Which of the following statements is true of a monopolistically competitive firm?

Monopolistic Competition

1

concept

Monopolistic Competition Revenue

Which of the following statements is true of a monopolistically competitive firm?

3m

Play a video:

2

concept

Monopolistic Competition Marginal Revenue

7m

Play a video:

A monopolistically competitive firm's demand curve is equal to the market demand curve.

For a monopolistically competitive firm, an increase in the quantity sold will always increase total revenue.

The barriers to market entry in perfect competition are more stringent than those for monopolistic competition.

A monopolistically competitive firm’s marginal revenue is less than its average revenue.

No; there are no barriers to entry

Some; of product differentiation

No; of product differentiation

Some; there are barriers to entry

  • Market structure refers to the competitive environment in which the buyers and sellers of a product operate.

      a. True
      b. False
  • Economists define a market as a place where buyers go to purchase units of a commodity.

      a. True
      b. False
  • A market structure is defined in terms of the number and sizes of buyers and sellers on a market, the type of product traded on the market, the mobility of resources, and the amount of knowledge economic agents have about market conditions.

      a. True
      b. False
  • If a market is perfectly competitive, then the market demand curve must be infinitely price elastic.

      a. True
      b. False
  • If the firms in an industry are price takers, then every firm in the industry faces a horizontal demand curve.

      a. True
      b. False
  • Firms that sell commodities on markets that are imperfectly competitive face downward-sloping demand curves.

      a. True
      b. False
  • Monopoly is a market structure in which there is only one buyer of a product for which there are no close substitutes.

      a. True
      b. False
  • Oligopoly is a market structure in which there are few sellers of a product and additional sellers cannot easily enter the industry.

      a. True
      b. False
  • Monopsony is a market structure in which there is a single buyer of a commodity or input for which there are no close substitutes.

      a. True
      b. False
  • Under perfect competition, changes in market supply do not affect market price.

      a. True
      b. False
  • Commodities that sell for the same price are referred to as homogeneous.

      a. True
      b. False
  • Most commodities are traded on perfectly competitive markets.

      a. True
      b. False
  • The combination of product homogeneity and perfect knowledge ensure that a single price will prevail on a perfectly competitive market.

      a. True
      b. False
  • Product price on a competitive market is determined by the intersection of the market demand curve with the market supply curve.

      a. True
      b. False
  • If a firm in a perfectly competitive industry charges a higher price than that charged by other firms in the industry it will be unable to sell any of its output.

      a. True
      b. False
  • The demand curve faced by a perfectly competitive firm is horizontal.

      a. True
      b. False
  • A perfectly competitive firm's demand curve is above its marginal revenue curve.

      a. True
      b. False
  • If profit maximizing firms in a perfectly competitive industry are producing 14,000 units per day, but can only sell 12,000 units per day at the current market price of $23, then the market equilibrium price must be greater than $23.

      a. True
      b. False
  • If profit maximizing firms in a perfectly competitive industry will produce 14,000 units per day if the market price is $23 and consumers will purchase 14,000 units per day if the market price is $20, then the market equilibrium quantity must be greater than 14,000.

      a. True
      b. False
  • The efficient market hypothesis asserts that the price of a share of a firm's stock reflects the value implied by available information about the profitability of the firm.

      a. True
      b. False
  • The only choice available to a perfectly competitive firm that is producing efficiently is what price to charge in order to maximize profits.

      a. True
      b. False
  • Every profit-maximizing firm should produce a level of output where marginal revenue is equal to marginal cost.

      a. True
      b. False
  • A perfectly competitive firm maximizes profit by producing a level of output where marginal cost is equal to price.

      a. True
      b. False
  • If a perfectly competitive firm is producing a level of output where its marginal cost is greater than market price, it should raise its price.

      a. True
      b. False
  • If a perfectly competitive firm is producing a level of output where price is equal to marginal cost and greater than average variable cost, then it should cease production in the short run.

      a. True
      b. False
  • The shut-down pointof a perfectly competitive firm is at the minimum point on its short-run average variable cost curve.

      a. True
      b. False
  • The supply curve of a perfectly competitive firm is identical to the portion of its marginal cost curve that is above its average total cost curve.

      a. True
      b. False
  • If a perfectly competitive firm is in long-run equilibrium, then it is earning an economic profit of zero.

      a. True
      b. False
  • If a perfectly competitive firm is in long-run equilibrium, then market price is equal to short-run marginal cost, short-run average total cost, long-run marginal cost, and long-run average total cost.

      a. True
      b. False
  • If firms in a perfectly competitive industry are earning economic profits greater than zero, then more firms will enter the industry.

      a. True
      b. False
  • If more firms enter a perfectly competitive industry, market equilibrium price will increase.

      a. True
      b. False
  • A perfectly competitive firm is in long-run equilibrium when all inputs are earning their opportunity costs.

      a. True
      b. False
  • Depreciation of a country's currency tends to make imports more expensive.

      a. True
      b. False
  • Appreciation of a country's currency tends to increase the demand for the country's exports.

      a. True
      b. False
  • An increase the number of U.S. dollars required to purchase one British pound would be a depreciation of the U.S. dollar and an appreciation of the British pound.

      a. True
      b. False
  • An increase in the U.S. demand for British products would tend to cause an appreciation of the British pound.

      a. True
      b. False
  • A monopolist's marginal revenue is below market price.

      a. True
      b. False
  • A natural monopoly is one that results from exclusive control of a crucial natural resource.

      a. True
      b. False
  • All monopoly power that is based on barriers to entry is subject to decay in the long run that based on government franchise.

      a. True
      b. False
  • Monopolists always make economic profits.

      a. True
      b. False
  • Monopolists are price takers.

      a. True
      b. False
  • If a monopolist earns $5,000 when it sells 100 units of output and $5,025 when it sells 101 units of output, then the marginal revenue of the 101st unit is $25.

      a. True
      b. False
  • If a monopolist has a linear demand curve, then it has a linear marginal revenue curve.

      a. True
      b. False
  • A profit-maximizing monopolist will never produce a quantity that corresponds to a point on the inelastic portion of its demand curve.

      a. True
      b. False
  • A monopolist will shut down in the short run if price is everywhere less than average total cost.

      a. True
      b. False
  • A monopolist that is earning a profit in the short run can be expected to earn at least as much profit in the long run.

      a. True
      b. False
  • If a monopolist is in short-run equilibrium, it must be in long-run equilibrium.

      a. True
      b. False
  • In general, if a perfectly competitive industry is taken over by a monopolist, it will charge a lower price and produce a larger quantity of output.

      a. True
      b. False
  • When compared to perfect competition, monopoly results in a deadweight loss.

      a. True
      b. False
  • The difference between the total amount that consumers would be willing to pay for a given level of consumption and the amount that they actually have to pay is called consumers' surplus.

      a. True
      b. False
  • Most markets are either perfectly competitive or monopolized.

      a. True
      b. False
  • If a firm is small, produces a differentiated good for which there are many close substitutes, and it is easy to enter and exit the industry, then the firm is a monopolistic competitor.

      a. True
      b. False
  • Monopolistic competition is most common in the manufacturing sector.

      a. True
      b. False
  • The short-run supply curve for a monopolistically competitive firm is identical to the upward-sloping portion of the firm's marginal cost curve above average variable cost.

      a. True
      b. False
  • Monopolistically competitive firms are price takers.

      a. True
      b. False
  • Monopolistically competitive firms face a downward-sloping demand curve.

      a. True
      b. False
  • If an imperfectly competitive firm has a linear demand curve, then its marginal revenue curve has the same price intercept as its demand curve.

      a. True
      b. False
  • If an imperfectly competitive firm has a linear demand curve, then its marginal revenue curve has a quantity intercept that is half that of the demand curve.

      a. True
      b. False
  • As more firms enter a monopolistically competitive industry, the market supply curve shifts to the right.

      a. True
      b. False
  • As firms leave a monopolistically competitive industry, the remaining firms' demand curves shift to the right and become less elastic.

      a. True
      b. False
  • If a monopolistically competitive firm is in long-run equilibrium, then its short-run average total cost curve is tangent to its demand curve.

      a. True
      b. False
  • A market that is monopolistically competitive will tend to have fewer firms than would be the case if the same market was perfectly competitive.

      a. True
      b. False
  • Monopolistically competitive firms operate with excess capacity.

      a. True
      b. False
  • In the long run, monopolistically competitive firms earn zero economic profit.

      a. True
      b. False
  • Product variation is the result of quality control problems.

      a. True
      b. False
  • Monopolistically competitive firms attempt to minimize selling expenses.

      a. True
      b. False
  • Selling expenses include any marketing expenditures that are intended to increase the demand for a product.

      a. True
      b. False
  • A firm should increase expenditures on marketing and product variation up to the point where an additional dollar spent generates a marginal revenue of no less than one dollar.

      a. True
      b. False
  • One problem with the theory of monopolistic competition is that it is difficult to define a market and to identify the firms that comprise it.

      a. True
      b. False
  • In most cases, a monopolistically competitive market can be adequately approximated by the perfectly competitive model or the oligopoly model.

      a. True
      b. False
  • Which of the following statements is true for a monopolistically competitive firm?

    Answer and Explanation: The correct answer is: D. Unlike perfectly competitive firms, monopolistically competitive firms are able to raise their prices without losing all of their customers.

    Which of the following is true about a monopolistically competitive firm quizlet?

    ​Which of the following is true about a monopolistically competitive firm? ​It can earn an economic profit in the short run, but not the long run.

    Which of the following is correct for a monopolistically competitive market?

    Monopolistic competition is the one in which there are large number of producers selling dissimilar products. There is also no entry barriers for the new firms.

    What is true about firms in monopolistic competition in the short run quizlet?

    What is true about firms in monopolistic competition in the short-run? Monopolistically competitive firms can generate an economic profit, a normal profit, or an economic loss.