Economics 2 TRUE/FALSE

A competitive firm will produce in the short run so long as its price exceeds its average fixed cost

False

The MRP of labor curve is the labor demand curve

True

A firm should reduce its employment of a resource whose marginal resource cost exceeds it marginal revenue product

True

A pure monopolist will maximize profits by producing at that output where price and marginal cost are equal

False

Because of the ability to influence price, a pure monopolist can increase price and increase volume of sales simultaneously

False

Because of their large-scale level of production, pure monopolists over allocate resources to their industry by producing beyond the P=MC output

False

In maximizing profit a firm will always produce that output where total revenues are at a maximum

False

In the long run a pure monopolist must produce at that output where average total cost is at a minimum

False

In the short run a competitive firm will always choose to shut down if product price is less than the lowest attainable average total cost

False

In the short run a pure monopolist will charge the highest price the market will bear for its product

False

In the short run a pure monopolist will maximize profits by producing at that level of output where the difference between price and average total cost is at a maximum

False

Monopolistically competitive firms are inefficient because they produce at a point on the rising segment of their average cost curves

False

Monopolistically competitive sellers produce efficiently because they obtain only normal profits in the long run

False

Monopolistically competitive sellers realize economic profits in the long run because entry barriers are significant

False

Producers should hire resources until the total output of each is equal

False

Pure monopolists always earn economic profits

False

Society's optimal amount of pollution is zero

False

The benefits received principle of taxation is used to support corporate and personal income taxes

False

The benefits received principle of taxation supports the case for highly progressive taxation

False

The market structure called "oligopoly" includes industries with one or a small number or firms

False

The monopolistically competitive firms make normal profits because they are forced to operate at the minimum point on their average total cost curve

False

The monopolistically competitive seller squares price and marginal cost in maximizing profits

False

Unlike most demand curves, the demand curve for loanable funds is upsloping

False

A highly progressive tax takes relatively more from the rich than it does from the poor

True

After all long run adjustments have been completed, a firm in a competitive industry will produce that level of output where average total cost is at a minimum

True

An improvement in the technology of pollution control is likely to increase society's optimal amount of pollution abatement

True

Because the equilibrium position of a purely competitive seller entails an quality of price and marginal costs, competition produces up to an efficient allocation of economic resources

True

Demand is the active end supply the passive determinant of land rent

True

Different rents on land reflect differences in the marginal revenue productivity of land

True

General speaking, the larger the number of firms in an oligopolistic industry, the more difficult it is for those firms to collude

True

If the XYZ Company can sell 4 units per week at $10 per unit and 5 units per week at $9 per unit, the marginal revenue of the fifth unit is $5.

True

If three or four homogenous oligopolists collude, the resulting price and production outcomes will be similar to those of pure monopoly

True

If you pay a $1000 tax on $10,000 of taxable income and a $3000 tax on a taxable income of $16,000, the tax is progressive

True

It will be profitable for a firm to hire additional units of any resource up to the point at which its MRP is equal to its MRC

True

Marginal cost is a measure of the alternative goods which society forgoes in using resources to produce an additional unit of some specific product

True

Marginal revenue is the addition to total revenue resulting from the sale of one more unit of output

True

Price and marginal revenue are identical for an individual purely competitive seller

True

States permit electric utilities to enjoy monopoly status but try to regulate them so that the competitive outcome is attained

True

The U.S. breakfast cereal industry is an example of differentiated oligopoly

True

The U.S. steel industry is an example of homogenous oligopoly

True

The basic function of profits and losses is to allocate society's scarce resources to their highest valued uses

True

The demand curve of a monopolistically competitive firm is more elastic than that of a pure monopolist

True

The demand curve of monopolistically competitive producer is less elastic than that of a purely competitive producer

True

The demand for a resource depends on its productivity and the market value of the product it is producing

True

The economic profits earned by monopolistically competitive sellers are zero in the long run

True

The interest rate is the price paid for the use of money

True

The larger the number of firms and the less the degree of product differentiation the greater will be the elasticity of a monopolistically competitive seller's demand curve

True

The marginal revenue product curve of a purely competitive seller declines solely because of the law of diminishing returns

True

The total revenue curve of a competitive seller graphs as a straight, upsloping line

True

the monopolistically competitive seller maximizes profits by equating marginal revenue and marginal cost

True