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test 3 micro ecin

QuestionAnswer
In competitive markets, firms that raise their prices are typically rewarded with larger profits. False
When individual firms in competitive markets increase their production, it is likely that the market price will fall. False
In a competitive market, firms are unable to differentiate their product from that of other producers. True
Firms in competitive markets are said to be price takers. True
For a firm in a competitive market, marginal revenue is always equal to average revenue. True
A profit-maximizing firm in a competitive market will increase production when average revenue exceeds marginal cost. True
A firm in a competitive market will maximize profit when the level of production is such that marginal cost equals price. True
By comparing the marginal revenue and marginal cost from each unit produced, a firm in a competitive market can determine the profit-maximizing level of production True
A firm’s incentive to compare marginal revenue and marginal cost is an application of the principle that rational people think at the margin. True
When a profit-maximizing firm in a competitive market experiences rising prices, it will respond with an increase in production. True
A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production. True
A firm will shut down in the short run if revenue is not sufficient to cover all of its fixed costs of production. False
The supply curve of a firm in a competitive market is the average variable cost curve, above the minimum of marginal cost. True
In the long run, when price is less than average total cost for all possible levels of production, a firm in a competitive market will choose to exit (or not enter) the market. True
The long-run equilibrium in a competitive market characterized by firms with identical costs is generally characterized by firms operating at efficient scale. True
A competitive market will typically experience entry and exit until all accounting profits are zero. False
In the long run, a competitive market with 1,000 identical firms will experience an equilibrium price equal to the minimum of each firm’s average total cost. True
At the end of the process of entry and exit, it is possible that some firms in a competitive market are making a positive economic profit. True
The short-run supply curve in a competitive market must be more elastic than the long-run supply curve. False
When a firm experiences zero-profit equilibrium, the firm’s revenue must be sufficient to cover all opportunity costs. True
The marginal firm in a competitive market will earn zero economic profits in the long run. True
A profit-maximizing firm in a competitive market will earn zero accounting profits in the long run. False
The De Beers Diamond company advertises heavily to promote the sale of all diamonds, not just its own. This is evidence that they have a monopoly position to some degree. True
The amount of power that a monopoly has is a function of whether there are close substitutes for its product. True
Declining average total cost with increased production is one of the defining characteristics of a natural monopoly. True
When a monopoly charges a higher price, fewer of its goods are sold. True
Average revenue for a monopoly is the total revenue divided by the quantity produced. True
For a monopoly, marginal revenue is often greater than the price they charge for their good. False
Like monopolies, competitive firms choose to produce a quantity in which marginal revenue equals marginal cost. True
During the life of a drug patent, the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost. True
Created by: Mets3172
 

 



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