Perfect compaction
Under perfect competition, changes in market supply do not affect market price.
False
59) Which of the following is not a type of market structure?
Competitive monopoly.
Monopolistically competitive firms are price takers
F
11) Perfect competition is characterized by all of the following EXCEPT
considerable advertising by individual firms
5) Zoe's Bakery determines that P < ATC and P > AVC. Zoe should:
continue to operate even though she is experiencing an economic loss.
50) Firms use marketing to
convince customers that their product is worth its price.
34) Which barrier to entry is an exclusive right granted to the author or composer of a literary, musical, dramatic or artistic work?
copyright
52) If a monopolistically competitive seller can convince buyers that its product is of better quality and value than products sold by rival firms
demand increases.
56)If you have found the percentage of the value of sales accounted for by the four largest firms in an industry, you have found the
four-firm concentration ratio.
49) Firms use marketing to
influence a consumer's buying decision.
The long-run supply curve of a perfectly competitive firm
is equal to that portion of the long-run marginal cost curve that is above the relevant short-run average total cost curve..
25) A monopoly is a market with
one supplier
3) The demand curve for a perfectly competitive firm is:
perfectly elastic
30) Which of the following would create a natural monopoly?
technology enabling a single firm to produce at a lower average cost than two or more firms
33) Which of the following is the best example of a natural monopoly?
the cable television company in your hometown
40) In monopolistic competition, each firm supplies a small part of the market. This occurs because
there are a large number of firms.
37) Recently in a small city, building contractors lobbied the city council to pass a law requiring all people working on residential dwellings be licensed by the city. Why would the contractors lobby for this requirement?
to create a legal barrier to entry
19) In a perfectly competitive market, the type of decision a firm has to make is different in the short run than in the long run. Which of the following is an example of a perfectly competitive firm's long-run decision?
whether or not to enter or exit an industry
Product price on a competitive market is determined by the intersection of the market demand curve with the market supply curve.
T
Selling expenses include any marketing expenditures that are intended to increase the demand for a product.
T
The combination of product homogeneity and perfect knowledge ensure that a single price will prevail on a perfectly competitive market.
T
The demand curve faced by a perfectly competitive firm is horizontal.
T
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.
T
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.
T
The shut-down pointof a perfectly competitive firm is at the minimum point on its short-run average variable cost curve.
T
When compared to perfect competition, monopoly results in a deadweight loss.
T
Which of the following industries is most likely to be monopolistically competitive?
The car repair industry.
27) Which of the following statements is correct?
The market demand and the firm's demand are the same for a monopoly.
60) If the market demand curve for a commodity has a negative slope then the market structure must be
The market structure cannot be determined from the information given..
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
Firms that sell commodities on markets that are imperfectly competitive face downward-sloping demand curves.
True
If the firms in an industry are price takers, then every firm in the industry faces a horizontal demand curve.
True
Market structure refers to the competitive environment in which the buyers and sellers of a product operate.
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
A depreciation of the U.S. dollar relative to foreign currencies will make
U.S. exports less expensive in foreign countries..
31) If the technology for producing a good enables one firm to meet the entire market demand at a lower price than two or more firms could, then that firm has
a natural monopoly.
48) Marketing consists of what?
advertising and packaging
Product variation refers to
an activity undertaken by a firm to increase demand..
If a firm sells its output on a market that is characterized by few sellers and many buyers and limited long-run resource mobility, then the firm is
an oligopolist
If one perfectly competitive firm increases its level of output, market supply
and market price will both remain constant..
28)Which describes a barrier to entry?
anything that protects a firm from the arrival of new competitors
29)A barrier to entry is
anything that protects a firm from the arrival of new competitors.
4) If a perfectly competitive firm is producing a quantity where P < MC, then profit:
can be increased by decreasing production.
20) A price-taking firm
cannot influence the price of the product it sells.
46) A differentiated product has
close but not perfect substitutes.
44) Which of the following is an example of a monopolistically competitive industry?
colleges and universities
43) In an industry with a large number of firms,
collusion is impossible.
A natural monopolyrefers to a monopoly that is defended from direct competition by
economies of scale over a broad range of output..
The demand curve faced by a monopolistically competitive firm is
elastic
12) Which of the following is the best example of a perfectly competitive market?
farming
26) Firms face competition when the good they produce
has a close substitute.
1) Price takers are individuals in a market who:
have no ability to affect the price of a good in a market.
9) The market type known as perfect competition is
highly competitive and firms find it impossible to earn an economic profit in the long run.
18) In perfect competition, a firm maximizes profit in the short run by deciding
how much output to produce.
32) Which of the following goods is the best example of a natural monopoly?
natural gas
16) Which of the following market types has only a few competing firms?
oligopoly
36) Which of the following is NOT correct about patents?
patents enable a firm to be a permanent monopoly
10) Which of the following market types has all firms selling products so identical that buyers do not care from which firm they buy?
perfect competition
Marginal revenue is equal to price for which one of the following types of market structure?
perfect competition
61) If a firm sells its output on a market that is characterized by many sellers and buyers, a homogeneous product, unlimited long-run resource mobility, and perfect knowledge, then the firm is a
perfect competitor..
51) Firms use marketing to
persuade buyers that their product is superior to others.
A monopolized market is in long-run equilibrium when
production takes place where long-run marginal cost is equal to marginal revenue and price is not below long-run average cost..
17) In a perfectly competitive market, the type of decision a firm has to make is different in the short run than in the long run. Which of the following is an example of a perfectly competitive firm's short-run decision?
profit maximizing level of output
Which of the following types of firms is likely to be a monopolistic competitor?
restaurant
41) In monopolistic competition, the products of different sellers are assumed to be
similar but slightly different.
2) The market for breakfast cereal contains hundreds of similar products, such as Froot Loops, corn flakes, and Rice Krispies, that are considered to be different products by different buyers. This situation violates the perfect competition assumption of:
standardized product
53) If a monopolistically competitive seller can convince buyers that its product is of better quality and value than products sold by rival firms
the firm gains more control over its price.
21) A large number of sellers all selling an identical product implies which of the following?
the inability of any seller to change the price of the product
Which of the following is a differentiated product?
.All of the above are differentiated products..
57) Which of the following four-firm concentration ratios would be the best indication of a perfectly competitive industry?
0.25 percent
58) Which of the following four-firm concentration ratios is consistent with monopolistic competition?
25 percent
If more firms enter a perfectly competitive industry, market equilibrium price will increase.
F
Which of the following is a differentiated product?
A shirt..
7) In the short run, a perfectly competitive firm produces output and breaks even if:
A. the firm produces the quantity at which P = ATC
23) If demand for a seller's product is perfectly elastic, which of the following is correct?
All of the above answers are correct, There is no incentive to sell at a price below the market price. B) It will not sell any output at all if it tries to price its product above the market price. C) There are a very large number of perfect substitutes for the seller's product.
35) Patents
All of the above answers are correct.
When a perfectly competitive industry is in long-run equilibrium, all firms in the industry
All of the above are correct.
Which of the following is a criticism of the theory of monopolistic competition?
All of the above are correct.
Which of the following markets comes close to satisfying the assumptions of a perfectly competitive market structure?
All of the above come close to satisfying the assumptions of perfect competition..
54) If a monopolistically competitive seller can convince buyers that its product is of better quality and value than products sold by rival firms
C) demand becomes more inelastic.
55) If a monopolistically competitive seller can convince buyers that its product is of better quality and value than products sold by rival firms
D) all of the above occur.
47) As the degree of product differentiation increases among the products sold in a monopolistically competitive industry, which of the following occurs?
Each seller's demand becomes more inelastic.
A market that is monopolistically competitive will tend to have fewer firms than would be the case if the same market was perfectly competitive.
F
A monopolist will shut down in the short run if price is everywhere less than average total cost.
F
A natural monopoly is one that results from exclusive control of a crucial natural resource.
F
A perfectly competitive firm's demand curve is above its marginal revenue curve.
F
Appreciation of a country's currency tends to increase the demand for the country's exports.
F
As more firms enter a monopolistically competitive industry, the market supply curve shifts to the right.
F
Commodities that sell for the same price are referred to as homogeneous.
F
If a monopolist is in short-run equilibrium, it must be in long-run equilibrium.
F
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.
F
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.
F
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.
F
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.
F
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.
F
Monopolistic competition is most common in the manufacturing sector.
F
Monopolistically competitive firms attempt to minimize selling expenses.
F
Monopolists always make economic profits.
F
Monopolists are price takers.
F
Most commodities are traded on perfectly competitive markets
F
Product variation is the result of quality control problems.
F
The only choice available to a perfectly competitive firm that is producing efficiently is what price to charge in order to maximize profits.
F
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.
F
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.
F
If a market is perfectly competitive, then the market demand curve must be infinitely price elastic
False
Monopoly is a market structure in which there is only one buyer of a product for which there are no close substitutes.
False
Economists define a market as a place where buyers go to purchase units of a commodity.
False.
Which of the following is a characteristic of monopolistic competition?
Few sellers..
42) Which of the following is different about perfect competition and monopolistic competition?
Firms in monopolistic competition compete on their product's price as well as its quality and marketing.
6) Which of the following is true?
If price falls below average variable cost, the firm will shut down in the short run.
8) What is the difference between perfect competition and monopolistic competition?
In perfect competition, firms produce identical goods, while in monopolistic competition, firms produce slightly different goods.
Which of the following is a criticism of the theory of monopolistic competition?
It is difficult to define a monopolistically competitive market and to determine the firms and products that comprise it
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.
T
If an imperfectly competitive firm is producing a level of output where marginal cost is equal to marginal revenue, marginal revenue is below average variable cost, and price is equal to average total cost, then the firm
None of the above is correct..
The market demand curve for a perfectly competitive industry is QD = 12 - 2P. The market supply curve is QS = 3 + P. The market will be in equilibrium if
P = 3 and Q = 6..
Which of the following is a barrier to entry that typically results in monopoly?
Production of the industry's product requires a large initial capital investment
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.
T
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.
T
A monopolist's marginal revenue is below market price.
T
A perfectly competitive firm is in long-run equilibrium when all inputs are earning their opportunity costs.
T
A perfectly competitive firm maximizes profit by producing a level of output where marginal cost is equal to price.
T
A profit-maximizing monopolist will never produce a quantity that corresponds to a point on the inelastic portion of its demand curve.
T
All monopoly power that is based on barriers to entry is subject to decay in the long run that based on government franchise.
T
An increase in the U.S. demand for British products would tend to cause an appreciation of the British pound
T
An increase 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.
T
As firms leave a monopolistically competitive industry, the remaining firms' demand curves shift to the right and become less elastic.
T
Depreciation of a country's currency tends to make imports more expensive
T
Every profit-maximizing firm should produce a level of output where marginal revenue is equal to marginal cost.
T
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.
T
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.
T
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.
T
If a monopolist has a linear demand curve, then it has a linear marginal revenue curve.
T
If a monopolistically competitive firm is in long-run equilibrium, then its short-run average total cost curve is tangent to its demand curve.
T
If a perfectly competitive firm is in long-run equilibrium, then it is earning an economic profit of zero.
T
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.
T
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.
T
If an imperfectly competitive firm has a linear demand curve, then its marginal revenue curve has the same price intercept as its demand curve.
T
In most cases, a monopolistically competitive market can be adequately approximated by the perfectly competitive model or the oligopoly model.
T
In the long run, monopolistically competitive firms earn zero economic profit.
T
Monopolistically competitive firms face a downward-sloping demand curve.
T
Monopolistically competitive firms operate with excess capacity.
T
A monopolist produces 14,000 units of output and charges $14 per unit. Its marginal revenue is $8, its marginal cost is $7 and rising, its average total cost is $10, and its average variable cost is $9. The monopolist should
increase output, which will result in an increase in the firm's positive economic profit..
The short-run supply curve of a perfectly competitive firm
is equal to that portion of the short-run marginal cost curve that is above the average variable cost curve..
38) Ownership of a necessary input creates what type of barrier to entry?
legal barrier to entry
A perfectly competitive firm should reduce output or shut down in the short run if market price is equal to marginal cost and price is
less than average variable cost
In the short run, a monopolist will shut down if it is producing a level of output where marginal revenue is equal to short-run marginal cost and price is
less than average variable cost..
45) All of the following are examples of product differentiation in monopolistic competition EXCEPT
lower price.
22) Perfectly competitive firms are price takers because
many other firms produce identical products.
If an imperfectly competitive firm is producing a level of output where marginal cost is equal to marginal revenue, marginal revenue is below average variable cost, and price is equal to average total cost, then the firm is
minimizing short-run average total cost..
62) If a firm sells its output on a market that is characterized by a single seller and many buyers of a homogeneous product for which there are no close substitutes and barriers to long-run resource mobility, then the firm is
monopolist
15) Which of the following market types has a large number of firms that sell similar but slightly different products?
monopolistic competition
39) An industry with a large number of firms, differentiated products, and free entry and exit is called
monopolistic competition.
63) If a firm sells its output on a market that is characterized by many sellers and buyers, a differentiated product, and unlimited long-run resource mobility, then the firm is
monopolistic competitor..
14) Which of the following market types has the fewest number of firms?
monopoly
24) One of the requirements for a monopoly is that
there is a unique product with no close substitutes