Exam #3 True/False Short Run
An improvement in technology that raises productivity will shift the marginal cost or short-run supply curve downward.
True
A purely competitive firm that wishes to produce and not close down will maximize profits or minimize losses at that output at which marginal costs and marginal revenue are equal.
True
An increase in the price of a variable input will shift the marginal cost or short-run supply curve downward.
False
Assuming that the purely competitive firm chooses to produce and not close down, to maximize profits or minimize losses it should produce at that point where price equals average cost.
False
Economic profit is the difference between total revenue and average revenue.
False
If, at the profit-maximizing level of output for the purely competitive firm, price exceeds the minimum average variable cost but is less than average total cost, the firm will make a profit.
False
Marginal revenue is the change in average revenue that results from selling one more unit of output.
False
One reason for studying the pure competition model is that most industries are purely competitive.
False
The demand curves for an individual firm in a purely competitive industry are perfectly inelastic.
False
The structures of the markets in which business firms sell their products in the U.S. economy are very similar.
False
There are significant obstacles to entry in a purely competitive industry.
False
Under purely competitive conditions, the product price changed by the firm increases as output increases.
False
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
If a purely competitive firm is producing output less than its profit-maximizing output, marginal revenue is greater than marginal cost.
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 competition, price is equal to marginal revenue and also equal to average revenue.
True
Price and average revenue are the same in pure competition.
True
Product price is a given fact to the individual competitive firm, but the supply plans of all competitive firms as a group are a basic determinant of product price.
True
The break-even point means that the firm is realizing normal profits, but not economic profits.
True
The purely competitive firm can maximize its economic profit (or minimize its loss) only by adjusting its output.
True
The purely competitive firm views an average revenue schedule as identical to its marginal revenue schedule.
True
The short-run supply curve of a purely competitive firm tends to slope upward from left to right because of the law of diminishing returns.
True
The short-run supply curve of the purely competitive firm is the segment of the firm's short-run marginal cost curve that lies above the firm's average variable cost curve.
True
Total revenue for each sales level is found by multiplying price by the quantity the firm can sell at that price.
True