Test 3
A firm that fades a downward sloping demand curve is...
A price setter
A monopolist is defined as
A single supplier of a good or service for which there is no close substitute.
Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC=$6.00; AVC=$4.00; MC=$3.50. The firm should
shut down
Which is always true at the firm's profit-maximizing rate of production?
Marginal Revenue = Marginal Cost
In order for a firm to receive monopoly profits, there must be...
barriers to market entry
A perfectly elastic demand function
is characteristic of an individual firm operating in a perfectly competitive market.
If a monopolist wishes to increase its output and quantity sold,
it must reduce its price, so its marginal revenue is less than its price
If a firm in a perfectly competitive market raises its prices,
it will sell nothing
When a firm is operating at an output rate at which total revenue equals total costs, this is called...
its breakeven point
An implication of the downward sloping demand curve for a monopolistic competitive firm is that...
its marginal revenue curve slopes downward but lies above the demand curve.
Compared to perfectly competitive firms, the demand curve for a monopolist will be...
less elastic
If there are no barriers to entry into an industry
long-run economic profits must be zero.
The short-run break-even price is the point at which
marginal cost, average total cost, and marginal revenue are all equal
For a perfectly competitive firm, profit maximization occurs when...
marginal revenue = marginal cost
If a firm is producing an output rate at which marginal cost is greater than price, the firm...
should reduce its output level
A monopolist's demand curve is...
the industry demand curve
The monopolists marginal revenue is less than price since
Additional units can only be sold if the price is lowered on all units sold
Which of the following is NOT a characteristic of monopolistic competition?
Barriers to entry into the market
For a firm in a perfectly competitive industry, the demand curve for its own product is...
Horizontal
Which of the following is NOT a characteristic of a perfectly competitive market?
It is difficult for a firm to enter or leave the market
The perfectly competitive firm cannot influence the market price because...
Its production is too small to affect the market
For a firm in a perfectly competitive industry, which of the following is TRUE?
MR = P
Which of the following conditions is true for a monopolist?
MR<P
In the short-run, a firm should shut down when...
P<AVC
When a firm is earning zero economic profits
P=ATC
For a perfectly competitive firm, the short-run break-even point occurs at the level of output where...
P=MC=ATC
The demand curve for a perfectly competitive industry is...
downward sloping
The demand curve for the product of a monopolistic competitor is...
downward sloping
At the short-run break-even point, the perfectly competitive firm is...
earning zero economic profits