Resource Econ Test 3
A firm operating in a competitive market will stay in business in the short run so long as the market price exceeds the firm's average total cost; otherwise, the firm will shut down. True or False
False
A monopolist produces an output level where marginal revenue equals marginal cost and charges a price where marginal cost equals average total cost True or False
False
Diminishing marginal productivity implies decreasing total product True or False
False
In the short run, if the market price is below the firm's average total cost of production, the firm will always shut down True or False
False
When an individual firm in a competitive market increases its production, it is likely that the market price will fall. True or False
False
Whenever firms in a perfectly competitive market produce the output level where marginal revenue equals marginal cost, we know that the firm is earning an economic profit True or False
False
For a typical firm, fixed costs increase in direct proportion to the increases in output. True or False
False
Variable costs usually change as the firm alters the quantity of output produced. True or False
True
When a monopolist increases the quantity that it sells, price decreases, which, all else equal, decreases total revenue; this is called the price effect. True or False
True
Price discrimination can increase both the monopolist's profits and society's welfare. True or False
True
A monopolist does not have a supply curve because the firm's decision about how much to supply is impossible to separate from the demand curve it faces True or False
True
Economies of scale often arise because higher production levels allow specialization among workers. True or False
True
For a firm operating in a perfectly competitive industry, marginal revenue and average revenue are equal. True or False
True
If an industry exhibits economies of scale, one larger firm may be able to produce goods at a lower long-run average cost than two smaller firms. True or False
True
In the long run, a competitive market with 1,000 identical firms will experience an equilibrium price equal to the minimum of each firm's average total cost. True or False
True