a competitive firm raised price?
a. They would increase
b. They would increase but profit would decrease
c. They would increase along with profit
d. They would fall to zero