Micro Test 3

Allocative efficiency is achieved when the production of a good occurs where

p=mc

A purely competitive seller is

price taker

The basic difference between pure competition and monopolistic competition is in the number of firms in the industry

False

Pure monopoly refers to

a single firm producing a product for which there are no are no close substitutes.

An increasing-cost industry is associated with

an upsloping long run supply curve

Barriers to entering an industry

are the basis for monopoly

If the entry or exit of firms does not affect the resource prices in an industry, we refer to it as a

constant cost industry

The process by which new firms and new products replace existing dominant firms and products is called

creative destruction

A constant-cost industry is one in which

100 units can be produced for 100$ then 150 can be produced 150$ 200 for 200 and so fourth

Competitive firms are price takers largely because of intensive advertising by their competitors

False

Efficiency or deadweight losses occur in purely competitive markets when P = MC = lowest ATC

False

In an unregulated monopoly at equilibrium, the output level is higher than the economically efficient level

False

Economists use the term imperfect competition to describe

Those markets are not purely competitive.

As long as its total revenues are greater than its total costs, a firm will earn positive economic profits

True

Marginal cost is a measure of the alternative goods that 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 discrimination will result in consumers with more elastic demand purchasing more of the good than when a single price is charged to all consumers in the market.

True

The long-run supply curve for a decreasing-cost industry is downsloping

True

The marginal revenue curve for a monopolist

becomes negative when output increases beyond some particular level.

The pure monopolist's demand curve is relatively elastic

in the price range where marginal revenue is positive.

A natural monopoly occurs when

long-run average cost decline continuously through the range of demand.

The quantitative difference between areas Q1bcQ2 and P1P2ba in the diagram measures

marginal revenue

Large minimum efficient scale of plant combined with limited market demand may lead to

natural monopoly

Pure monopolists may obtain economic profits in the long run because

of barriers of entry

Local electric or gas utility companies mostly operate in which market structure

pure monopoly

A competitive firm faces fixed costs even if it produces zero output. If it starts producing and selling some output, which of the following would happen

the firms total cost would increase and its losses may become larger

The term productive efficiency refers to

the production of a good at the lowest average total cost

The MR = MC rule applies

to firms in all type of industries

In the short run, a purely competitive firm that seeks to maximize profit will produce

where total revenue exceeds total cost by maximum amount

The representative firm in a purely competitive industry

will earn zero economic profit in the long run