Question

1. In the short run, a monopolist may
A. attract other firms into the industry
B. upgrade technology
C. incur loss
D. charge the lowest price possible to attract buyers

2. In both monopolistic competition and oligopoly market structures
A. firms may enter and exit the industry easily
B. consumers perceive differences among the products of various competitors
C. economic profits may be earned in the short run and long run
D. producers collude tacitly

3. In the short run, a monopolistically competitive firm
A. always earns profit
B. earns profit higher than an oligopolistic firm
C. earns profit higher than a perfectly competitive firm
D. may or may not earn profit

Answer 1

Q1- Answer is C. Monopolist in short run could incur loss or could earn profit. Actually any type of firm in short run could incur losses and could earn profit. But a monopolist in long run will always earns profit.

Q2- Answer is B. Product of monopolistic and oligopoly are firms are different. Entry in monopolistic industry is easy but in oligopoly it could be difficult. Economic profit in long run could be earned by oligopoly but monopolistic earns only normal profit in long run. And collusion is possible only in oligopoly.

Q3- Answer is D. In short run any firm in any industry could earn normal profit or incur losses or may earn economic profit. In long run monopolistic firm earns only normal profit.

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