Equation for monopolistic competition and monopoly
1. 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.
2. 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.
3. 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%
4. When Ep = – 2, the optimal markup on cost is:
a. 33%
b. 67%
c. 100%
d. 200%
5. If the optimal markup on cost is 40%, the optimal markup on price is:
a. 15%
b. 28%
c. 45%
d. 60%
