Econ Test
For a purely competitive firm in long-run equilibrium, A) MR=MC=minimum ATC B) MR=MC=maximum ATC C) P>MR>ATC D) MR>MC
A
When a purely competitive industry is in long-run equilibrium, which statement is true? A) Firms in the industry are earning normal profits B) Price and long-run ATC are not equal to each other C) Marginal cost is at its minimum level D) Marginal cost is equal to total revenue
A
Which industry comes closest to being purely competitive? A) Agriculture B) Retail trade C) Electricity D) Automobile
A
The analysis of monopoly indicates that the monopolist A) Will charge the highest price it can B) Will seek to maximize total profits C) Is guaranteed an economic profit D) is only interested in normal profit
B
A monopolist will avoid setting a price in the inelastic segment of the demand curve and prefer to set the price in the elastic segment
True
A purely competitive firm is a price taker but a monopolist is a price maker
True
A purely competitive firm that wishes to produce and not close down will maximize profits or minimize losses it should produce at that output at which marginal costs and marginal revenue are equal
True
A purely competitive firm will produce in the short run the output at which marginal cost and marginal revenue are equal provided that the price of the product is greater than its average variable cost of production
True
Imperfectly competitive markets are defined as all markets except those that are purely competitive.
True
In a purely competitive industry individual firms do not have control over the price of their product
True
In pure monopoly, there are strong barriers to entry.
True
In the long run in pure competition, economic profits will attract new firms to enter an industry, while economic losses will cause existing firms to leave an industry.
True
The existence of economic profits in an industry will attract new firms to enter an industry.
True
The monopolist can increase the sales of its product if it charges a lower price.
True
The pure monopolist produces a product for which there are no close substitutes.
True
The purely competitive firm can maximize its economic profit (or minimize its loss) only by adjusting its output.
True
When compared with the purely competitive industry with identical costs of production, a monopolist will charge a
higher price and produce less output
The demand schedule or curve confronted by the individual purely competitive firm is
perfectly elastic
A monopolist will charge the highest price it can get.
False
Pure monopoly guarantees economic profits
False
The demand curves for an individual firm in a purely competitive industry are perfectly inelastic
False
The monopolist determines the profit-maximizing output by producing that output at which marginal cost and marginal revenue are equal and sets the product price equal to marginal cost and marginal revenue at that output.
False
There are significant obstacles to entry in a purely competitive industry
False
Under purely competitive conditions, the product price charged by the firm increases as output increases.
False
The Zebra, Inc., is selling in a purely competitive market. Its output is 250 units, which sell for $2 each. At this level of output, marginal cost is $2 and AVC is $2.25. The firm should
Increase output to maximize profits.
Which would be defining characteristics of pure monopoly? A) The firm does no advertising and it sells a standardized product. B) No close substitutes for the product exist and there is one seller C) The firm can easily enter into or exit from the industry and profits are guaranteed D) The firm holds a patent and is technologically progressive
B
In which market model is the individual seller of a product a price taker?
Pure competition
An example of a natural monopoly would be
Railroads
An example of monopolistic competition is
Running shoes
At present output a monopolist determines that its marginal cost is $18 and its marginal revenue is $21. The monopolist will maximize profits or minimize losses by
Decreasing price and increasing output
The demand cure for the pure monopolist is
Down-sloping