QUESTION 1 In a perfectly competitive market, in the long run, the marginal cost

Question

QUESTION 1

In a perfectly competitive market, in the long run, the marginal cost of a firm becomes equal to its minimum average total cost.

A.) True

B.) False

QUESTION 2

Generally, The price a firm charges for its product is equal to its total revenue divided by the number of units sold.

A.) True

B.) False

QUESTION 3

In a perfectly competitive firm to maximize profit a firm must make sure that the price it charges does not exceed its marginal cost.

A.) True

B.) False

QUESTION 4

Firms in a competitive market can never make economic profits while they may make biasness (accounting) profits.

A.) True

B.) False

QUESTION 5

When a perfectly competitive firm is making a positive economic profit its average revenue must be greater than its average total cost.

A.) True

B.) False

QUESTION 6

To maximize its profit a firm always produces at the quantity level where it can charge the highest price and earn the greatest revenue; this strategy is consistent with setting is MC equal to price.

A.) True

B.) False

QUESTION 7

When a firm in a competitive market is making a positive economic profit its business profit may be positive or negative.

A.) True

B.) False  

QUESTION 8

In a perfectly competitive market new entries could result in increases in input prices thus making production costs go up.

A.) True

B.) False  

QUESTION 9

In a perfectly competitive market, in the long run, each firm produces the maximum amount it can produce and charges the lowest price possible. That is why we consider competitive markets efficient.

A.) True

B.) False

QUESTION 10

A monopolist always under-produces and charges a price higher than its MC.

A.) True

B.) False

QUESTION 11

As the only supplier in the market a monopolist can charge any price it wishes and buyers have no choice but to pay.

A.) True

B.) False

QUESTION 12

The marginal revenue is the additional revenue generated by the last unit of labor hired.

A.) True

B.) False

QUESTION 13

The price a monopolist charges may or may not be above its average cost but it is always above its MR.

A.) True

B.) False

QUESTION 14

When demand curve is a downward-sloping straight line (linear) marginal revenue will be greater than MC at all output leveles.

A.) True

B.) False

QUESTION 15

By setting its MR equal to its MC a monopolist determines the output that would maximize its profit.

A.) True

B.) False

QUESTION 16

In the long run each competitive firm would produce at the quantity level where its MC is equal to its MR as well as its ATC.

A.) True

B.) False

QUESTION 17

A monopoly always makes an economic profit.

A.) True

B.) False

QUESTION 18

When a monopoly's ATC is equal to the price it charges it is making normal economic profits.

A.) True

B.) False

QUESTION 19

When a monopoly is making a zero economic profit still its MR>ATC.

A.) True

B.) False

QUESTION 20

An increase in demand would enable a monopolist to raise its price while reducing its output.

A.) True

B.) False

Explanation / Answer

1. A.) True

2. A.) True

3. B.) False

4. B.) False

5. A.) True

6. B.) False

7. A.) True because sometimes firms are said to earn economic profit when they are able to cover only its variable cost.

8. B.) False

9. B.) False

10. A.) True

11. A.) True

12. B.) False

13. A.) True

14. B.) False

15. A.) True

16. A.) True

17. B.) False

18. A.) True

19. B.) False

20. A) True

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