Perfect Competition & Monopoly

question

A monopoly:

answer

determines its own price, given its demand curve

question

A perfectly competitive firm is a:

answer

price taker.

question

An increase in demand in a perfectly competitive market will cause a(n):

answer

temporary increase in price in a constant-cost industry.

question

Perfect competition is characterized by:

answer

the inability of any one firm to influence price.

question

Price takers:

answer

are those individuals in a competitive market who must accept the market price as
given

question

Suppose that the market for computers is dominated by a single firm, like Dell, that is
able to exert influence over prices and output. This situation violates the perfect
competition assumption of:

answer

many buyers and sellers.

question

Suppose that the market for haircuts in a community is a perfectly competitive constant-
cost industry and that the market is initially in long-run equilibrium. Subsequently, an
increase in population increases the demand for haircuts. In the long run, we expect that:

answer

more firms will enter the market, driving the price of haircuts down and the
profits of individual firms back down to zero.

question

The practice of selling the same product at different prices in different markets, without corresponding differences in costs, is:

answer

price discrimination.

question

The profit-maximizing level of output for a perfectly competitive firm in the short run
occurs where:

answer

marginal cost equals price.

question

The supply curve for the firm in perfect competition:

answer

tells the quantity produced at each price.

question

A perfectly competitive firm will earn a profit and will continue producing the profit-
maximizing quantity of output in the short run if price is:

answer

greater than average total cost.

question

A perfectly competitive firm's short-run supply curve is its:

answer

marginal cost curve above the average variable cost curve

question

An assumption of the model of perfect competition is:

answer

identical goods.

question

For a firm in a perfectly competitive market:

answer

marginal revenue equals price and average revenue.

question

Firms in the model of perfect competition will:

answer

increase output up to the point that the marginal benefit of an additional unit of
output is equal to the marginal cost.

question

If all firms in a perfectly competitive industry earn zero economic profits, in the long
run, the:

answer

industry is in long-run equilibrium.

question

People in the eastern part of Beirut are prevented by border guards from traveling to the
western part of Beirut to shop for food. This situation violates the perfect competition
assumption of:

answer

ease of entry and exit.

question

Suppose that the market for candy canes operates under conditions of perfect
competition, that it is initially in long-run equilibrium, and that the price of each candy
cane is $0.10. Now suppose that the price of sugar rises, increasing the marginal and
average total cost of producing candy canes by $0.05; there are no other changes in
production costs. Based on the information given, we can conclude that once all the
adjustments to long-run equilibrium are achieved, the price of candy canes will equal:

answer

fifteen cents

question

The competitive model assumes all of the following EXCEPT

answer

that firms attempt to maximize their total revenue.

question

Which of the following is not an assumption economists make when using the model of
perfect competition?

answer

Each firm sets it price equal to its average total cost.

question

When monopolies exist because economies of scale prevail over the entire range of demand:

answer

economists suggest that we may want to regulate their production and pricing, but we may not want to give up their cost advantages.

question

Which of the following is (are) true concerning monopoly?
It is at the opposite end of the spectrum from a perfectly competitive firm.
A monopoly has no rivals.
A monopoly does not need to worry about other firms entering the industry.
All of the above are true.

answer

All of the above are true.

question

Which of the following is true regarding monopoly?

answer

Monopolies produce too little and charge too much from the standpoint of efficiency.

question

The power a firm has to set is own price is called:

answer

monopoly power.

question

The demand curve facing a price setter:

answer

is downward sloping.

question

The United States bans most efforts to create a monopoly when:

answer

efforts to form a monopoly "unfairly" drive out competitors.

question

The Aluminum Company of America gained monopoly power because:

answer

it had exclusive ownership of a resource required to produce aluminum.

question

Suppose that a monopoly firm is required to pay a new annual license fee just for the privilege of doing business in its fair city; the fee is somewhat less than the economic profit the firm is now earning. In response to the increase in fees, the firm will:

answer

not change its price.

question

The two theoretical extremes of the market structure spectrum are occupied on one end by perfect competition and on the other end by:

answer

monopoly.

question

To maximize profit, a monopoly firm determines its _______ , _______ , and _______ curves and produces an output where _______ .

answer

demand; marginal revenue; marginal cost; MR = MC.

1 of 30

question

A monopoly:

answer

determines its own price, given its demand curve

question

A perfectly competitive firm is a:

answer

price taker.

question

An increase in demand in a perfectly competitive market will cause a(n):

answer

temporary increase in price in a constant-cost industry.

question

Perfect competition is characterized by:

answer

the inability of any one firm to influence price.

question

Price takers:

answer

are those individuals in a competitive market who must accept the market price as
given

question

Suppose that the market for computers is dominated by a single firm, like Dell, that is
able to exert influence over prices and output. This situation violates the perfect
competition assumption of:

answer

many buyers and sellers.

question

answer

more firms will enter the market, driving the price of haircuts down and the
profits of individual firms back down to zero.

question

The practice of selling the same product at different prices in different markets, without corresponding differences in costs, is:

answer

price discrimination.

question

The profit-maximizing level of output for a perfectly competitive firm in the short run
occurs where:

answer

marginal cost equals price.

question

The supply curve for the firm in perfect competition:

answer

tells the quantity produced at each price.

question

A perfectly competitive firm will earn a profit and will continue producing the profit-
maximizing quantity of output in the short run if price is:

answer

greater than average total cost.

question

A perfectly competitive firm's short-run supply curve is its:

answer

marginal cost curve above the average variable cost curve

question

An assumption of the model of perfect competition is:

answer

identical goods.

question

For a firm in a perfectly competitive market:

answer

marginal revenue equals price and average revenue.

question

Firms in the model of perfect competition will:

answer

increase output up to the point that the marginal benefit of an additional unit of
output is equal to the marginal cost.

question

If all firms in a perfectly competitive industry earn zero economic profits, in the long
run, the:

answer

industry is in long-run equilibrium.

question

People in the eastern part of Beirut are prevented by border guards from traveling to the
western part of Beirut to shop for food. This situation violates the perfect competition
assumption of:

answer

ease of entry and exit.

question

answer

fifteen cents

question

The competitive model assumes all of the following EXCEPT

answer

that firms attempt to maximize their total revenue.

question

Which of the following is not an assumption economists make when using the model of
perfect competition?

answer

Each firm sets it price equal to its average total cost.

question

When monopolies exist because economies of scale prevail over the entire range of demand:

answer

economists suggest that we may want to regulate their production and pricing, but we may not want to give up their cost advantages.

question

answer

All of the above are true.

question

Which of the following is true regarding monopoly?

answer

Monopolies produce too little and charge too much from the standpoint of efficiency.

question

The power a firm has to set is own price is called:

answer

monopoly power.

question

The demand curve facing a price setter:

answer

is downward sloping.

question

The United States bans most efforts to create a monopoly when:

answer

efforts to form a monopoly "unfairly" drive out competitors.

question

The Aluminum Company of America gained monopoly power because:

answer

it had exclusive ownership of a resource required to produce aluminum.

question

answer

not change its price.

question

The two theoretical extremes of the market structure spectrum are occupied on one end by perfect competition and on the other end by:

answer

monopoly.

question

To maximize profit, a monopoly firm determines its _______ , _______ , and _______ curves and produces an output where _______ .

answer

demand; marginal revenue; marginal cost; MR = MC.

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