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# Microeconomics final review

question
In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.

For a purely competitive firm, total revenue graphs as a
straight, upsloping line.
question
If a firm in a purely competitive industry is confronted with an equilibrium price of \$5, its marginal revenue
will also be \$5.
question
The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______.
downsloping; perfectly elastic
question
Which of the following is not a basic characteristic of pure competition?
considerable nonprice competition
question
Which of the following industries most closely approximates pure competition?
agriculture
question
Marignal revenue is the
change in total revenue associated with the sale of one more unit of output.
question
A perfectly elastic demand curve implies that the firm
can sell as much output as it chooses at the existing price.
question
In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.

For a purely competitive firm,
the demand and marginal revenue curves will coincide.
question
Price is taken to be a "given" by an individual firm selling in a purely competitive market because
each seller supplies a negligible fraction of the total market.
question
Economists use the term imperfect competition to describe
those markets that are not purely competitive.
question
The accompanying table gives cost data for a firm that is selling in a purely competitive market. Given the \$75 product price, at its optimal output, the firm will
realize a \$30 economic profit.
question
Profit maximizing output is where
MC=ATC
question
The MR = MC rule can be restated for a purely competitive seller as P = MC because
each additional unit of output adds exactly its price to total revenue.
question
A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating
Marginal revenue and mariginal cost
question
On a per-unit basis, economic profit can be determined as the difference between
product price and average total cost.
question
If a purely competitive firm shuts down in the short run,
it will realize a loss equal to its total fixed costs.
question
A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its
Total variable costs
question
In the short run, a purely competitive seller will shut down if
price is less than average variable cost at all outputs.
question
A firm finds that at its MR = MC output, its TC = \$1,000, TVC = \$800, TFC = \$200, and total revenue is \$900. This firm should
produce because the resulting loss is less than its TFC.
question
A purely competitive firm's short-run supply curve is
upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve
question
In the short run, a purely competitive firm will always make an economic profit if
P=MC
question
Suppose the market for corn is a purely competitive, constant-cost industry that is in long-run equilibrium. Now assume that an increase in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price will be
the same as the initial equilibrium price, but the new industry output will be greater than the original output.
question
Which of the following distinguishes the short run from the long run in pure competition?
Firms can enter and exit the market in the long run but not in the short run.
question
Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm
should continue producing in the short run but leave the industry in the long run if the situation persists
question
Which of the following is true concerning purely competitive industries?
In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.
question
Long-run competitive equilibrium
results in normal economic profit
question
The primary force encouraging the entry of new firms into a purely competitive industry is
economic profits earned by firms already in the industry.
question
What do economies of scale, the ownership of essential raw materials, and patents have in common?
They are all barriers to entry
question
Which of the following is characteristic of a pure monopolist's demand curve?
It is the same as the market demand curve
question
Pure monopoly refers to
a single firm producing a product for which there are no close substitutes.
question
For a pure monopolist, the relationship between total revenue and marginal revenue is such that
marginal revenue is positive when total revenue is increasing, but marginal revenue becomes negative when total revenue is decreasing.
question
For an imperfectly competitive firm,
the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.
question
Natural monopolies result from
extensive economies of scale in production.
question
Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's
price and average total cost would be higher, but output would be lower.
question
Confronted with the same unit cost data, a monopolistic producer will charge
a higher price and produce a smaller output than a competitive firm.
question
Economic profit in the long run is
An important economic problem associated with pure monopoly is that, at the profit-maximizing outputs, resources are
question
An important similarity between a monopolistically competitive firm and a purely competitive firm is that
economic profit tends toward zero for both.
question
The economic inefficiencies of monopolistic competition may be offset by the fact that
consumers have increased product variety.
question
Suppose that total sales in an industry in a particular year are \$800 million and sales by the top four sellers are \$50 million, \$40 million, \$30 million, and \$30 million, respectively. We can conclude that
this industry is monopolistically competitive.
question
Monopolistic competition means
many firms producing differentiated products.
question
In monopolistically competitive markets, resources are
underallocated because long-run equilibrium occurs where price exceeds marginal cost.
question
Nonprice competition refers to
advertising, product promotion, and changes in the real or perceived characteristics of a product.
question
A monopolistically competitive firm's marginal revenue curve
is downsloping and lies below the demand curve.
question
Oligopoly is more difficult to analyze than other market models because
of mutual interdependence and the fact that oligopoly outcomes are less certain than in other market models.
question
The mutual interdependence that characterizes oligopoly arises because
each firm in an oligopoly depends on its own pricing strategy and that of its rivals.
question
If a product such as cement or bricks is costly to ship and, therefore, markets are very localized, the national concentration ratio for that industry
will be greater than 50 percent.
question
In which of these continuums of degrees of competition (lowest to highest) is oligopoly properly placed?
pure monopoly, oligopoly, monopolistic competition, pure competition
question
Oligopolistic industries are characterized by
a few dominant firms and substantial entry barriers.
question
Which of the following is the best example of oligopoly?
automobile manufacturing
1 of 49
question
In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.

For a purely competitive firm, total revenue graphs as a
straight, upsloping line.
question
If a firm in a purely competitive industry is confronted with an equilibrium price of \$5, its marginal revenue
will also be \$5.
question
The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______.
downsloping; perfectly elastic
question
Which of the following is not a basic characteristic of pure competition?
considerable nonprice competition
question
Which of the following industries most closely approximates pure competition?
agriculture
question
Marignal revenue is the
change in total revenue associated with the sale of one more unit of output.
question
A perfectly elastic demand curve implies that the firm
can sell as much output as it chooses at the existing price.
question
In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.

For a purely competitive firm,
the demand and marginal revenue curves will coincide.
question
Price is taken to be a "given" by an individual firm selling in a purely competitive market because
each seller supplies a negligible fraction of the total market.
question
Economists use the term imperfect competition to describe
those markets that are not purely competitive.
question
The accompanying table gives cost data for a firm that is selling in a purely competitive market. Given the \$75 product price, at its optimal output, the firm will
realize a \$30 economic profit.
question
Profit maximizing output is where
MC=ATC
question
The MR = MC rule can be restated for a purely competitive seller as P = MC because
each additional unit of output adds exactly its price to total revenue.
question
A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating
Marginal revenue and mariginal cost
question
On a per-unit basis, economic profit can be determined as the difference between
product price and average total cost.
question
If a purely competitive firm shuts down in the short run,
it will realize a loss equal to its total fixed costs.
question
A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its
Total variable costs
question
In the short run, a purely competitive seller will shut down if
price is less than average variable cost at all outputs.
question
A firm finds that at its MR = MC output, its TC = \$1,000, TVC = \$800, TFC = \$200, and total revenue is \$900. This firm should
produce because the resulting loss is less than its TFC.
question
A purely competitive firm's short-run supply curve is
upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve
question
In the short run, a purely competitive firm will always make an economic profit if
P=MC
question
Suppose the market for corn is a purely competitive, constant-cost industry that is in long-run equilibrium. Now assume that an increase in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price will be
the same as the initial equilibrium price, but the new industry output will be greater than the original output.
question
Which of the following distinguishes the short run from the long run in pure competition?
Firms can enter and exit the market in the long run but not in the short run.
question
Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm
should continue producing in the short run but leave the industry in the long run if the situation persists
question
Which of the following is true concerning purely competitive industries?
In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.
question
Long-run competitive equilibrium
results in normal economic profit
question
The primary force encouraging the entry of new firms into a purely competitive industry is
economic profits earned by firms already in the industry.
question
What do economies of scale, the ownership of essential raw materials, and patents have in common?
They are all barriers to entry
question
Which of the following is characteristic of a pure monopolist's demand curve?
It is the same as the market demand curve
question
Pure monopoly refers to
a single firm producing a product for which there are no close substitutes.
question
For a pure monopolist, the relationship between total revenue and marginal revenue is such that
marginal revenue is positive when total revenue is increasing, but marginal revenue becomes negative when total revenue is decreasing.
question
For an imperfectly competitive firm,
the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.
question
Natural monopolies result from
extensive economies of scale in production.
question
Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's
price and average total cost would be higher, but output would be lower.
question
Confronted with the same unit cost data, a monopolistic producer will charge
a higher price and produce a smaller output than a competitive firm.
question
Economic profit in the long run is
An important economic problem associated with pure monopoly is that, at the profit-maximizing outputs, resources are
question
An important similarity between a monopolistically competitive firm and a purely competitive firm is that
economic profit tends toward zero for both.
question
The economic inefficiencies of monopolistic competition may be offset by the fact that
consumers have increased product variety.
question
Suppose that total sales in an industry in a particular year are \$800 million and sales by the top four sellers are \$50 million, \$40 million, \$30 million, and \$30 million, respectively. We can conclude that
this industry is monopolistically competitive.
question
Monopolistic competition means
many firms producing differentiated products.
question
In monopolistically competitive markets, resources are
underallocated because long-run equilibrium occurs where price exceeds marginal cost.
question
Nonprice competition refers to
advertising, product promotion, and changes in the real or perceived characteristics of a product.
question
A monopolistically competitive firm's marginal revenue curve
is downsloping and lies below the demand curve.
question
Oligopoly is more difficult to analyze than other market models because
of mutual interdependence and the fact that oligopoly outcomes are less certain than in other market models.
question
The mutual interdependence that characterizes oligopoly arises because
each firm in an oligopoly depends on its own pricing strategy and that of its rivals.
question
If a product such as cement or bricks is costly to ship and, therefore, markets are very localized, the national concentration ratio for that industry
will be greater than 50 percent.
question
In which of these continuums of degrees of competition (lowest to highest) is oligopoly properly placed?
pure monopoly, oligopoly, monopolistic competition, pure competition
question
Oligopolistic industries are characterized by
a few dominant firms and substantial entry barriers.
question
Which of the following is the best example of oligopoly?
automobile manufacturing

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