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28 Aug 2018

70) In a monopolistically competitive industry, the long-run equilibrium output corresponds to the tangency of the firm's LRAC and its demand curve. This output is also where marginal revenue equals marginal cost because A) firms will have negative profits at any other level of output. B) the average total cost is equal to average revenue at that output. C) firms are price takers in this market structure. D) marginal cost is above price. E) firms prefer it this way.

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Deanna Hettinger
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30 Aug 2018
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Related questions

32. Which of the following is not a difference between monopolies and perfectly competitive markets?

A. Monopolies face downward sloping demand curves while perfectly competitive firms face horizontal demand curves.

B. Monopolies charge a price higher than marginal cost while perfectly competitive firms charge a price equal to marginal cost.

C. Monopolies can earn profits in the long run while perfectly competitive firms break even.

D. Monopolies choose to produce the quantity at which marginal revenue equals marginal cost while perfectly competitive firms do not.

40. Which of the following statements is not correct?

A. Both monopolies and monopolistically competitive firms can earn economic profits in the long run.

B. Both monopolistically competitive and perfectly competitive firms can earn economic profits in the short run.

C. Only competitive firms produce the welfare-maximizing level of output.

D. Firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost.

43. A monopolistically competitive firm is currently producing 20 units of output. At this level of output the firm is charging a price equal to $20, has marginal revenue equal to $12, has marginal cost equal to $12, and has average total cost equal to $18. From this information we can infer that

A. the profits of the firm are negative.

B. firms are likely to leave this market in the long run.

C. the firm is currently maximizing its profit.

D. All of the above are correct.

Excess capacity in monopolistically competitive industries results because in equilibrium

A) each firm's output level is too great to minimize the average cost.

B) each firm's output level is too small to minimize the average cost.

C) firms make a positive economic profit.

D) price equals marginal cost.

 

20) When price is less than average variable cost at the profit-maximizing level of output, a firm should: A) continue to produce the level of output at which marginal revenue equals marginal cost if it is operating in the long run. B) shutdown, because it cannot even cover all of its variable costs let alone its fixed costs if it stays in business. C) shutdown, because it will lose nothing in that case. D) continue to produce the level of output at which marginal revenue equals marginal cost if it is operating in the short run. 21) When price is greater than average variable cost but less than average total cost at the profit-maximizing level of output, a firm should: A) continue to produce the level of output at which marginal revenue equals marginal cost. B) shutdown to minimize its losses. C) reduce output to the level at which price equals average variable cost to minimize its losses. D) increase output to minimize its losses. 22) Assume that at the current market price, a perfectly competitive firm's profit-maximizing level of output yields total revenues that are just equal to total costs. Which of the following statements applies to this firm? A) The firm should increase its explicit costs to reduce its tax burden. B) The firm should shut down right now. C) The firm should continue to operate in the short run to minimize losses, but shut down if things don't improve over the long run. D) The firm is earning zero economic profit and should continue to operate. 23) The perfectly competitive firm's supply curve: A) coincides with its perfectly elastic demand curve. B) is the firm's average total cost curve above the shutdown point. C) is perfectly inelastic at the market price. D) is the firm's marginal cost curve above the minimum point on the AVC curve. 24) Assume there is a decrease in the market demand for a good sold by price-taking firms that are initially producing the profit-maximizing level of output. How will the market adjust over time? A) Firms will exit the market, causing price to rise until losses are eliminated. B) Firms will exit the market, causing price to fall until positive profits are eliminated. C) Firms will enter the market, causing price to fall until positive profits are eliminated. D) Firms will enter the market, causing price to rise until losses are eliminated. 25) What is the "most efficient capacity" for the perfectly competitive firm? A) The plant size for which Price = AR. B) The plant size at which LRAC is at its minimum. C) The plant size at which MR = MC. D) The plant size at which any of the SRATC curves are tangent to the LRAC curve.

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