MC AR = MR The demand curve the firm faces slopes downward. Entry is easy. 2. Question: At the point of long-run equilibrium for a perfectly competitive firm, Student Answer: economic profits are zero. TR > TC. TR < TC. P = AVC. normal profits are zero. 3. Question: The greater the price elasticity of the demand curve that the firm faces in monopolistic competition, Student Answer: the higher the degree of competition in the industry. the lower the degree of competition in the industry. the fewer substitutes for the good produced. the easier it is for the firm to raise its price. the less sales the firm will gain from a price decrease. 4. Question: Retail outlets operate in which of the following market structures? Student Answer: perfect competition monopolistic competition oligopoly monopoly oligopsony 5. Question: Which one of the following is NOT a basic assumption of the model of perfect competition? Student Answer: Many buyers Many sellers A differentiated product Full information Mobile resources 6. Question: A firm in a(n) industry will have the most elastic demand curve. Student Answer: monopolistic oligopolistic monopolistically competitive perfectly competitive 7. Question: The marginal cost curve above the minimum average variable cost Student Answer: indicates points where the firm will realize an economic profit. covers the area where a firm should shut down. is equal to the firm's marginal revenue curve. is the firm's short-run supply curve. 8. Question: A firm in a monopolistically competitive industry faces a downward-sloping demand curve because Student Answer: the product is homogeneous. the product is differentiated. nonprice competition is missing. barriers to entry are high. 9. Question: Along a downward-sloping monopoly demand curve, Student Answer: marginal revenue is greater than price. elasticity of demand is constant. marginal revenue decreases when price decreases. marginal revenue is equal to zero when price is equal to zero. 10. Question: Perfect competition is Student Answer: not an abstraction from reality;it is reality. an "ideal type"?that is, a model or guidepost for comparison. the only market structure in the United States. the best of all possible worlds. found in the U.S. steel industry.
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