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

answer

straight, upsloping line.

question

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue

answer

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 ______.

answer

downsloping; perfectly elastic

question

Which of the following is not a basic characteristic of pure competition?

answer

considerable nonprice competition

question

Which of the following industries most closely approximates pure competition?

answer

agriculture

question

Marignal revenue is the

answer

change in total revenue associated with the sale of one more unit of output.

question

A perfectly elastic demand curve implies that the firm

answer

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,

answer

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

answer

each seller supplies a negligible fraction of the total market.

question

Economists use the term imperfect competition to describe

answer

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

answer

realize a $30 economic profit.

question

Profit maximizing output is where

answer

MC=ATC

question

The MR = MC rule can be restated for a purely competitive seller as P = MC because

answer

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

answer

Marginal revenue and mariginal cost

question

On a per-unit basis, economic profit can be determined as the difference between

answer

product price and average total cost.

question

If a purely competitive firm shuts down in the short run,

answer

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

answer

Total variable costs

question

In the short run, a purely competitive seller will shut down if

answer

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

answer

produce because the resulting loss is less than its TFC.

question

A purely competitive firm's short-run supply curve is

answer

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

answer

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

answer

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?

answer

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

answer

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?

answer

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

answer

results in normal economic profit

question

The primary force encouraging the entry of new firms into a purely competitive industry is

answer

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?

answer

They are all barriers to entry

question

Which of the following is characteristic of a pure monopolist's demand curve?

answer

It is the same as the market demand curve

question

Pure monopoly refers to

answer

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

answer

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,

answer

the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.

question

Natural monopolies result from

answer

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

answer

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

answer

a higher price and produce a smaller output than a competitive firm.

question

Economic profit in the long run is

answer

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

answer

economic profit tends toward zero for both.

question

The economic inefficiencies of monopolistic competition may be offset by the fact that

answer

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

answer

this industry is monopolistically competitive.

question

Monopolistic competition means

answer

many firms producing differentiated products.

question

In monopolistically competitive markets, resources are

answer

underallocated because long-run equilibrium occurs where price exceeds marginal cost.

question

Nonprice competition refers to

answer

advertising, product promotion, and changes in the real or perceived characteristics of a product.

question

A monopolistically competitive firm's marginal revenue curve

answer

is downsloping and lies below the demand curve.

question

Oligopoly is more difficult to analyze than other market models because

answer

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

answer

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

answer

will be greater than 50 percent.

question

In which of these continuums of degrees of competition (lowest to highest) is oligopoly properly placed?

answer

pure monopoly, oligopoly, monopolistic competition, pure competition

question

Oligopolistic industries are characterized by

answer

a few dominant firms and substantial entry barriers.

question

Which of the following is the best example of oligopoly?

answer

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

answer

straight, upsloping line.

question

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue

answer

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 ______.

answer

downsloping; perfectly elastic

question

Which of the following is not a basic characteristic of pure competition?

answer

considerable nonprice competition

question

Which of the following industries most closely approximates pure competition?

answer

agriculture

question

Marignal revenue is the

answer

change in total revenue associated with the sale of one more unit of output.

question

A perfectly elastic demand curve implies that the firm

answer

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,

answer

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

answer

each seller supplies a negligible fraction of the total market.

question

Economists use the term imperfect competition to describe

answer

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

answer

realize a $30 economic profit.

question

Profit maximizing output is where

answer

MC=ATC

question

The MR = MC rule can be restated for a purely competitive seller as P = MC because

answer

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

answer

Marginal revenue and mariginal cost

question

On a per-unit basis, economic profit can be determined as the difference between

answer

product price and average total cost.

question

If a purely competitive firm shuts down in the short run,

answer

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

answer

Total variable costs

question

In the short run, a purely competitive seller will shut down if

answer

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

answer

produce because the resulting loss is less than its TFC.

question

A purely competitive firm's short-run supply curve is

answer

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

answer

P=MC

question

answer

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?

answer

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

answer

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?

answer

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

answer

results in normal economic profit

question

The primary force encouraging the entry of new firms into a purely competitive industry is

answer

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?

answer

They are all barriers to entry

question

Which of the following is characteristic of a pure monopolist's demand curve?

answer

It is the same as the market demand curve

question

Pure monopoly refers to

answer

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

answer

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,

answer

the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.

question

Natural monopolies result from

answer

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

answer

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

answer

a higher price and produce a smaller output than a competitive firm.

question

Economic profit in the long run is

answer

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

answer

economic profit tends toward zero for both.

question

The economic inefficiencies of monopolistic competition may be offset by the fact that

answer

consumers have increased product variety.

question

answer

this industry is monopolistically competitive.

question

Monopolistic competition means

answer

many firms producing differentiated products.

question

In monopolistically competitive markets, resources are

answer

underallocated because long-run equilibrium occurs where price exceeds marginal cost.

question

Nonprice competition refers to

answer

advertising, product promotion, and changes in the real or perceived characteristics of a product.

question

A monopolistically competitive firm's marginal revenue curve

answer

is downsloping and lies below the demand curve.

question

Oligopoly is more difficult to analyze than other market models because

answer

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

answer

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

answer

will be greater than 50 percent.

question

In which of these continuums of degrees of competition (lowest to highest) is oligopoly properly placed?

answer

pure monopoly, oligopoly, monopolistic competition, pure competition

question

Oligopolistic industries are characterized by

answer

a few dominant firms and substantial entry barriers.

question

Which of the following is the best example of oligopoly?

answer

automobile manufacturing

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Microeconomics final review

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