question
The golden rule of profit maximization states that any firm maximizes profit by producing where
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marginal revenue equals marginal cost
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The demand curve facing a perfectly competitive firm is
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perfectly elastic
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A perfect competitive firm making economic loss, should shut down when
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Price is less than the average variable cost (P<AVC)
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The entry of new firms into a competitive industry in the long run has the effect of
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eliminating economic profits
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Long-run equilibrium for a perfectly competitive firm occurs when
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P=MC=MR=ATC
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A natural monopoly results when a firm has
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Decreasing average costs over the range of market demand
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The demand curve a monopolist uses in making an output decision is
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The same as the market demand curve (downward sloping from the right)
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In order to sell an additional unit of its product, a monopolist must decrease price on all units
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True
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Which of the following is true of marginal revenue for a monopolist that charges a single price?
answer
P>MR because the monopolist must decrease price on all units sold in order to sell an additional unit
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The golden rule of profit maximization states that any firm maximizes profit by producing where
answer
marginal revenue equals marginal cost
question
The term monopolistic competition
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denotes an industry with many sellers of differentiated products
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Oligopolists are more sensitive to the pricing and output policies of their rivals when
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all firms produce identical products
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If Family Travel Agency, a monopolistic competitor, offers services that are differentiated from the services of other producers in the industry, it
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has some power to control the price it charges
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What do monopolistic competition, pure monopoly, and perfect competition have in common?
answer
the rule of profit maximization
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*Monopolistic competition
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characterizes an industry in which many firms offer products or services that are similar, but not perfect substitutes. Barriers to entry and exit in a monopolistic competitive industry are low, and the decisions of any one firm do not directly affect those of its competitors
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