AP Micro Unit 5
If the firm produces 10 units of output, its economic profits will equal
$50
Assume a decreasing-cost perfectly competitive industry. Which of the following statements is true?
As industry output contracts, each firm's long-run average total cost curve shifts upward.
Assume an increasing-cost perfectly competitive industry. Which of the following statements is true?
As the industry expands its output, at least one input price increases, increasing the minimum of long-run average total cost.
Which of the following is a source of monopoly power?
Barriers to entry
Which of the following statements concerning a natural monopoly is true?
If the monopolist chooses to produce the quantity at which price is equal to average cost, it would earn a normal profit.
For a perfectly competitive firm producing the profit-maximizing quantity, the average total cost is $10 and the average variable cost is $8. If the market price for its product is $10, which of the following is true for the firm?
It is earning zero economic profit and will remain in business.
A profit-maximizing, perfectly competitive firm is currently in long-run equilibrium. It is earning $15,000 of total revenue from a sale of 1,000 units. Its total fixed cost of production is $2,500. Which of the following can correctly be inferred from the information provided?
Its marginal cost is $15.00, and its average variable cost is $12.50.
Reff Corp is a firm with total revenue of $1,000, marginal cost of $5, and average variable cost of $4. Both the output and the input markets are perfectly competitive, and Reff Corp is currently in long-run equilibrium. Reff Corp's output and total fixed cost of production must be equal to which of the following?
Output 200, fixed cost $200
If the monopolist chooses to maximize total revenue rather than total profit, it will choose which combination of price and output?
P3, Q3 (MR = 0, up to D)
The graph above shows the total revenue and total cost curves for a firm in which type of market structure and what is the profit-maximizing quantity?
Perfect competition Q3
Which of the following enables a seller to capture the entire consumer surplus in a market?
Perfect price discrimination
Which of the following is a characteristic of firms in a perfectly competitive industry?
Producing identical products
Which of the following is most likely to occur if a single-price monopolist is replaced by a perfectly competitive market?
The deadweight loss will decrease.
Which of the following is necessary for a firm to practice price discrimination?
The firm can prevent resale of its goods.
Which of the following is true for a monopoly but NOT for a perfectly competitive firm?
The firm faces a downward-sloping demand curve.
Which of the following statements relating to a profit-maximizing perfectly competitive firm is true?
The firm's price is given by the market and is equal to marginal revenue.
Assume a profit-maximizing monopolist is able to price discriminate, dividing its consumers into two distinct groups charging each a different price. Based on this information, which of the following is true?
The group with the more elastic demand will pay the lower price.
Which of the following is true for a monopolist that engages in perfect price discrimination?
The monopolist sells the allocatively efficient quantity of output.
Assume that the market is a profit-maximizing monopoly. Which of the following areas shows the producer surplus and the deadweight loss?
The producer surplus is area P1BJFP1BJF, and the deadweight loss is area BJEBJE.
The firm's economic profit is equal to
area P2 P3 JK
Assuming a linear downward-sloping demand curve, as a monopoly firm sells additional units of output, its marginal revenue will
decrease continuously
Compared with a perfectly competitive market,a single-price monopoly with the same market demand and cost curves will
decrease output and increase price
If a profit-maximizing firm in a perfectly competitive market chooses to produce in the short run, then marginal cost is always
greater than or equal to average variable cost
The long-run industry supply curve for corn is
horizontal
A monopolist introduces a technological innovation that lowers the marginal cost and average cost of production. The price of the good and the level of output are most likely to change in which of the following ways?
price decreases, level of output increases
A firm is producing the allocatively efficient level of output if
price is equal to marginal cost
Most economists argue that a monopoly is inefficient because it
produces too little output and sets a price above marginal cost
A monopolist's demand curve is necessarily
the same as the market demand curve
The reason that firms in perfect competition earn zero economic profit in the long run is that
there are no barriers to entry or exit
