Economics test 2, chapter 8

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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


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