Question 1

In evaluating profit-maximizing or loss-minimizing behavior, the main difference between firms in pure competition and monopoly is found in the:

Accepted Answer

A)   profit-maximizing rule.
B)   cost conditions they face.
C)   demand and revenue conditions they face.
D)   all of the above.E) A) and B)
F) A) and C)

Question 2

What rule should a seller follow to minimize its losses when producing if there is no output level at which it could earn a profit?

Accepted Answer

The firm can minimize losses a...

Question 3

Which of the following is not a distinguishing characteristic of the four market models?

Accepted Answer

A)   Number of sellers.
B)   Product type: differentiated or identical.
C)   The use of advance production methods.
D)   Entry and exit.E) B) and C)
F) None of the above

Question 4

Assume that a purely competitive firm sold 100 units of output today and the marginal revenue from the 100th unit sold was $4.00. If instead of 100 units it sold 1,000 units, the marginal revenue from the 1,000th unit would have been:

Accepted Answer

A)   $4.00.
B)   less than $4.00.
C)   more than $4.00.
D)   less or more than $4.00, depending on where its buyer was located.E) B) and C)
F) None of the above

Question 5

Excess profits can be earned over the long run by:

Accepted Answer

A)   oligopolists.
B)   monopolistic competitors.
C)   oligopolists and monopolistic competitors.
D)   monopolistic competitors and pure competitors.E) A) and D)
F) A) and C)

Question 6

Which of the following statements concerning nonprice competition in oligopoly markets is true?

Accepted Answer

A)   There is no nonprice competition in oligopoly markets.
B)   Nonprice competition is important when the products sold in the market are differentiated.
C)   Advertising campaigns that stress the product itself, instead of each individual firm's brand of the product, are typical in oligopoly markets.
D)   Nonprice competition provides a desirable alternative to price competition because there is mutual interdependence in pricing, but not in promotional activities.E) A) and B)
F) All of the above

Question 7

-This figure could apply to:

Accepted Answer

A)   monopoly over the long run.
B)   pure competition over the short run.
C)   monopolistic competition over the long run.
D)   all of the above.E) All of the above
F) None of the above

Question 8

Entry into an oligopolistic market may be difficult due to:

Accepted Answer

A)   the amount and cost of capital required to produce efficiently.
B)   the amount of advertising expenditures required to secure a profitable share of the market.
C)   both of the above.
D)   none of the above.E) A) and D)
F) B) and D)

Question 9

In the long run, a firm operating in pure competition will just break even (earn a normal profit).

Accepted Answer

A) True 
 B)False

Question 10

The individual seller's demand curve is the market demand curve in monopoly.

Accepted Answer

A) True 
 B)False

Question 11

-The relationship between demand and average cost shown in this figure could be found in a purely competitive market in:

Accepted Answer

A)   the short run but not the long run.
B)   the long run but not the short run.
C)   either the short run or the long run.
D)   neither the short run nor the long run.E) B) and C)
F) A) and D)

Question 12

If a purely competitive firm is earning an economic profit:

Accepted Answer

A)   it is operating in the long run.
B)   its price is greater than its average total cost.
C)   it has found a way of raising its price by restricting its output.
D)   all of the above.E) B) and C)
F) All of the above

Question 13

In pure competition, the market demand curve and the demand curve for an individual seller's product are both downward sloping.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements about oligopoly markets is true?

Accepted Answer

A)   Restricted entry makes it difficult for new competitors to come into the market.
B)   Unlike pure competitors, oligopolists can operate inefficiently over the long run.
C)   Individual sellers can earn economic profits over both the short run and the long run.
D)   All of the above.E) All of the above
F) C) and D)

Question 15

What is the relationship between the individual firm's demand curve and marginal revenue curve in pure competition and in monopoly?

Accepted Answer

In pure competition, since the firm's de...

Question 16

-If this firm were to produce at its profit-maximizing or loss-minimizing output it would:

Accepted Answer

A)   earn a profit.
B)   lose an amount equal to its total variable costs.
C)   lose an amount equal to part of its total fixed costs.
D)   lose an amount equal to its total variable costs plus part of its total fixed costs.E) B) and C)
F) None of the above

Question 17

In pure competition, the long-run is characterized by firms producing the product at the lowest possible per-unit cost.

Accepted Answer

A) True 
 B)False

Question 18

Assume that over the short run, the price a pure competitor can earn when operating where marginal cost equals marginal revenue is greater than average variable cost but less than average total cost. This firm will:

Accepted Answer

A)   minimize its loss by producing.
B)   maximize its profit by producing.
C)   minimize its loss by shutting down.
D)   maximize its profit by shutting down.E) All of the above
F) C) and D)

Question 19

In the long run, a firm in pure competition earns an economic profit and operates at the minimum point on its long-run average total cost curve.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following statements is FALSE?

Accepted Answer

A)   In pure competition buyers do not have to absorb the additional cost of nonprice competition.
B)   Sellers earn no economic profit over the long run in pure competition and monopolistic competition.
C)   Easy entry into the market is found in pure competition and monopolistic competition, but not in oligopoly and monopoly.
D)   Over the long run, a seller operates at minimum long-run average total cost in pure competition and monopolistic competition.E) A) and D)
F) None of the above

Exam 13: Competition and Market Structures

Which of the following statements is FALSE?

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In evaluating profit-maximizing or loss-minimizing behavior, the main difference between firms in pure competition and monopoly is found in the:

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Which of the following is not a distinguishing characteristic of the four market models?

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In the long run, a firm operating in pure competition will just break even (earn a normal profit).

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Entry into an oligopolistic market may be difficult due to:

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Which of the following statements concerning nonprice competition in oligopoly markets is true?

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In the long run, a firm in pure competition earns an economic profit and operates at the minimum point on its long-run average total cost curve.

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Assume that over the short run, the price a pure competitor can earn when operating where marginal cost equals marginal revenue is greater than average variable cost but less than average total cost. This firm will:

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The individual seller's demand curve is the market demand curve in monopoly.

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-The relationship between demand and average cost shown in this figure could be found in a purely competitive market in:

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What is the relationship between the individual firm's demand curve and marginal revenue curve in pure competition and in monopoly?

Correct AnswerverifiedIn pure competition, since the firm's de...View AnswerShow Answer

Assume that a purely competitive firm sold 100 units of output today and the marginal revenue from the 100th unit sold was $4.00. If instead of 100 units it sold 1,000 units, the marginal revenue from the 1,000th unit would have been:

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-If this firm were to produce at its profit-maximizing or loss-minimizing output it would:

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What rule should a seller follow to minimize its losses when producing if there is no output level at which it could earn a profit?

Correct AnswerverifiedThe firm can minimize losses a...View AnswerShow Answer

In pure competition, the long-run is characterized by firms producing the product at the lowest possible per-unit cost.

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-This figure could apply to:

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If a purely competitive firm is earning an economic profit:

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Excess profits can be earned over the long run by:

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In pure competition, the market demand curve and the demand curve for an individual seller's product are both downward sloping.

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Which of the following statements about oligopoly markets is true?

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In pure competition, since the firm's de...
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The firm can minimize losses a...
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