ECON final exam

If a competitive firm doubles its output, its total revenue

doubles.

For a competitive firm, marginal revenue is

equal to the price of the good sold.

Which of the following markets would most closely satisfy the requirements for a competitive market?

gold bullion.

A firm whose average total cost continually declines at least to the quantity that could supply the entire market is known as a

natural monopoly.

A monopolist maximizes profit by producing the quantity at which

marginal revenue equals marginal cost.

When fixed costs are ignored because they are irrelevant to a business's production decision, they are called

sunk costs.

Assume a firm in a competitive industry is producing 800 units of output, and it sells each unit for $6. Its average total cost is $4. Its profit is

$1,600.

True statements about price discrimination.

- Price discrimination increases a monopolist's profits. - For a monopolist to engage in price discrimination, buyers must be unable to engage in arbitrage. - Price discrimination requires that the seller be able to separate buyers according to their willingness to pay. - Price discrimination can raise economic welfare.

Barriers to entry in a monopolized market.

- The government gives a single firm the exclusive right to produce some good. - The costs of production make a single producer more efficient than a large number of producers. - A key resource is owned by a single firm.

characteristics of a competitive market

- There are many buyers and sellers in the market. - The goods offered for sale are largely the same. - Firms can freely enter or exit the market.

Which of the following is not a barrier to entry in a monopolized market?

A single firm is very large.

Which of the following can defeat the profit-maximizing strategy of price discrimination?

Arbitrage.

Which of the following is not a characteristic of a competitive market?

Firms generate small but positive economic profits in the long run.

Which of the following statements about price and marginal cost in competitive and monopolized markets is true?

In competitive markets, price equals marginal cost; in monopolized markets, price exceeds marginal cost.

Which of the following statements is correct?

Only for competitive firms does average revenue equal marginal revenue.

Which of the following statements about price discrimination is not true?

Perfect price discrimination generates a deadweight loss.

Which of the following represents the firm's short-run condition for shutting down?

Shut down if TR < VC

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then

a one-unit decrease in output will increase the firm's profit.

Which of the following statements is true?

When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price.

The process of buying a good in one market at a low price and selling the good in another market for a higher price in order to profit from the price difference is known as

arbitrage.

In the long run, some firms will exit the market if the price of the good offered for sale is less than

average total cost.

The fundamental source of monopoly power is

barriers to entry.

When a monopolist produces an additional unit, the marginal revenue generated by that unit must be

below the price because the price effect outweighs the output effect.

Price discrimination

can maximize profits if the seller can prevent the resale of goods between customers.

Compared to a perfectly competitive market, a monopoly market will usually generate

higher prices and lower output.

The purpose of antitrust laws is to

increase competition in an industry by preventing mergers and breaking up large firms.

If marginal revenue exceeds marginal cost, a monopolist should

increase output.

If a competitive firm is producing a level of output where marginal revenue exceeds marginal cost, the firm could increase profits if it

increased production.

A firm that shuts down temporarily has to pay

its fixed costs but not its variable costs.

The competitive firm maximizes profit when it produces output up to the point where

marginal cost equals marginal revenue.

Cengage Learning is a monopolist in the production of your textbook because

the government has granted Cengage Learning exclusive rights to produce this textbook.

A natural monopoly occurs when

there are economies of scale over the relevant range of output.

A monopoly is able to continue to generate economic profits in the long run because

there is some barrier to entry to that market.

The inefficiency associated with monopoly is due to

underproduction of the good.

A grocery store should close at night if the

variable costs of staying open are greater than the total revenue due to staying open.