LESSON 1 FINALS

Question 1

refers to a seller that does not have the ability to
control the price of the product it sells. The seller takes the
price determined in the market.

Answer 1

Price taker

Question 2

The seller takes the
price determined in the market. T OR F

Answer 2

TRUE

Question 3

Is established
at the intersection of the market
demand and market supply curves

Answer 3

equilibrium price

Question 4

equilibrium price has been
established, a single perfectly
competitive firm faces a vertical
(flat, perfectly elastic) T or F

Answer 4

FALSE ( HORIZONTAL)

Question 5

The firm takes the equilibrium price
as given, hence it is a price taker. T OR F

Answer 5

TRUE

Question 6

If the firm tries to charge a price higher than the market-established
price, it will sell many of its products. T or F

Answer 6

FALSE ( IT WONT)

Question 7

If the firm wants to maximize profits, it does not offer to sell its good
at a lower price than the equilibrium price. T OR F

Answer 7

TRUE

Question 8

The equilibrium price is the only relevant price for the perfectly competitive firm. T OR F

Answer 8

TRUE

Question 9

states an inverse
relationship between price and quantity
demanded. The curve must be downward
sloping.

Answer 9

The law of demand

Question 10

A single perfectly competitive firm’s flat demand
curve simply represents its

Answer 10

pricing situation.

Question 11

is the change
in TR that results from selling one
additional unit of output.

Answer 11

firm’s marginal revenue

Question 12

firm’s marginal revenue at any output
level is always not equal to the equilibrium
price. T OR F

Answer 12

FALSE ( EQUAL)

Question 13

says
that a firm produces quantity of
output at which MR=MC2

Answer 13

Profit Maximization Rule

Question 14

Each firm produces and sells a homogenous product and Firms have easy entry and exit

Answer 14

Perfect Competition

Question 15

The single seller sells a product that has no close substitute.
The barriers to entry are extremely high

Answer 15

Monopoly

Question 16

Monopolies can exist as?

Answer 16

government monopoly or market monopoly.

Question 17

a right that government grants to a firm and that permits the firm to provide a
particular good or service and excludes all others from doing so (eliminating potential competition by
law)

Answer 17

Public Franchise

Question 18

patent holders are shielded from competitors; no one else can legally produce and sell the
patented product or process

Answer 18

Patents

Question 19

required for entry into some industries & occupations

Answer 19

Government Licenses

Question 20

In monopoly competition New entrants
must enter on a small scale. T OR F

Answer 20

FALSE (LARGE SCALE)

Question 21

If economies of scale are so pronounced that only one firm
can survive in the industry, the firm is called a?

Answer 21

natural monopoly

Question 22

defined as a seller that has
the ability to control to some degree the price of the product
it sells.

Answer 22

price searcher

Question 23

Industry, they are one and the same. The
demand curve of the this firm is the same for the
industry (downward sloping)

Answer 23

Monopoly firm

Question 24

More is sold at lower prices than at higher prices, ceteris
paribus. T OR F

Answer 24

TRUE

Question 25

In perfect competition, the firm’s demand
curve is not the same as its MR curve. T OR F

Answer 25

FALSE (SAME)

Question 26

In monopoly, the firm’s demand curve is
not the same as its MR curve. T OR F

Answer 26

TRUE

Question 27

Legal Barriers of monopoly firms

Answer 27

Public franchise
Patents
Government licenses