If market demand increases, a perfectly competitive firm will find:
a. its cost curves shifting up.
b. its profit-maximizing output level increasing.
c. its average revenue curve shifting down.
d. its marginal cost falling.
e. its profits decreasing.
QUESTION 2Average-cost pricing for a natural monopoly will:
a. result in the socially efficient level of output.
b. result in a less than socially efficient level of output.
c. result in a greater than socially efficient level of output.
d. result in the firm suffering economic losses.
QUESTION 3If the world price of a good is lower than its domestic equilibrium price, the country will:
a. import a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied domestically.
b. export a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied domestically.
c. import a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied by foreign producers.
d. export a quantity of the good equal to the difference between the quantity demanded by foreign consumers and the quantity supplied domestically.
e. import a quantity of the good equal to the difference between the quantity demanded by foreign consumers and the quantity supplied by foreign producers.
QUESTION 4Which of the following conditions define a perfectly competitive market?
a. The transaction costs are very high.
b. Information is available to participants at a high cost.
c. The product is homogenous.
d. There are limited number of buyers and sellers.
QUESTION 5When firms leave a perfectly competitive market, then, other things remaining unchanged:
a. the market supply will decrease but the market price will rise.
b. both the market supply and the market price will fall.
c. both the market demand and the price will increase.
d. the market demand will decrease but the market price will rise.
e. both the market demand and the market supply will decrease.
QUESTION 6What would be the impact if the government forced the breakup of a natural monopoly to promote greater competition in an industry?
a. Smaller firms would have a cost advantage over larger firms.
b. The price paid by consumers would be unchanged.
c. The average cost of producing the good would increase.
d. The average cost of producing the good would decrease.
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