Question 1 of 20
The representative firm in a purely competitive industry:
A. Will always earn a profit in the short run
B. May earn either an economic profit or a loss in the long run
C. Will always earn an economic profit in the long run
D. Will earn an economic profit of zero in the long run
Question 2 of 20
An example of a monopolistically competitive industry would be:
D. Retail clothing
Question 3 of 20
Firms in an industry will not earn long-run economic profits if:
A. Fixed costs are zero
B. The number of firms in the industry is fixed
C. There is free entry and exit of firms in the industry
D. Production costs for a given level of output are minimized
Question 4 of 20
Marginal product is:
A. the increase in total output attributable to the employment of one more worker.
B. the increase in total revenue attributable to the employment of one more worker.
C. the increase in total cost attributable to the employment of one more worker.
D. total product divided by the number of workers employed.
Question 5 of 20
The law of diminishing returns indicates that:
A. as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.
B. because of economies and diseconomies of scale a competitive firm's long-run average total cost curve will be U-shaped.
C. the demand for goods produced by purely competitive industries is downsloping.
D. beyond some point the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.
Question 6 of 20
If average total cost is declining, then:
A. marginal cost must be greater than average total cost.
B. the average fixed cost curve must lie above the average variable cost curve.
C. marginal cost must be less than average total cost.
D. total cost must also be declining.
Question 7 of 20
Average fixed costs diminish continuously as output increases.
Question 8 of 20
Patents and copyrights were established by the government to reduce oligopoly and monopoly power.
Question 9 of 20
A purely competitive firm is a price maker, but a monopolist is a price taker.
Question 10 of 20
The profit-maximizing rule MC = MR is followed by firms under:
A. monopolistic competition, but not perfect competition.
B. perfect competition, but not monopolistic competition.
C. either monopolistic competition or perfect competition, depending on the costs of production.
D. both monopolistic competition and perfect competition.
Question 11 of 20 4.35 Points
A perfectly competitive firm will continue producing in the short run as long as it can cover its:
A. total cost.
B. average total cost.
C. average variable cost.
D. average fixed cost.
Question 12 of 20
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:
A. greater than marginal cost.
B. less than marginal cost.
C. less than average variable cost.
D. greater than average total cost.
Question 13 of 20
Monopolistic competition is an industry characterized by:
A. a product with many close substitutes.
B. a horizontal demand curve.
C. a small number of firms.
D. barriers to entry and exit.
Question 14 of 20
If a perfectly competitive firm increases production from 10 units to 11 units, and the market price is $20 per unit, total revenue for 10 units is:
Question 15 of 20
The demand curve facing a monopolist is:
A. horizontal, the same as that facing a perfectly competitive firm.
B. downward sloping, the same as that facing a perfectly competitive firm.
C. upward sloping, the same as that facing a perfectly competitive firm.
D. downward sloping, unlike the horizontal demand curve facing a perfectly competitive firm.
Question 16 of 20
Suppose that a monopolist increases production from 10 units to 11 units. If the market price declines from $30 per unit to $29 per unit, marginal revenue for the eleventh unit is:
Question 17 of 20
Most electric, gas, and water companies are examples of:
A. unregulated monopolies.
B. natural monopolies.
C. restricted-input monopolies.
D. sunk-cost monopolies.
Question 18 of 20
If a perfectly competitive firm is producing a quantity that generates P > MC, then profit:
A. is maximized.
B. can be increased by increasing the price.
C. can be increased by decreasing the price.
D. can be increased by increasing production.
Question 19 of 20
Evaluate the following statement using economic reasoning: "A monopolist can charge whatever she wants because she is the only source available."
Question 20 of 20
Identify and describe a real world example of an oligopoly. What characteristics of this market fit the definition of an oligopoly? What role does advertising play in this market? Is this consistent with what you’ve learned about advertising and oligopoly in this course?