Econ Exam 3 Ch.

In the long run, the perfectly competitive firm

earns only a normal profit.

A monopolist charges a price that is ________ and produces ________ than a perfect competitor.

higher; less

A perfectly competitive market has

homogeneous products.

The advertisement approach that allows a consumer to follow up directly to an advertising message is known as

interactive marketing.

If there are no barriers to entry into an industry,

long-run economic profits must be zero.

A monopolistically competitive firm finds its profit-maximizing rate of output by

marginal revenue and marginal cost.

Refer to the above figure. Profits for this firm are

negative.

If a constant-cost, perfectly competitive industry experiences an increase in the demand for its product, we would expect

only the quantity supplied of the product to increase.

The long-run equilibrium of a monopolistic competitor differs from the long-run equilibrium of a perfect competitor in that

the monopolistic competitor charges a higher price.

In the figure, the line segment A to B represents

the range of outputs over which the firm experiences relatively constant economies of scale.

The time period during which a firm's capital is fixed but its labor is variable is called

the short run.

The price elasticity of demand in a monopolistically competitive industry is highly elastic when

there are a lot of close substitutes.

The law of diminishing marginal product is not responsible for the shape of

total fixed cost curve.

If the above figure accurately portrays the market conditions for a given monopolist, we can be assured that the monopolist

will be forced to go out of business in the long run.

In the above figure, the total cost of producing the profit maximizing level of output is shown by rectangle

0P2BQ1.

Refer to the above table. What does total fixed cost equal at output level 2?

150

Suppose that one worker can produce 15 cookies, two workers can produce 35 cookies together, and three workers can produce 65 cookies together. What is the marginal product of the 2nd worker?

20 cookies

Refer to the above figure. Average variable costs are represented by curve

3

Which of the following statements is true about the planning horizon?

All inputs are variable.

The supply curve for a perfectly competitive firm in the short run is the portion of its

MC curve above its AVC curve.

Which of the following statements is true?

Since every good has some substitute, even if imperfect, the demand for a good produced by a monopolist will not have zero price elasticity.

Which of the following statements is true about the relationship between a firm's demand curve under perfect competition and monopoly?

Under perfect competition the demand curve is perfectly elastic while under monopoly the demand curve has elastic, unitary and inelastic portions.

Which of the following would NOT be considered a fixed cost of production?

Wages paid to labor

The portion of consumer surplus that would have existed in a perfectly competitive market but is unobtainable by anyone in society under a monopoly is known as

a deadweight loss.

Monopolistic competition means

a large number of firms producing differentiated products.

In the long run in a monopolistically competitive market, a firm will, in theory,

break even.

The effect of a tariff

can lead to a monopoly advantage for firms inside the U.S. since they become the sole suppliers inside the U.S.

Economic profits and losses are true market signals because they

convey information about where resources should flow into or out of, and they reward people who act on the information.

Which of the following will make price discrimination difficult for a monopolist?

The possibility of resale of the product

Which of the following statements is FALSE?

The profit-maximizing monopolist will always produce only along the inelastic portion of the demand curve, whereas equilibrium in a perfectly competitive industry always occurs along the elastic portion of the demand curve.

Marginal cost begins to rise when

diminishing marginal product begins.

Personalized advertising that uses postal mailings, phone calls, and e-mail messages is known as

direct marketing.

The demand curve for a perfectly competitive industry is

downward-sloping.

The long-run equilibrium for a firm in an information product industry is where

price equals average total cost.

If AVC is $6 when P = MC, a firm

should shut down if price is less than $6.

Marginal revenue equals

the change in total revenue from selling one more unit.

A firm should continue producing until

the cost of increasing output by one more unit equals the revenues obtainable from selling the extra unit.

When a firm has economic profits equal to zero

the firm is earning a normal rate of return on investment.

If a firm is experiencing diseconomies of scale, then

the long-run average cost curve is rising as output expands.