Q1. State whether the following is true or false and why:
(1) Monopolists can charge whatever price they want and maximize profit since they are price
makers.
T/F:
Why?
(2) A firm that has a monopoly on a certain good must worry about the actions of other firms who sell close substitutes.
T/F
Why?
(3) Average Total Cost is the change in output over the change in quantity produced.
T/F
Why?
(4) Perfectly competitive firms will receive normal economic profit in the long run regardless of
the decisions they make.
T/F
Why?
(5) The market for wheat is an example of a perfectly competitive market.
T/F
Why?
(6) A firm has a marginal revenue function: MR(q) = 4q + 5. This firm is in a perfectly competitve market.
T/F
Why?
Q2. The marginal revenue and marginal cost functions for a monopolist firm that mines diamonds are given by: