In a competitive market where firms are earning economic losses, which of the following should be expected as the industry moves to long-run equilibrium, ceteris paribus?
A higher price and fewer firms.
Marginal cost pricing results in the most desirable mix of goods and services from the consumer's standpoint because:
The prices consumers pay are a reflection of the value of the goods and services given up.
To maximize profits, a competitive firm will seek to expand output until:
Price equals marginal cost.
To determine the market supply, the quantities:
Supplied at each price by each supplier are added together
In a perfectly competitive industry, economic profit:
Will approach zero in the long run as prices are driven to the level of average production costs
Marginal cost pricing means that a firm:
Produces up to the output where P = MC for a given market price.
Which of the following is consistent with long-run equilibrium for a perfectly competitive market?
Maximum technical efficiency is achieved.
According to the text, a convincing argument against concentration of market power is that:
The exercise of market power results in a higher price
A monopolist will find that its marginal revenue curve:
Lies below its demand curve and is steeper than its demand curve
Relative to a competitive market with the same cost and market demand, a monopolist will produce:
Less output at a higher price
If a monopolist is producing a level of output where MR is less than MC, then it should:
Lower its output
If long-run economic losses are being experienced in a competitive market:
Equilibrium price will rise as firms exit.
The exit of firms from a market, ceteris paribus:
Reduces the economic losses of remaining firms in the market.
Which characteristic of competitive markets permits society to answer the WHAT-to-produce question efficiently?
Marginal cost pricing
If economic profits are earned in a competitive market, then over time:
Additional firms will enter the market.
Perfectly competitive firms cannot individually affect market price because:
There are many firms, none of which has a significant share of total output.
(true or false) Because a perfectly competitive firm has no market power, its marginal cost curve is flat (i.e., horizontal).
Which of the following is true for a monopolist?
It must lower its price on all of its units in order to sell any additional units.
The price charged by a profit-maximizing monopolist occurs:
At a price on the demand curve above the intersection where MR = MC.
In monopoly and perfect competition, a firm should expand production when
Marginal revenue is above marginal cost.
Suppose that a firm earn $20,000 in total revenue, has $15,000 in total explicit costs, and a total of $4,960 in total implicit costs. The firm's economic profit equals:
$40 (20,000 - 15,000 - 4,960)
A firm should shutdown (produce zero output and pay only fixed costs) only if the losses from continuing production exceed:
there is an increase in profit taxes then the average total costs will __________ and marginal costs will __________.
remain unchanged; remain unchanged
When the market price does not change, technological improvements that shift the ATC and MC curves downward always have the following effect on the economic profits of the firm:
The sequence of events common to competitive markets evolves as follows: High prices and profits signal consumers' demand for more output, economic profit attracts new suppliers, the market supply curve shifts to the right as firms enter, prices slide down the market demand curve, and a new equilibrium is reached with increased output and lower prices. Throughout this process firms try to keep ahead of the profit squeeze by:
Reducing costs of production.
While firms set output based on the profit maximizing rule, the monopolist sets price based on
The demand curve.
(tru/false)In general a monopoly receives larger profits than a comparable competitive industry, by reducing the quantity supplied and pushing prices up
Which of the following characterizes a competitive market?
downward-sloping demand curve for the market