(1) In a perfectly competitive industry, any restrictions that prevent new firms
ID: 1165114 • Letter: #
Question
(1) In a perfectly competitive industry, any restrictions that prevent new firms from entering:
A) hinder economic efficiency. B) guarantee that all existing firms will earn exactly a zero profit. C) lead to negative profits. D) reduce the average cost of production.
(2) All of the following are barriers to entry in an industry EXCEPT :
A) governmental restrictions. B) a patent. C) economies of scale. D) low marginal tax rates.
(3) For a monopolist:
A) there is no relationship between marginal revenue and price. B) marginal revenue is less than price for all units being sold except the first unit. C) marginal revenue is equal to price for all units being sold. D) marginal revenue is greater than price for all units being sold except for the first unit.
(4)Use the below figure. The AFC at output level 20 is:
A) $10.00. B) $0.50. C) $1.00. D) $3.00.
Explanation / Answer
a) "B"
when all the existing firms earn a zero profit then only the new firm will not enter the market.
b) "D"
Low marginal tax rate doesn't act as a barrier to entry.
c) "B"
For a monopolist, the marginal revenue will always be less than the price except for the first unit where the MR and the price is always equal.
d) at the quantity 20 the total cost is 50 and the variable cost is 40. Then the fixed cost will be 10. The answer is "A".
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