Micro Test III

_____ describes the market structure of monopoly.

A single firm producing all of the output for the industry.

Suppose the equilibrium price in a perfectly competitive industry is $100 and a firm in the industry charges $112. What will happen?

The firm will not sell any of it's output.

When compared to firms in perfect competition, monopolists tend to charge _____ prices and offer _____ quantities of output.

higher, lower.

Perfectly competitive firms respond to changing market conditions by varying their...

output.

The demand curve for the output of a perfectly competitive firm is...

perfectly elastic.

The practice of charging different prices to different consumers is...

price discrimination.

A characteristic of perfect competition that ensures that economic profit will be zero in the long run is...

that there is freedom of entry and exit in the market.

Marginal revenue is defined by...

the change in total revenue divided by the change in quantity.

What do monopolistic competition, pure monopoly, and perfect competition have in common?

the rule of profit maximization.

The demand curve a monopolist uses in making an output decision is...

the same as the market demand curve.

The main reason a monopolist can earn long-run economic profit, whereas a perfectly competitive firm cannot, is that...

there are no barriers to entry in perfect competition.

Homogeneous products are...

uniform or standardized.

If a perfectly competitive firm is incurring a short-run loss, it...

will continue to operate in the short run if its variable costs are covered.

What characteristic does perfect competition share with monopolistic competition?

zero long-run economic profit.

The Organization of Petroleum Exporting Countries is an example of...

a cartel.

Oligopolistic industries consist of...

a few interdependent firms.

A cartel is...

a group of monopolistically competitive firms which charge the same price.

Natural monopolies form when...

long-run average cost declines as a firm expands output.

The golden rule of profit maximization states that any firm maximizes profit by producing where

marginal revenue equals marginal cost.

For perfectly competitive firms, what is the relationship among market price (P), average revenue (AR), and marginal revenue (MR)?

P = AR = MR

Monopolistic competition is different from perfect competition because monopolistic competitors produce...

differentiated products.

Perfectly competitive firms are price takers because...

each firm is too small compared to the market to be able to affect price.

Each member of a cartel...

faces a temptation to cheat on the agreement because lowering its price slightly below the established price increase the firm's sales and profit.

It is harder to explain the behavior of firms in oligopoly than in other market structures because in oligopoly...

firms base their decisions on what their rivals do.

Collusion occurs when...

firms get together to maximize joint profits.

_____ is likely to be present in a perfectly competitive market.

firms producing identical products.