Micro: All 4 Market Structures

In the LR, a profit-maximizing monopolistically competitive firm sets its price a. above MC b. below MC c. equal to MR d. equal to MC

a. above MC

Productive efficiency refers to a. cost minimization, where P = min. ATC b. production at a level where P = MC c. maximizing profits by producing where MR = MC d. setting TR = TC

a. cost minimization, where P = min. ATC

There would be some control over price within rather narrow limits in which market mode? a. monopolistic competition b. pure competition c. pure monopoly d. oligopoly

a. monopolistic competition

The kinked-demand model of oligopoly assumes that a. rivals will ignore price increases but will match price cuts b. rivals will ignore price cuts but will match price increases c. the oligopolistic firms are colluding d. a firm faces a more elastic demand curve if it cuts its price, and less elastic if it raises its price

a. rivals will ignore price increases but will match price cuts

If a regulatory commission wishes to allow a firm to earn a normal rate of return, it should set price equal to a. min. AFC b. ATC c. MC d. MR

b. ATC

If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing a. MR and MC b. P and AVC c. TR and TC d. TR and TFC

b. P and AVC

In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies? a. pure monopoly b. oligopoly c. monopolistic competition d. pure competition

b. oligopoly

On a per-unit-basis, economic profit can be determined as the difference between a. MR and product price b. product price and ATC c. MR and MC d. AFC and product price

b. product price and ATC

A pure monopolist's SR profit-maximizing or loss-minimizing position is such that price a. equals MR b. will vertically intersect demand where MR = MC c. will always = ATC d. always exceeds ATC

b. will vertically intersect demand where MR = MC

Which of the following is true concerning purely competitive industries? a. there will be economic losses in LR because of cut-throat competition b. economic profits will persist in LR if consumer demand is strong and stable c. in the SR, firms may incur economic losses or earn economic profits, but in the LR they earn normal profits d. there are economic profits in LR but not in the SR

c. in the SR, firms may incur economic losses or earn economic profits, but in the LR they earn normal profits

The monopolistically competitive seller's demand curve will become more elastic the a. more significant the barriers to entering the industry b. greater the degree of product differentiation c. larger the number of competitors d. smaller the number of competitors

c. larger the number of competitors

In the SR, the price changed by a monopolistically competitive firm attempting to maximize profits a. must be less than ATC b. must be more than ATC c. may be either equal to ATC, less than ATC, or more than ATC d. must be equal to ATC

c. may be either equal to ATC, less than ATC, or more than ATC

If oligopolistic firms facing similar cost and demand conditions successfully collude, price and output results in this industry will be most accurately predicted by which of the following models? a. the kinked demand curve model of oligopoly b. the price-leadership model of oligopoly c. the pure monopoly model d. the monopolistic competition model

c. the pure monopoly model

In the LR, the economic profits for a monopolistically competitive firm will be a. the same as the profits for a monopolist b. slightly less than the profits of a monopolist c. the same as the profits for a purely competitive firm d. slightly more than the profits of a purely competitive firm

c. the same as the profits for a purely competitive firm

If a purely competitive firm is producing at some output level less than the profit-maximizing output, then a. price is necessarily greater than ATC b. fixed costs are large relative to variable costs c. price exceeds MR d. MR exceeds MC

d. MR exceeds MC

In the short run, a purely competitive firm will earn a normal profit when a. P = AVC b. P > MC c. that firm's MR = market equilibrium price d. P = ATC

d. P = ATC

Which of the following statements is not true for a monopolistically competitive industry? a. firms tend to operate with excess capacity b. each firm faces a downward-sloping demand curve c. these firms earn zero-economic profits in the LR d. firms operate at the lowest point of their ATC curves in the LR

d. firms operate at the lowest point of their ATC curves in the LR

In the LR, economic theory predicts that a monopolistically competitive firm will a. earn an economic profit b. realize all economies of scale c. equate price and MC d. have excess production capacity

d. have excess production capacity

Price leadership represents a situation where oligopolistic firms a. reduce their reliance on nonprice competition b. form a cartel c. face a kinked demand curve d. tacitly collude

d. tacitly collude

What is the meaning of the phrase "dilemma of regulation"? a. natural monopolies achieve economies of scale but charge high prices when there is no government regulation; government regulation reduces prices but results in diseconomies of scale. b. natural monopolies are profitable, but only if the government permits price discrimination; government regulation to restrict price discrimination reduces monopoly prices, but the regulation also reduces monopoly output. c. the fair-return price achieves allocative efficiency but may produce economic losses; the socially optimal price yields a normal profit but may not be allocatively efficient. d. the socially optimal price achieves allocative efficiency but may produce economic losses; the fair-return price yields a normal profit but may not be allocatively efficient.

d. the socially optimal price achieves allocative efficiency but may produce economic losses; the fair-return price yields a normal profit but may not be allocatively efficient.