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MCQ 3
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Questions in this quiz (6)
1Given the MC=MR profit maximisation principle holds,the monopoly price mark up and profit margin are large when:
- Athe marginal costs are large and non-decreasing in output
- Bthe cross price elasticity of demand is small
- Cthe minimum efficient scale of production lies far to the right of the demand curve
- Dpeople will purchase the same quantity of the good irrespective of the price
2The NE outcome of the Bertrand model is considered paradoxical because :
- AAll firms set prices not smaller than the Marginal cost
- BIt is contrary to the expectation that adding more firms to an oligopoly should always lead to prices going down
- Cit is based on the assumption of zero conjectural variation
- Dsome firms may set prices greater than marginal cost
3A common effect of capacity constraints and increasing marginal costs is that
- Athey relax competition in prices, by making consumers less willing to switch to a different supplier,even when offered a lower price
- Bthey makeit impossible/unprofitable for the lower priced firm to capture the entire demand thereby decreasing incentives to reduce prices
- Cthey make it beneficial to undercut competitors prices only when they are close to the marginal cost level
- Dall of the above
4the strategic effect of supermarket price wars is that
- Asupermarkets are less willing to reduce prices seeing the rivals commited to retalitation
- Bsupermarkets differentiate themselves from competitors and reduce the consumers costs of switching to a different store
- Cprice competition between competitors is intensified as they all want to fulfil the promise and become the cheapest
- Dstores can use non zero conjectural variation to benefit from changing strategy when others stick to their nash equilibrium startegies
5The mc=Mr profit maximisation principle could fail when
- AMarginal revenue is non increasing and the marginal cost non decreasing
- BThe monopolist can price discriminate offering lower prices to those consumers who can resell the product to other consumers
- CThe total cost and demand function become steeper as output increases
- DThe demand is more elastic at low prices than high prices
6The long run equilibrium in a perfectly competitive market features
- AIndividual firms producing at the minimum of short run average variable cost
- BLong run industry supply being equal to the sum of long run average cost of all firms
- CThe firms marginal and average revenue being smaller than the long run average cost of producing any quantity other than the equilibrium quantity
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- Quiz on MCQ 3, created by aasiajk on 27/08/2015.
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- aasiajk
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