Which of the following is not a characteristic of pure competition?:
Pricing strategies by firms
A standardized product
No barriers to entry
A large number of sellers
Which of the following is a characteristic of a purely competitive seller's demand curve?:
Price and marginal revenue are equal at all levels of output
Average revenue is less than price
Its elasticity coefficient is 1 at all levels of output
It is the same as the market demand curve
If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:
May be either greater or less than $5
Will also be $5
Will be less than $5
Will be greater than $5
Price is constant to the individual firm selling in a purely competitive market because:
The firm's demand curve is down-sloping
Of product differentiation reinforced by extensive advertising
Each seller supplies a negligible fraction of total supply
Marginal costs are constant
The marginal revenue curve of a purely competitive firm:
Lies below the firm's demand curve
Is downsloping because price must be reduced to sell more output
Is horizontal at the market price
Has all of these characteristics
A perfectly elastic demand curve implies that the firm:
Must lower price to sell more output
Can sell as much output as it chooses at the existing price
Realizes an increase in total revenue that is less than product price when it sells an extra unit
Is selling a differentiated (heterogeneous) product
The fact that a purely competitive firm's total revenue curve is linear and up-sloping to the right implies that:
Product price increases as output increases
Product price decreases as output increases
Product price is constant at all levels of output
Marginal revenue declines as more output is produced
Marginal revenue is the:
Change in product price associated with the sale of one more unit of output
Change in average revenue associated with the sale of one more unit of output
Difference between product price and average total cost
Change in total revenue associated with the sale of one more unit of output
When a firm is experiencing economies of scale:
Long-run total cost is decreasing
Long-run average (per-unit) total cost is decreasing
An increase in output is accompanied by a more-than-proportionate increase in long-run total cost
A given percentage increase in output requires a more-than-proportionate increase in resources
When diseconomies of scale occur:
The long-run average total cost curve falls
Marginal cost intersects average total cost
The long-run average total cost curve rises
Average fixed costs will rise
Which of the following is characteristic of a purely competitive seller's demand curve?:
Price and marginal revenue are equal at all levels of output
Average revenue is less than price
Its elasticity coefficient is 1 at all levels of output
It is the same as the market demand curve
In the short run, the individual competitive firm's supply curve is that segment of the:
Average variable cost curve lying below the marginal cost curve
Marginal cost curve lying above the average variable cost curve
Marginal revenue curve lying below the demand curve
Marginal cost curve lying between the average total cost and average variable cost curves
Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation:
Should close down in the short run
Is maximizing its profits
Is realizing a loss of $60
Is realizing an economic profit of $40
A purely competitive firm's short-run supply curve is:
Perfectly elastic at the minimum average total cost
Up-sloping and equal to the portion of the marginal cost curve that lies above the average VARIABLE cost curve
Up-sloping and equal to the portion of the marginal cost curve that lies above the average TOTAL cost curve
Up-sloping only when the industry has constant costs
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:
Minimizes losses by producing at the minimum point of its AVC curve
Maximizes profits by producing where MR = ATC
Should close down immediately
Should continue producing in the short run, but leave the industry in the long run if the situation persists
Assume that the market for soybeans is purely competitive. Currently, firms growing soybeans are earning positive economic profits. In the long run, we can expect:
New firms to enter, causing the market price of soybeans to fall
New firms to enter, causing the market price of soybeans to rise
Some firms to exit, causing the market price of soybeans to fall
Some firms to exit, causing the market price of soybeans to rise
Assume that the market for corn is purely competitive. Currently, firms growing corn are suffering economic losses. In the long run, we can expect:
New firms to enter, causing the market price of corn to fall
New firms to enter, causing the market price of corn to rise
Some firms to exit, causing the market price of corn to fall
Some firms to exit, causing the market price of corn to rise
A natural monopoly occurs when:
Long-run average costs decline continuously through the range of demand
A firm owns or controls some resource essential to production
Long-run average costs rise continuously as output is increased
Economies of scale are obtained at relatively low levels of output
Price discrimination refers to:
Selling a given product for different prices at two different times
Any price above that which is equal to a minimum average total cost
The selling of a given product to different customers at different prices that do not reflect cost differences
The difference between the prices a purely competitive seller and a purely monopolistic seller would offer
If a pure monopolist can price discriminate by separating buyers into two or more groups:
The marginal revenue curve and the total revenue curve will now coincide
The marginal revenue curve will now shift to a position above the demand curve
The firm will face multiple marginal revenue curves
Marginal revenue will become less at each level of output than it would be without price discrimination
Other things equal, a price-discriminating monopolist will realize:
Realize a smaller economic profit than a non-discriminating monopolist
Produce a larger output than a non-discriminating monopolist
Produce the same output as a non-discriminating monopolist
Produce a smaller output than a non-discriminating monopolist
Pure monopoly refers to:
Any market in which the demand curve to the firm is down-sloping
A standardized product being produced by many firms
A single firm producing a product for which there are no close substitutes
A large number of firms producing a differentiated product
Which of the following is correct?:
Both purely competitive and monopolistic firms are "price-takers"
Both purely competitive and monopolistic firms are "price-makers"
A purely competitive firm is a "price-taker," while a monopolist is a "price-maker"
A purely competitive firm is a "price-maker," while a monopolist is a "price-taker"
A purely monopolistic firm:
Has no entry barriers
Faces a down-sloping demand curve
Produces a product or service for which there are many close substitutes
Earns only a normal profit in the long run
The supply curve of a monopolist:
Is that portion of its marginal cost that lies above average variable cost
Is the same as that of a purely competitive industry
Is its average variable cost curve
Does not exist because prices are not "given" to a monopolist
If a monopolist engages in price discrimination, it will:
Realize a smaller profit
Charge a higher price where individual demand is inelastic and a lower price where individual demand is elastic
Produce a smaller output than when it did not discriminate
Charge a competitive price to all its customers
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