Practice Exam Multiple choice questions. 1) Which of the following statements about natural monopoly is correct? A) A natural monopoly’s average cost is decreasing. B) A natural monopoly’s marginal cost is decreasing. C) A natural monopoly usually has a small fix cost. D) Governments usually want to ban natural monopoly. 2) Which of the following statements about perfect price discrimination is correct? A) A firm in a perfect competitive market can apply perfect price discrimination
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impact on the markets is to promote competition and economic efficiency. Industrial regulation also intends that monopolies and oligopolies do not control the entire market‚ charging high prices and providing fewer and inferior products‚ which in turn “harms consumers and society” (McConnell‚ Brue‚ Flynn & et al‚ 2011‚ pg. 382). These regulations reduce the market power of monopolies‚ therefore allowing entry into the market by the competition which then allows for substitute products and price competition
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higher price and lower quantities. 2. “Technically”‚ yes‚ these firms are in fact violating the optimality rule – but only for the time it takes for that employee to cover the costs of his salary during the training program. I will illustrate an example: John Smith is hired at a salary of 100K/year and expected to have a marginal revenue product (to the company) of 150K. He is to enter a management training program lasting 12 months in which time he will generate no revenue for the company.
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TECHNOLOGICAL INSTITUTE OF THE PHILIPPINES COLLEGE OF BUSINESS EDUCATION Principles of Economics With Land Reform and Taxation (Econ 003) NAME : _______________________________________________ SCORE : ____________________________ MIDTERM QUIZ No. 1 (Take Home) SECTION: _____________________________ DIRECTION: Write the CAPITAL LETTER of the CORRECT ANSWER on the space provided. Any form of ERASURES is strictly not allowed. 1. If you were running a firm in a perfectly competitive
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Alternative theories to profit maximization ranging from perfect competition to strict monopolies. Companies and The Market Most companies are profit oriented. Companies survive and live on profit. Even governmental institutions‚ NGO’s and NPO’s are profit oriented‚ what they do with profit is different though. Saying this means that companies seek always to be at a position where profit is maximized. As we know by now this happens when MC=MR but this is an always changing point as supply and
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INTRODUCTION Pure monopoly and perfect competition are two extreme cases of market structure. In reality‚ there are markets having large number of producers competing with each other in order to sell their product in the market. Thus‚ there is monopoly on the one hand and perfect competition‚ on the other hand. Such a mixture of monopoly and perfect competition is called monopolistic competition. It is a case of imperfect competition. The model of monopolistic competition describes a common market
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“Pure Competition‚ Pure Monopoly‚ Monopolistic Competition and Oligopoly. Companies may move from market structure to market structure over the course of growth and time. This movement between structures may be the result of product changes‚ introduction of competition or consumer interests. McConnell and Brue (2004) also states that‚ pure competition is "a very large number of firms producing a standardized product". This is the case with the corn industry. One example of a pure competition corporation
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sub-optimal allocation of resources in a market/industry. In simple terms‚ the market may not always allocate scarce resources efficiently in a way that achieves the highest total social welfare. Market failure can occur for number of reasons. EXAMPLES OF POTENTIAL MARKET FAILURE There are plenty of reasons why the normal operation of market forces may not lead to economic efficiency. Public Goods Public Goods not provided by the free market because of their two main characteristics *
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long run‚ because if profit was being made‚ more firms would enter the market and market prices would decline until all firms made zero profit. These elements are perfect competition‚ monopolistic competition‚ oligopoly‚ and monopoly. Based on the differing outcomes of different market
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degree even when it appears that the monopoly position of a dominant seller is unassailable. This can have important implications for the competitive behaviour (conduct) of existing firms and clearly then affects the performance of a market from an economic efficiency viewpoint (e.g. allocative‚ productive and dynamic efficiency)Contestable markets and perfect competition - the differencesContestable markets are different from perfect competitive markets. For example‚ it is feasible in a contestable
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