Practice quiz 5

Q: Refer to Figure 12.2.1, which shows a perfectly competitive firm's total revenue and total cost curves. Which one of the following statements is false ?

At an output of Q 2 units a day, the firm incurs an economic loss.

question

Perfect competition occurs in a market where there are many firms, each selling

answer

an identical product.

question

Consider Figure 13.3.2. Consider a perfectly competitive market. If the light grey area shows the consumer surplus, and the dark grey area shows the producer surplus, which graph correctly represents this market?

answer

(a)

question

Refer to Figure 13.2.4. Grannie's is the only cake bakery on Coastal Island. The graph shows Grannie's demand curve, marginal revenue curve, and marginal cost curve. Grannie's profit-maximizing price is ________ a cake and its profit-maximizing output is ________ cakes a week.

answer

$28; 12

question

A monopoly is a market with a single firm that

answer

produces a good or service for which no close substitute exists and which is protected by a barrier that prevents other firms from selling that good or service.

question

Consumer surplus is

answer

less in the case of a single-price monopoly than in the case of a perfectly competitive industry.

question

Which one of the following is an example of a natural barrier to entry of new firms into an industry?

answer

economies of scale

question

A natural monopoly exists when

answer

one firm can supply the entire market at a lower cost than two or more firms.

question

Refer to Figure 13.3.1. If this market were perfectly competitive, the output level would exceed the single-price monopoly output level by

answer

20 units.

question

Consider a perfectly competitive industry with long-run external economies. When demand increases permanently, the equilibrium price

answer

falls and the equilibrium quantity increases.

question

A single-price monopolist's demand curve

answer

is the same as the market demand curve.

question

Refer to Figure 13.2.1. This single-price monopoly produces ________ units per day and charges a price of $________ per unit.

answer

20; 75

question

When a perfectly competitive market is in long-run equilibrium

answer

all firms make zero economic profit.

question

Refer to Figure 12.4.1, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry. In the long run, market

answer

supply will decrease.

question

If firms in a perfectly competitive market are making an economic profit, new firms will enter. This entry shifts the industry

answer

supply curve rightward, and the market price falls.

question

In a perfectly competitive market, the market price is $8. An individual firm is producing the output at which MC = $8. AVC at that output is $10. What should the firm do to maximize its economic profit in the short run?

answer

Shut down.

question

In the price range above minimum average variable cost, a perfectly competitive firm's supply curve is

answer

the same as its marginal cost curve.

question

The slope of a perfectly competitive firm's demand curve is

answer

zero.

question

In which one of the following situations will a perfectly competitive firm make an economic profit?

answer

MR > ATC

question

Refer to Figure 12.2.1, which shows a perfectly competitive firm's total revenue and total cost curves. Which one of the following statements is false?

answer

At an output of Q2 units a day, the firm incurs an economic loss.

question

An example of a perfectly competitive industry is the

answer

wheat industry.

question

The shutdown point occurs at the point of minimum

answer

average variable cost.

question

Refer to Figure 12.3.2 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry, The firm is

answer

making an economic profit.

question

Suppose that the market in which bakeries compete is a perfectly competitive market. Which one of the following reasons does not explain why it is difficult for a bakery to make an economic profit in the long run?

answer

All bakeries are able to set the market price.

question

In monopolistic competition

answer

firms practice product differentiation.

question

Which one of the following statements about the sections of the kinked demand curve in Figure 15.2.1 is correct?

answer

AB assumes other firms will not match a price increase, while BC assumes other firms will match a price decrease.

question

Firm X is competing in an oligopolistic industry. When firm X increases its price

answer

the rival firm Y will increase its market share if firm Y keeps a constant price.

question

In monopolistic competition, each firm supplies a ________ part of the total industry output and its actions ________ the actions of the other firms.

answer

small; do not directly affect

question

The market structure in which natural or legal barriers prevent the entry of new firms and a small number of firms compete is

answer

oligopoly.

question

Which one of the following quotations best describes a dominant firm oligopoly?

answer

"Construction prices in this town seem to be always set by Big Jim's Dandy Construction Company."

question

If price falls below minimum average variable cost, the best a firm can do is

answer

stop production and incur a loss equal to total fixed cost.

1 of 30

question

Perfect competition occurs in a market where there are many firms, each selling

answer

an identical product.

question

answer

(a)

question

answer

$28; 12

question

A monopoly is a market with a single firm that

answer

produces a good or service for which no close substitute exists and which is protected by a barrier that prevents other firms from selling that good or service.

question

Consumer surplus is

answer

less in the case of a single-price monopoly than in the case of a perfectly competitive industry.

question

Which one of the following is an example of a natural barrier to entry of new firms into an industry?

answer

economies of scale

question

A natural monopoly exists when

answer

one firm can supply the entire market at a lower cost than two or more firms.

question

Refer to Figure 13.3.1. If this market were perfectly competitive, the output level would exceed the single-price monopoly output level by

answer

20 units.

question

Consider a perfectly competitive industry with long-run external economies. When demand increases permanently, the equilibrium price

answer

falls and the equilibrium quantity increases.

question

A single-price monopolist's demand curve

answer

is the same as the market demand curve.

question

Refer to Figure 13.2.1. This single-price monopoly produces ________ units per day and charges a price of $________ per unit.

answer

20; 75

question

When a perfectly competitive market is in long-run equilibrium

answer

all firms make zero economic profit.

question

Refer to Figure 12.4.1, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry. In the long run, market

answer

supply will decrease.

question

If firms in a perfectly competitive market are making an economic profit, new firms will enter. This entry shifts the industry

answer

supply curve rightward, and the market price falls.

question

answer

Shut down.

question

In the price range above minimum average variable cost, a perfectly competitive firm's supply curve is

answer

the same as its marginal cost curve.

question

The slope of a perfectly competitive firm's demand curve is

answer

zero.

question

In which one of the following situations will a perfectly competitive firm make an economic profit?

answer

MR > ATC

question

Refer to Figure 12.2.1, which shows a perfectly competitive firm's total revenue and total cost curves. Which one of the following statements is false?

answer

At an output of Q2 units a day, the firm incurs an economic loss.

question

An example of a perfectly competitive industry is the

answer

wheat industry.

question

The shutdown point occurs at the point of minimum

answer

average variable cost.

question

Refer to Figure 12.3.2 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry, The firm is

answer

making an economic profit.

question

answer

All bakeries are able to set the market price.

question

In monopolistic competition

answer

firms practice product differentiation.

question

Which one of the following statements about the sections of the kinked demand curve in Figure 15.2.1 is correct?

answer

AB assumes other firms will not match a price increase, while BC assumes other firms will match a price decrease.

question

Firm X is competing in an oligopolistic industry. When firm X increases its price

answer

the rival firm Y will increase its market share if firm Y keeps a constant price.

question

In monopolistic competition, each firm supplies a ________ part of the total industry output and its actions ________ the actions of the other firms.

answer

small; do not directly affect

question

The market structure in which natural or legal barriers prevent the entry of new firms and a small number of firms compete is

answer

oligopoly.

question

Which one of the following quotations best describes a dominant firm oligopoly?

answer

"Construction prices in this town seem to be always set by Big Jim's Dandy Construction Company."

question

If price falls below minimum average variable cost, the best a firm can do is

answer

stop production and incur a loss equal to total fixed cost.

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Practice quiz 5

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