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Terms in this set (24)
The demand curve for a perfectly competitive firm is __________ while the demand curve to a monopolist is __________.
Perfectly elastic; downward sloping
Refer to the given diagram. At the point of monopoly profit maximization, consumer surplus is represented by the area:
Which of the following statements about a firm which is a price-taker is false?
The demand curve faced by the firm is downward sloping.
A price taker confronts a demand curve that is:
Horizontal at the market price.
Because the monopolist charges a price in excess of marginal costs, it must be the case that the monopolist:
Produces less than the socially efficient level of output.
To say a firm is earning normal profits means:
Accounting profits are large enough to cover the owners' opportunity costs.
Comparing prefect competition and imperfect competition, to sell an extra unit of output, a perfect competitor __________ while an imperfect competitor __________.
Does not alter price; must lower price
On a graph for a perfect competitor, which of the following curves coincide?
The demand curve, average revenue curve, and marginal revenue curve.
Refer to the given diagram. The distance representing the profit maximizing price to the monopolist is:
0C. / OC
Refer to the given diagram. A perfectly competitive equilibrium would have resulted in a price equal to the distance __________ and a quantity equal to the distance __________.
0G; 0H / OG; OH
Perfect competition is efficient and monopoly in not because in perfect competition __________ while in monopoly __________.
Price setters face:
Less than perfectly elastic demand.
A firm earning a normal profit:
Has no incentive to leave the industry.
If a monopolist finds that her marginal revenue equals her marginal costs at the current level of output, she should:
Wrong answer: contract production until the difference between marginal revenues and marginal costs is larger.
Wrong answer: expand output until price equals marginal costs.
Wrong answer: raise her price.
A profit maximizing perfectly competitive firm must decide:
Only on how much to produce, taking price of the good as fixed.
An imperfectly competitive firm is one that:
Has some degree of influence over the price it charges for its output.
If a firm collects $90 in revenues when it sells 4 units, $100 in revenues when it sells 5 units, and $105 when it sells 6 units, one can infer the firm is likely to be
Wrong answer: a perfect competitor.
Wrong answer: a perfect competitor or a monopolist.
Wrong answer: a monopolist.
For entry into a particular perfectly competitive industry to occur, which of the following must be true?
Economic profits > 0.
If a monopolist's price is $7 when he sells 150 units of output, then his total revenues will __________ if he sells 200 units.
Rise or fall
Refer to the given diagram. At the profit maximizing level of output, the monopolist collects total revenues equal to the area:
0CEA. / OCEA
Which of the following is NOT true of a perfectly competitive firm?
It seeks to maximize revenue.
Both the perfectly competitive firm and the monopolist find that:
It is best to expand production until the benefits and costs of the last unit produced are equal.
Which of the following statements is false?
Price setters can sell any quantity at any price.
In the perfectly competitive industry, economic profits:
Serve to motivate entry or exit.