Economics test 2, chapter 8
A market structure is defined in terms of the number and sizes of buyers and sellers on a market, the type of product traded on the market, the mobility of resources, and the amount of knowledge economic agents have about market conditions.
True
A monopolist that is earning a profit in the short run can be expected to earn at least as much profit in the long run.
True
A monopolist's marginal revenue is below market price.
True
A perfectly competitive firm is in long-run equilibrium when all inputs are earning their opportunity costs.
True
A perfectly competitive firm maximizes profit by producing a level of output where marginal cost is equal to price.
True
A profit-maximizing monopolist will never produce a quantity that corresponds to a point on the inelastic portion of its demand curve.
True
All monopoly power that is based on barriers to entry is subject to decay I the long run that based on government franchise.
True
An increase in the number of U.S. dollars required to purchase one British pound would be a depreciation of the U.S. dollar and an appreciation of the British pound.
True
As firms leave a monopolistically competitive industry, the remaining firms demand curves shifts to the right and become less elastic.
True
Depreciation of a country's currency tends to make imports more expensive.
True
Every profit-maximizing firm should produce a level of output where marginal revenue is equal to marginal cost.
True
Firms that sell commodities on markets that are imperfectly competitive face downward-sloping demand curves.
True
If a firm in a perfectly competitive industry charges a higher price than that charged by other firms in the industry it will be unable to sell any of its output.
True
If a firm is small, produces a differentiated good for which there are many close substitutes, and it is easy to enter and exit the industry, then the firm is a monopolistic competitor.
True
If a monopolist earns $5,000 when it sells 100 units of output and $5,025 when it sells 101 units of output, then the marginal revenue of the 101st unit is $25.
True
If a monopolistically competitive firm is in long-run equilibrium, then its short-run average total cost curve is tangent to its demand curve.
True
If a monopolists has a linear demand curve, then it has linear marginal revenue curve.
True
If a perfectly competitive firm is in long-run equilibrium then market price is equal to short-run marginal cost, short-run average total cost, long-run marginal cost, and long-run average total cost.
True
If a perfectly competitive firm is in long-run equilibrium, then it is earning an economic profit of zero.
True
If an imperfectly competitive firm has a linear demand curve, then its marginal revenue curve has a quantity intercept that is half that of the demand curve.
True
If an imperfectly competitive firm has a linear demand curve, then its marginal revenue curve has the same price intercept as its demand curve.
True
If firms in a perfectly competitive industry are earning economic profits greater than zero, then more firms will enter the industry.
True
If the firms in an industry are price takers, then every firm in the industry faces a horizontal demand curve.
True
In most cases, a monopolistically competitive market can be adequately approximated by the perfectly competitive model or the oligopoly model.
True
In the long run, monopolistically competitive firms earn zero economic profit.
True
Market structure refers to the competitive environment in which the buyers and sellers of a product operate.
True
Monopolistically competitive firms face a downward sloping demand curve.
True
Monopolistically competitive firms operate with excess capacity.
True
Monopsony is a market structure in which there is a single buyer of a commodity or input for which there are no close substitutes.
True
Oligopoly is a market structure in which there are few sellers of a product and additional sellers cannot easily enter the industry.
True
One problem with the theory of monopolistic competition is that it is difficult to define a market and to identify the firms that comprise it.
True
Product price on a competitive market is determined by the intersection of the market demand curve with the market supply curve.
True
Selling expenses include any marketing expenditures that are intended to increase the demand for a product.
True
The combination of product homogeneity and perfect knowledge ensure that a single price will prevail on a perfectly competitive market.
True
The demand curve faced by a perfectly competitive firm is horizontal.
True
The difference between the total amount that consumers would be willing to pay for a given level of consumption and the amount that they actually have to pay is called consumers' surplus
True
The efficient market hypothesis asserts that the price of a share of a firm's stock reflects the value implied by available information about the profitability of the firm.
True
The shut-down point of a perfectly competitive firm is at the minimum point on its short-run average variable cost curve.
True
When compared to perfect competition, monopoly results in a deadweight loss.
True
an increase in the U.S. demand for British products would tend to cause an appreciation of the British pound.
True
A market that is monopolistically competitive will tend to have fewer firms than would be the case if the same markets was perfectly competitive.
False
A monopolist will shut down in the short run if price is everywhere less than average total cost.
False
A natural monopoly is one that results from exclusive control of a crucial natural resource.
False
A perfectly competitive firm's demand curve is above its marginal revenue curve.
False
Appreciation of a country's currency tends to increase the demand for the country's exports.
False
As more firms enter a monopolistically competitive industry, the market supply curve shifts to the right.
False
Commodities that sell for the same price are referred to as homogeneous.
False
Economists define a market as a place where buyers go to purchase units of a commodity.
False
If a market is perfectly competitive, then the market demand curve must be infinitely price elastic.
False
If a monopolists is in short-run equilibrium, it must be in long-run equilibrium.
False
If a perfectly competitive firm is producing a level of output where its marginal cost is greater than market price, it should raise its price.
False
If a perfectly competitive firm is producing a level of output where price is equal to marginal cost and greater than average variable cost, then it should cease production in the short run.
False
If more firms enter a perfectly competitive industry, market equilibrium price will increase.
False
If profit maximizing firms in a perfectly competitive industry are producing 14,000 units per day, but can only sell 12,000 units per day at the current market price of $23, then the market equilibrium price must be greater than $23
False
If profit maximizing firms in a perfectly competitive industry will produce 14,000 units per day if the market price is $23 and consumers will purchase 14,000 units per day if the market price is $20, then the market equilibrium quantity must be greater than 14,000.
False
In general, if a perfectly competitive industry is taken over by a monopolist, it will charge a lower price and produce a larger quantity of output.
False
Monopolistic competition is most common in the manufacturing sector.
False
Monopolistically competitive firms are price takers
False
Monopolistically competitive firms attempt to minimize selling expenses.
False
Monopolists always make economic profits.
False
Monopolists are price takers.
False
Monopoly is a market structure in which there is only one buyer of a product for which there are no close substitutes.
False
Most commodities are traded on perfectly competitive markets.
False
Most markets are either perfectly competitive or monopolized.
False
Product variation is the result of quality control problems.
False
The only choice available to a perfectly competitive firm that is producing efficiently is what price to charge in order to maximize profits.
False
The short-run supply curve for a monopolistically competitive firm is identical to the upward-sloping portion of the firm's marginal cost curve above average variable cost.
False
The supply curve of a perfectly competitive firm is identical to the portion of its marginal cost curve that is above its average total cost curve.
False
Under perfect competition, changes in market supply do not affect market price.
False
A firm should increase expenditures on marketing and product variation up to the point where an additional dollar spent generates a marginal revenue of no less than one dollar.
True
