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Name _________________
ECON 2020 Exam #4
DIRECTIONS: Read each question and EVERY possible answer VERY carefully.
Select the best answer from the alternatives. Good luck!
1. Which of the following is a characteristic of monopolistic competition?
A. imperfect information
B. high barriers to entry
C. no close substitutes
D. many, small buyers and sellers
E. “What do tigers dream of when they take a little tiger snooze?”
Use the following graph to answer questions 2 – 3.
2. If the above firm decreases price from P1 to P2, then total revenue
A. “’Cause we’re the three best friends that anyone could have. . .”
B. increases by area A and decreases by area C
C. decreases by area A and increases by area C
D. increases by area A and decreases by area B
E. decreases by area A and increases by area B
3. If the above firm sells Q1 units at a price of P1, then the marginal revenue from
the last unit sold will be
A. greater than P1
B. less than P1
C. equal to P1
D. “I tend to think of myself as a one-man wolf pack.”
4. Which of the following conditions is necessary for price discrimination?
A. prevention of resale
B. some degree of market/monopoly power
C. two or more groups of buyers with different incomes
D. all of the above
E. A and B only
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