Microeconomics
The complete description of a competitive firm's supply curve is as follows: The competitive firm's short-run supply curve is that portion of the average variable cost curve that lies above marginal cost
False
Natural monopolies differ from other forms of monopoly because they are not subject to barriers to entry.
False
Patent and copyright laws are major sources of natural monopolies.
False
Profit-maximizing firms enter a competitive market when, for existing firms in that market, total revenue exceeds fixed costs.
False
When buyers in a competitive market take the selling price as given, they are said to be market entrants
False; Price Taker's
A long-run supply curve that is flatter than a short-run supply curve results from the fact that firms can enter and exit a market more easily in the long run than in the short run.
True
A market is competitive if each buyer is small compared to the market and each seller is small compared to the market
True
A monopoly has the ability to set the price of its product at whatever level it desires
True
Bill owns the only grocery store in a small community that lies 200 miles from the nearest city, this represents a monopoly situation.
True
Firms have difficulty entering the market, this is NOT a characteristic of a perfectly competitive market
True
For a competitive firm, Profit = Total revenue - Total cost.
True
For a firm in a perfectly competitive market, the price of the good is always equal to marginal revenue.
True
For a monopolist, profit is determined by Profit = Total Revenue - Total Cost
True
For a profit-maximizing monopolist, P > MR = MC
True
If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then a one-unit increase in output will increase the firm's profit.
True
A competitive firm is a price maker and a monopoly is a price taker.
False
A government-created monopoly arises when government spending in a certain industry gives rise to monopoly power.
False
A monopolist's average revenue is always equal to marginal revenue.
False
A monopoly's marginal cost will be less than its average fixed cost.
False
A natural monopoly occurs when the product is sold in its natural state (such as water or diamonds).
False
A profit-maximizing monopolist will produce the level of output at which average revenue is equal to average total cost.
False
Controlling the price of its goods is an impossible feat for a monopolist to accomplish.
False
Economists assume that monopolists behave as cost minimizers.
False
Firms that shut down in the short run still have to pay their variable costs.
False
For a competitive firm, average revenue equals the price of the good, but marginal revenue is different.
False
If a firm in a perfectly competitive market triples the number of units of output sold, then total revenue will more than triple.
False
If a profit-maximizing monopolist faces a downward-sloping market demand curve, its average revenue is less than the price of the product.
False
If marginal cost exceeds marginal revenue, the firm is most likely to be at a profit-maximizing level of output
False
In a perfectly competitive market, the process of entry and exit will end when, for firms in the market, price is equal to average variable cost
False
In order to sell more of its product, a monopolist must sell to the government.
False
Marginal revenue for a monopolist is computed as average revenue divided by quantity sold.
False
The decision to shut down and the decision to exit are both short-run decisions , this statement is correct regarding a firm's decisionmaking
False
The defining characteristic of a natural monopoly is constant marginal cost over the relevant range of output.
False
The entry of new firms into a competitive market will increase market supply and increase market prices.
False
The key difference between a competitive firm and a monopoly firm is the ability to select the level of competition in the market.
False
The market demand curve for a monopolist is typically unitary elastic at the point of profit maximization.
False
The monopolist's profit- maximizing quantity of output is determined by the intersection of the marginal cost and demand.
False
The short-run supply curve for a firm in a perfectly competitive market is likely to be horizontal
False
When a firm operates under conditions of monopoly, its price is not constrained.
False
When a monopolist increases the amount of output that it produces and sells, its average revenue increases and its marginal revenue increases.
False
When a perfectly competitive firm makes a decision to shut down, it is most likely that marginal cost is above average variable cost
False
When marginal revenue equals marginal cost, the firm should increase the level of production to maximize its profit
False
When new firms have an incentive to enter a competitive market, their entry will increase the price of the product
False
When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is downward sloping.
False
When total revenue is less than variable costs, a firm in a competitive market will continue to operate as long as average revenue exceeds marginal cost
False
Whenever a perfectly competitive firm chooses to change its level of output, holding the price of the product constant, its marginal revenue increases if MR < ATC and decreases if MR > ATC.
False
A firm will exit a market if, for all positive levels of output, its total revenue is less than its total cost.
True
In a competitive market, the actions of any single buyer or seller will have a negligible impact on the market price.
True
In a market that allows free entry and exit, the process of entry and exit ends when, for the typical firm in the market, profit is zero.
True
In the long run all of a firm's costs are variable. In this case the exit criterion for a profit-maximizing firm is price < average total cost
True
The additional revenue a firm in a competitive market receives if it increases its production by one unit equals its marginal revenue.
True
The assumption of a fixed number of firms is appropriate for analysis of the short run, but not the long run.
True
The costs of production make a single firm more efficient than a large number of firms, this is a primary source of barriers to entry
True
When a firm has little ability to influence market prices it is said to be in a competitive market.
True