If marginal revenue is less than price for a firm, it must be true that the firm
a. is a monopoly
b. is in perfect competition
c. is in monopolistic competition
d. faces a perfectly elastic demand curve
e. faces a downward-sloping demand curve
QUESTION 2Dairy price supports result in a redistribution of welfare from consumers to dairy farmers.
a. True
b. False
QUESTION 3Monopolistic competition is similar to
a. perfect competition, in that firms face downward-sloping demand curves and earn zero long-run economic profit
b. pure monopoly, in that firms face downward-sloping demand curves and can earn economic profits both in the short run and in the long run
c. perfect competition, in that firms face perfectly elastic demand curves and earn zero long-run economic profit
d. pure monopoly, in that firms can earn economic profits both in the short run and in the long run, and similar to perfect competition, in that firms face perfectly elastic demand curves
e. pure monopoly, in that firms face downward-sloping demand curves, and similar to perfect competition, in that long-run economic profit is zero
QUESTION 4Taxpayers and consumers end up paying for agricultural price supports.
a. True
b. False
QUESTION 5Firms in monopolistic competition and perfect competition typically
a. are price takers
b. produce identical products
c. earn zero economic profit in the long run
d. face a downward-sloping demand curve
e. face an upward-sloping total revenue curve at all rates of output
QUESTION 6As a result of legislation to establish a floor price for milk, most dairy farmers will
a. end up earning a normal rate of return in the long run
b. end up earning a zero rate of return in the long run
c. end up earning a negative rate of return in the long run
d. benefit from the increased cost of specialized resources used in dairy farming
e. suffer if they own specialized resources at the time the legislation is passed
QUESTION 7Monopolistically competitive firms do not achieve productive efficiency because
a. entry of firms raises production costs in the long run
b. barriers to entry allow profit to be earned in the long run
c. price is greater than marginal cost at the profit maximizing output level
d. profit is maximized at a quantity where average total cost is not minimized
e. there is no threat of entry in the long run
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