question
The distinction betweeen the short run and the long run for a perfectly competitive firm or a monopoly is that:
answer
in the long run no inputs are fixed whereas in the short run at least one input is fixed.
question
Which of the following is not a characteristic of a perfectly competitive firm's demand curve?
answer
- it is perfectly elastic at all price
-it is the same as the market demand curve
-it lies above the firms marginal revenue curve
-it is the same as the market demand curve
-it lies above the firms marginal revenue curve
question
Which of the following is not a characteristic of a perfectly competitive market?
answer
the ability of an individual firm to affect the market price
question
the absence of barriers to entering the market
answer
the absence of barriers to entering the market
question
What is a characteristic of a perfectly competitive firm's demand curve?
answer
it is the same as the firms average revenue (AR) and marginal revenue (MR) curves
question
Consider a perfectly competitive market described by the supply function P=20+0.1Q and demand function P=80-0.3Q. If the market is in equilibrium, then an individual firms total revenue (TR), average revenue (AR) and marginal revenue (MR) functions are:
answer
TR=35Q, AR=35, MR=35
question
Suppose a perfectly competitive firm produces 40 units of output per-period (e.g. daily) and sells all units for the market price of $6. If average fixed cost (AFC) is $2, average variable cost is $1, and marginal cost is $6, then the firm:
answer
-is maximizing total profit by producing and selling 40 units of output.
-earns a per-period total profit of $120
-earns a per-period total profit of $120
question
In which of the following cases would a monopoly increase its per-period total profits by raising price and reducing output:
answer
if it were producing a level of output such that MC>MR
question
In which of the following cases would a monopoly increase its per-period total profits by lowering price and increasing output:
answer
if it were producing a level of output such that MC<MR
question
In which of the following cases would a perfectly competitive firm increase its per-period total profits by raising price and reducing output:
answer
if it were producing a level of output such that MC>MR
question
In which of the following cases would a perfectly competitive firm increase its per-period total profits by lowering price and increasing output:
answer
if it were producing a level of output such that MC<MR
question
For uniform-price monopolist ____________________ and for perfectly competitive firm ____________________
answer
P=AR>MR ; P=MR=AR
question
If a monopolist or a perfectly competitive firm is producing a break-even point, then:
answer
-Average revenue (AR) is equal to Average total cost (ATC)
-Total Revenue (TR) is equal to Total Cost (TC)
-Total Revenue (TR) is equal to Total Cost (TC)
question
What do economies of scale, the exclusive ownership of essential raw materials used in the production process and patents have in common?
answer
they are all barriers to entry
question
A natural monopoly, such as a local electricity provider, is the result of:
answer
-economies of scale existing over a wide range of output
-long run average total costs declining continuously as output increases
-long run average total costs declining continuously as output increases
question
A monopoly is producing a level of output such that marginal revenue (MR) is equal to marginal cost (MC). The firm is selling its output at a price of $5 per unit and is incurring average variable costs (AVC) of $8 per unit and average total costs (ATC) of $10 per unit. Given this information, it may be concluded that the firm:
answer
is operating at a loss that could be reduced by shutting down
P<ATC
5<10
P<ATC
5<10
question
The principle that a firm should produce up to the point where the marginal revenue (MR) from the sale of an extra unit of output is equal to the marginal cost (MC) of producing the extra unit applies:
answer
to both perfectly competitive firms and monopolies
question
Consider a perfectly competitive firm producing a level of output such that marginal revenue is equal to marginal cost. The firm is selling its output at a price of $4 per unit and is incurring average variable costs of $1 per unit and average total costs of $6 per unit. Given this information, it may be concluded that the firm:
answer
is operating at a loss that is less than the loss incurred by shutting down
P<ATC
4<6
P<ATC
4<6
question
Consider a perfectly competitive firm producing a level of output such that marginal revenue is equal to marginal cost. The firm is selling its output at a price of $8 per unit and is incurring average variable costs of $4 per unit and average total costs of $6 per unit. Given this information, it may be concluded that the firm:
answer
is operating at maximum total profit
P>ATC
8>6
P>ATC
8>6
question
Suppose the demand function for a profit maximizing monopolists good is P=120-0.2Q. It's total cost (TC) function is TC=40+4Q+Q², and it's marginal cost (MC) function is MC=4+2Q. If the firm uses a uniform pricing strategy, then rounded to the nearest unit of output and to the nearest dollar the firm will:
answer
produce 48 units of output, charge a price of $110, and earn a total profit (π) of $2744
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