1. In a perfectly competitive market, consumer surplus typically is

A) undefined.
B) positive.
C) zero.
D) negative.

2. Which of the following statements is TRUE?
A) A monopolist always produces a higher level of output than would be produced if the market were competitive.
B) At the monopolist's equilibrium, resources are being efficiently allocated.
C) Monopolists raise the price and restrict production, compared to a competitive situation.
D) With a monopoly, the value to society of the last unit produced is less than it's production cost.

3. A monopolist is maximizing profit at an output rate of 1,000 units per month. At this output rate, the price that its customers are willing and able to pay is $8 per unit, average total cost is $5 per unit, and marginal cost is $6 per unit. It may be concluded that at this monthly output rate, marginal revenue is
A) $5 per unit, and the monopolist earns zero economic profits.
B) $6 per unit, and the monopolist earns economic profits of $3,000 per month.
C) $5 per unit, and the monopolist earns economic profits of $2,000 per month.
D) $6 per unit, and the monopolist earns economic losses of $1,000 per month.

4. Which of the following describes monopolistic competition?
A) P = MR = MC
B) There is only one seller in the industry
C) Advertising plays a key role
D) Homogenous products

5. Marginal cost pricing for an information product
A) would cause the firm to earn economic profits.
B) would allow the firm to break even.
C) would cause the firm to expand output to increase economic profits.
D) would cause the firm to experience economic losses.

6. If a firm produces an experience good, its mode of advertising will be
A) not to advertise.
B) direct advertising.
C) persuasive advertising.
D) none of the above.

7. There is no incentive for additional producers of an information product to enter the industry when the price charged for these products by each firm already in the industry is equal to
A) average total cost.
B) average fixed cost.
C) marginal cost.
D) average variable cost.

8. A monopolistic competitor in long-run equilibrium is like a perfect competitor in that
A) zero economic profits are made.
B) price is greater than marginal cost.
C) price equals marginal cost.
D) both produce at the minimum points of their average total cost curves.

9. The demand curve for a monopolistically competitive firm is
A) elastic because the products produced are homogeneous.
B) inelastic because of barriers to entry.
C) elastic because of product differentiation.
D) inelastic because of the profit maximizing behavior of the firm.

10. Which of the following statements is true about the economic profits earned by a monopolistic competitor firm in the long run?
A) Economic profits can be positive since firms have some degree of monopoly power.
B) Economic profits will tend towards zero since positive profits will attract new firms into the industry.
C) Economic profits will be positive since the firm has a downward sloping demand curve.
D) Economic profits can be negative since there is so much competition in the market.

11. A search good is a product
A) that an individual must consume before the quality can be established.
B) with qualities that consumers lack the expertise to assess without assistance.
C) with characteristics that enable an individual to evaluate the product's quality in advance of a purchase.
D) that emphasizes the features of its product.