Micro Econ test 3

question

For a perfectly competitive firm, price is identical to revenue at every quantity

answer

TRUE

question

Firms in a perfectly competitive market achieve both allocative & productive efficiency in the short run

answer

FALSE

question

allocative efficiency

answer

A state of the economy in which production is in accordance with consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to society equal to the marginal cost of producing it

question

productive efficiency

answer

a situation in which a good or service is produced at the lowest possible cost

question

marginal benefit

answer

the additional benefit to a consumer from consuming one more unit of a good or service

question

Perfectly competitive firms are sometimes called price makers because they have significant control over product price.

answer

FALSE

question

Consumers benefit from market exchange when the maximum price they are willing to pay for a unit of a good is less than what they usually pay.

answer

FALSE

question

In a perfectly competitive market, what can one farmer do to change the market price?

answer

The firm cannnot change market price

question

Perfectly competitive firms will leave the industry that they are operating in if they _____

answer

Are unable to cover their variable costs

question

variable costs

answer

costs that vary with the quantity of output produced

question

If Harry's Blueberries, a perfectly competitive firm, shuts down in the short run, Harry must pay _____

answer

Only the fixed cost of production

question

To achieve allocative efficiency, firms _____

answer

Produce the output consumers value most

question

In the short run, a firm will produce a positive amount of output as long as _____

answer

Price exceeds average variable cost

question

MOST likely to be a perfect competitive firm

answer

A farm that grows soybeans

question

A perfectly competitive firm is currently producing at a point where price is $10 and both marginal cost and average variable cost are $7. To maximize profit or minimize loss in the short run, this firm should _____

answer

Increase it's output

question

Monopolists always earn positive short-run economic profit.

answer

False

question

A natural monopoly emerges from legal restrictions imposed by a government

answer

False

question

Rent-seeking activities are socially wasteful because they use scarce resources but do not add to society's output

answer

True

question

revenue

answer

income

question

A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total cost curve.

answer

True

question

Which of the following factors explains the difference in long-run profits earned by a monopolist and a perfectly competitive firm?

answer

There are no barriers to entry in perfect competition

question

A non-discriminating monopolist observes that marginal revenue is $23 and marginal cost is $30 at its present output level. In order to maximize profit, it should _____

answer

Raise price AND lower output

question

marginal revenue

answer

the additional income from selling one more unit of a good; sometimes equal to price

question

Which of the following can be concluded about a monopolist whose marginal revenue is zero for a particular output level?

answer

Total revenue earned by the monopolist is at its maximum at that output level.

question

Why would a monopolist sort customer by age or separate customers in time?

answer

to prevent those who pay the lower price from reselling the product to those paying the higher price

question

When compared to firms in perfect competition, monopolists tend to charge ___

answer

Higher prices and offer lower quantites

question

Suppose a single firm supplies all the ceramic windlasses in the United States. The demand curve that the firm faces is _____

answer

Elastic only at the profit madximizing output

question

price elasticity of demand

answer

a measure of the sensitivity of demand to changes in price

question

price elasticity of supply

answer

the responsiveness of the quantity supplied to a change in price, measured by dividing the percentage change in the quantity supplied of a product by the percentage change in the product's price

question

Which of the following does a monopoly control that a perfectly competitive firm does not control?

answer

Price

question

The demand curve a monopolist faces is _____

answer

The same as the market demand curve

question

demand curve

answer

a graph of the relationship between the price of a good and the quantity demanded

question

market demand curve

answer

the demand curve that shows the quantities demanded by everyone who is interested in purchasing the product

question

If a firm is deciding how much output to produce and sell in a perfectly competitive market, and if the price of the good is greater than its marginal cost,

answer

More should be produced

question

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

answer

Higher; lower

question

Oligopoly

answer

A market structure in which a few large firms dominate a market

question

The defining characteristic of oligopoly is product differentiation.

answer

False

question

game theory

answer

the study of how people behave in strategic situations

question

Game theory provides us with a general approach to understanding the behavior of firms when their choices are interdependent.

answer

True

question

A group of firms that agree to coordinate their production and pricing decisions to reap monopoly profit is called an oligopoly.

answer

False

question

Cartel

answer

a formal organization of producers that agree to coordinate prices and production

question

Cartels are inherently unstable

answer

True

question

Which of the following is not considered a barrier to entry?

answer

Perfect price discrimination

question

An agreement among firms in the industry to divide the market and fix the price is called _____

answer

Collusion

question

A common feature of monopolistic competition, pure monopoly, and perfect competition is that ___

answer

They all have a profit maximizing condition

question

Collusion among firms to raise prices is rare in monopolistically competitive markets because _____

answer

There are too many firms

question

What does each firm have to consider in the oligopolistic industry?

answer

Rising long run average cost curve

question

In both monopolistic competition and a non-price-discriminating monopoly, _____

answer

Marginal revenue lies below the demand curve

1 of 48

question

For a perfectly competitive firm, price is identical to revenue at every quantity

answer

TRUE

question

Firms in a perfectly competitive market achieve both allocative & productive efficiency in the short run

answer

FALSE

question

allocative efficiency

answer

question

productive efficiency

answer

a situation in which a good or service is produced at the lowest possible cost

question

marginal benefit

answer

the additional benefit to a consumer from consuming one more unit of a good or service

question

Perfectly competitive firms are sometimes called price makers because they have significant control over product price.

answer

FALSE

question

Consumers benefit from market exchange when the maximum price they are willing to pay for a unit of a good is less than what they usually pay.

answer

FALSE

question

In a perfectly competitive market, what can one farmer do to change the market price?

answer

The firm cannnot change market price

question

Perfectly competitive firms will leave the industry that they are operating in if they _____

answer

Are unable to cover their variable costs

question

variable costs

answer

costs that vary with the quantity of output produced

question

If Harry's Blueberries, a perfectly competitive firm, shuts down in the short run, Harry must pay _____

answer

Only the fixed cost of production

question

To achieve allocative efficiency, firms _____

answer

Produce the output consumers value most

question

In the short run, a firm will produce a positive amount of output as long as _____

answer

Price exceeds average variable cost

question

MOST likely to be a perfect competitive firm

answer

A farm that grows soybeans

question

answer

Increase it's output

question

Monopolists always earn positive short-run economic profit.

answer

False

question

A natural monopoly emerges from legal restrictions imposed by a government

answer

False

question

Rent-seeking activities are socially wasteful because they use scarce resources but do not add to society's output

answer

True

question

revenue

answer

income

question

A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total cost curve.

answer

True

question

Which of the following factors explains the difference in long-run profits earned by a monopolist and a perfectly competitive firm?

answer

There are no barriers to entry in perfect competition

question

A non-discriminating monopolist observes that marginal revenue is $23 and marginal cost is $30 at its present output level. In order to maximize profit, it should _____

answer

Raise price AND lower output

question

marginal revenue

answer

the additional income from selling one more unit of a good; sometimes equal to price

question

Which of the following can be concluded about a monopolist whose marginal revenue is zero for a particular output level?

answer

Total revenue earned by the monopolist is at its maximum at that output level.

question

Why would a monopolist sort customer by age or separate customers in time?

answer

to prevent those who pay the lower price from reselling the product to those paying the higher price

question

When compared to firms in perfect competition, monopolists tend to charge ___

answer

Higher prices and offer lower quantites

question

Suppose a single firm supplies all the ceramic windlasses in the United States. The demand curve that the firm faces is _____

answer

Elastic only at the profit madximizing output

question

price elasticity of demand

answer

a measure of the sensitivity of demand to changes in price

question

price elasticity of supply

answer

the responsiveness of the quantity supplied to a change in price, measured by dividing the percentage change in the quantity supplied of a product by the percentage change in the product's price

question

Which of the following does a monopoly control that a perfectly competitive firm does not control?

answer

Price

question

The demand curve a monopolist faces is _____

answer

The same as the market demand curve

question

demand curve

answer

a graph of the relationship between the price of a good and the quantity demanded

question

market demand curve

answer

the demand curve that shows the quantities demanded by everyone who is interested in purchasing the product

question

If a firm is deciding how much output to produce and sell in a perfectly competitive market, and if the price of the good is greater than its marginal cost,

answer

More should be produced

question

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

answer

Higher; lower

question

Oligopoly

answer

A market structure in which a few large firms dominate a market

question

The defining characteristic of oligopoly is product differentiation.

answer

False

question

game theory

answer

the study of how people behave in strategic situations

question

Game theory provides us with a general approach to understanding the behavior of firms when their choices are interdependent.

answer

True

question

A group of firms that agree to coordinate their production and pricing decisions to reap monopoly profit is called an oligopoly.

answer

False

question

Cartel

answer

a formal organization of producers that agree to coordinate prices and production

question

Cartels are inherently unstable

answer

True

question

Which of the following is not considered a barrier to entry?

answer

Perfect price discrimination

question

An agreement among firms in the industry to divide the market and fix the price is called _____

answer

Collusion

question

A common feature of monopolistic competition, pure monopoly, and perfect competition is that ___

answer

They all have a profit maximizing condition

question

Collusion among firms to raise prices is rare in monopolistically competitive markets because _____

answer

There are too many firms

question

What does each firm have to consider in the oligopolistic industry?

answer

Rising long run average cost curve

question

In both monopolistic competition and a non-price-discriminating monopoly, _____

answer

Marginal revenue lies below the demand curve

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Micro Econ test 3

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