1.The four types of market structures we study in economics are perfect competition, monopoly, oligopoly, and monopsony.
2. The long run is considered to be the period when a firm’s inputs are mainly variable and at least one input is fixed.
3. The government regulates a pure monopoly by setting price where AVC (average variable costs) = D (demand).
4. Monopolies, since no close substitutes nor competitors exist, can price whatever they want and still maximize total revenues.
5.As competition increases in markets, the demand curve for products becomes more price elastic and downward pressure on prices tends to ensue.
6. As an imperfect competitor produces more and more output, we can assume that eventually marginal costs will continue to rise and marginal revenues to fall.
8. The point where imperfect competitors will price their products and earn the highest level of total revenues is at the midpoint of the demand curve where total revenues are highest on the total revenue curve.
9. In general, we can expect higher barriers of entry for a monopolistically competitive market structure than an oligopoly market structure
10. Monopolistic competition would represent the market structure within which Coca-Cola and Pepsi Cola firms operate.
11. The perfect competitor can produce as much as it wants or as little as it wants with no effects on market price whatsoever
12. Oligopolies and monopolies attempt reduce output and raise price, thereby incurring overcapacity and waste to society.
13. Redistribution of income from wealthier individuals to lower-income individuals by government in the form of higher taxes and progressive tax systems actually tends to lower prosperity because it weakens the link between productive activity and the reward derived from it, encourages resources to flow into wasteful rent-seeking activities, as well as higher tax rates required to finance redistribution result in resources being devoted toward tax avoidance activities.
14. Decreasing the percentage tariff price on an imported good will result in greater market share for the foreign producer in the domestic country.
15. Which market structure can earn long-run economic profits?
b. Monopolistic competition
e. c and d only
16. All firms produce where
|a.||marginal revenues are greater than or equal to marginal costs|
|b.||average total costs are greater than marginal costs|
|c.||marginal benefits are greater than marginal profits|
|d.||short-run profits are less than long-run profits|
17. A perfect competitor is a __________ and can earn economic profits ____________.
|a.||price taker, in both the short run and long run|
|b.||price maker, in only the long run|
|c.||price maker, never|
|d.||price maker, in both the short run and long run|
|e.||price taker, in only the short run|
18. The upward-sloping portion of a long-run average total cost curve is the result of
|economies of scale.|
|diseconomies of scale.|
|the existence of fixed resources.|
19. The law of diminishing marginal returns explains the general shape of the firm’s
|a.||long-run cost curves.|
|b.||the laws of diminishing returns has nothing to do with cost curves.|
|c.||short-run cost curves.|
|d.||both short-run and long-run cost curves|
20. Which of the following labor resources will likely have the most inelastic supply schedule in the short run?
|d.||filling station attendants|
21. If Congress suddenly passes legislation that required all U.S. workers to receive the same annual pay, we would expect
|a.||less human capital investment.|
|b.||a shortage of workers to fill the least desirable jobs.|
|c.||a surplus of workers to fill the easy, desirable jobs.|
|d.||all of the above.|
22. Economic profit
|a.||does not exist in competitive markets.|
|b.||provides incentive for investors to undertake risky projects.|
|c.||motivates entrepreneurial innovation.|
|d.||does all of the above.|
|e.||is both b and c|
23. The demand curve of the perfect competitor is
24. An import tariff on an imported good will result in
|a.||higher domestic consumer prices for that good.|
|b.||increased market share for the domestic producer.|
|c.||increased revenues for the domestic government.|
|d.||deadweight losses to society.|
|e.||only a, b, and c.|
|f.||a, b, c, and d.|
25. A nation benefits from international trade if it
|a.||imports goods for which it is a low opportunity cost producer.|
|b.||imports more than it exports.|
|c.||exports more than it imports.|
|d.||exports good for which it is a low opportunity cost producer|
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