36. Which of the following is true for perfect competition but not true for mono

Question

36. Which of the following is true for perfect competition but not true for monopolistic competition and monopoly?
a. MC = MR.
b. P = MC.
c. Positive long run profits.
d. Both b and c.

37. Profit margin equals:
a. marginal cost minus marginal revenue.
b. average cost minus average revenue.
c. average cost minus average variable cost.
d. price minus cost.

38. If a firm charges a price of $10 for a product with a marginal cost of $4, the markup on cost equals:
a. 67%
b. 33%
c. 150%
d. 50%

39. When Ep = - 2, the optimal markup on cost is:
a. 33%
b. 67%
c. 100%
d. 200%

40. If the optimal markup on cost is 40%, the optimal markup on price is:
a. 15%
b. 28%
c. 45%
d. 60%

Explanation / Answer

36. Which of the following is true for perfect competition but not true for monopolistic competition and monopoly?

Ans: P =MC

37. Profit margin equals:

Ans: Price - cost

38. If a firm charges a price of $10 for a product with a marginal cost of $4, the markup on cost equals:

Ans : 4 / (10-4) = 4/6 = 67 %

39. When Ep = - 2, the optimal markup on cost is:

Ans : 100%

40. If the optimal markup on cost is 40%, the optimal markup on price is:

Ans. Markup on price = markup on cost / ( 1 + markup on cost)

0.4 / 1.4 = 2 / 7 = 28%

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