ECON 201 Final Exam Answers

a. right; = 0; = ATC; = minimum ATC
b. right; > 0; > ATC
c. left; < 0; < ATC d. left; = 0; = ATC; > minimum ATC
Question 26
(Exhibit: Profit Maximization in Monopolistic Competition) In monopolistic competition, longrun
equilibrium is characterized by:
a. P > MR.
b. P < MR. c. P = MR. d. profit maximization, which occurs where P = MR = MC. Question 27
(Exhibit: Profit Maximization in Monopolistic Competition) In Panel (a), if the firm raises its
price above P, it will:
a. lose all its customers.
b. still have some customers.
c. not lose any customers.
d. have none of the above occur.
Question 28
(Exhibit: Profit Maximization in Monopolistic Competition) In determining the price in
monopolistic competition:
a. the price to the firm is given by supply and demand for the industry.
b. the firm is a price taker.
c. the firm applies the marginal decision rule.
d. A and B are true.
Question 29
Which of the following is (are) most likely to be produced under conditions resembling perfect
competition – automobiles, beer, corn, diamonds, and eggs. Defend your answer in economic
terms.