Question

1. The perfectly competitive firm's demand curve is horizontal at the market price.

True

False

2. In perfect competition, the market price is established at the intersection of the market demand and market supply curves in the industry and the individual firms are "price takers" of that market price.

True

False

3. The perfectly competitive firm will continue to produce in the "short-run" if the price in the market is below their average total cost but above their average variable cost.

True

False

4. The theory of the perfect competitive firm provides a complete and accurate description of most real world firms existing today.

True

False

5. If a firm is earning ECONOMIC PROFIT, they must be producing at an output level where the price is above their average total cost.

True

False

6. We can be sure that the perfectly competitive firm, producing an output level where "price = marginal cost" is earning a normal profit, even in the short-run.

True

False

7. Public franchises, patents, and copyright laws are examples of legal barriers to entry in monopoly models and are the source of monopoly power.

True

False

8. In general, monopoly may exist because one firm has the exclusive ownership of a scarce resource such as bauxite, an essential element in the production of aluminum.

True

False

9. The monopolist is a "price maker" and must lower price to sell an additional unit of its product.

True

False

10. In monopoly theory, a price maker is a person who actively seeks out the best price for a product that he or she wisher to buy.

True

False

11. As a price maker, a rational monopolist can charge whatever price it wants to charge and sell the same amount by virtue of it's monopoly power and position.

True

False

12. A monopolist is always assured of positive economic profits given its control over price.

True

False

13. For the monopolist, the marginal revenue curve lies above their demand curve in graphic illustration of their cost and revenue structure.

True

False

14. The monopolist faces a "horizontal" demand curve.

True

False

15. The monopolist can sell all it can produce at the market established price.

True

False

16. The marginal revenue curve of the monopolist lies below its demand curve.

True

False

17. The monopolist, by definition, is a "price taker."

True

False

18. In theory of monopoly, the monopoly firm is the industry.

True

False

19. To maximize profits, a single-price monopolist will produce where Marginal costs = Marginal revenue: establishing a price that is greater than their marginal cost.

True

False

20. As a consequence of the perfectly competitive firm producing the quantity of output at which: price equals marginal revenue and marginal cost, it will  achieve "allocative efficiency" in the deployment of societies scarce resources.

True

False

Answer 1

1) True AR=MR

2) True firms are price takers they can not influence the price

3) Ture firm will continue to operate until able to recover fixed cost

4) True

5)True

6)True

7) True

8)True

9) true

10)True

11) True base on elasticity demand for goods

12) True

14) false downward sloping demand curve

15)True

16) True

17) True

18) True

19) Tue

20) True