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AP Micro Unit 5
Terms in this set (17)
1. Perfect competition requires that
C. producers have no ability to exert influence over the market price of the product.
2. Suppose a perfectly competitive firm in the short run sells its product for a price that is less than the
minimum point on its ATC curve. Which of the following statements is true?
B. Some firms in this industry will exit the industry in the long run, and the exiting will continue until the market price increases and is equal to the break-even point on the ATC curve.
3. Suppose a perfectly competitive industry is initially in long-run equilibrium. Demand for the product
produced in this industry increases due to a change in tastes and preferences. In the short run this will result in
A. the product selling for a higher price, each firm producing more of the good, and positive economic profits for the firms in the industry.
4. Suppose a perfectly competitive industry is initially in long-run equilibrium. Demand for theproduct
produced in this industry increases due to a change in tastes and preferences. In the long run this will result in
C. the industry output of this good increasing, the price staying constant due to the entry of new firms into the industry, and each firm in the industry earning zero economic profit.
5. A firm in the short run must decide whether or not it should produce any level of output. This means that the firm must
D. consider whether its revenue is sufficient to cover its variable costs of production.
6. A perfectly competitive firm's minimum-cost output corresponds to the level of output at which
B. variable cost is minimized.
8. For a firm to profit maximize, it must also be true that
B. the market price is greater than the shutdown price.
9. The short-run industry supply curve for a perfectly competitive market is
C. equal to the horizontal sum of the supply curves of the individual producers.
D. equal to the horizontal sum of the individual firms' MC curves at and above the AVC.
10. The demand for the monopolist's product
A. is downward sloping. B. equals the market demand curve.
11. Which of the following statements is true?
I. A monopolistic market structure is composed one firm
II. A perfectly competitive firm profit-maximizes by producing the level of output at which MR = MC.
16. Which of the following statements is true? I. A perfectly competitive industry produces an efficient level of output because P = MC for the last unit produced in this industry. II. A monopoly produces an efficient level of output because MR = MC for the last unit produced by this monopoly. III. A perfectly price-discriminating monopolist produces an efficient level of output because the value consumers are willing to pay for the last unit sold is equal to the cost of producing this last unit.
B. Statements I and II
20. For a perfectly competitive firm, if the market price is $8 then
C. marginal revenue is equal to $8.
21. Assume that in the short run at the profit-maximizing output, the price is lower than average variable cost. The perfectly competitive firm should
E. shut down.
22. Assume that a perfectly competitive firm is operating where marginal revenue is greater than marginal costs. To increase profits, the firm should
A. increase production.
27. Which of the following represents the correct relationship between the demand curve for a perfectly competitive industry and the demand curve for a perfectly competitive firm?
PC Industry Demand: Downward slope to the right PC Firm Demand: perfectly elastic
30. Average fixed cost is shown as the distance between
C. average variable cost and average total cost.
31. Which of the following is true of a monopolist's demand curve?
E. It lies above its marginal revenue curve.
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