The short-run industry supply curve in a perfectly competitive market is the horizontal sum of each firm's short-run supply curve.
a. True
b. False
QUESTION 2The main reason a monopolist can earn long-run economic profit, whereas a perfectly competitive firm cannot, is that
a. monopolists operate under economies of scale
b. perfectly competitive firms have opportunity costs
c. demand for the monopolist's output is inelastic
d. demand for the monopolist's output is elastic
e. there are no barriers to entry in perfect competition
QUESTION 3The Sherman Antitrust Act makes it unlawful for firms to collude to restrain trade.
a. True
b. False
QUESTION 4When marginal revenue equals marginal cost, the firm just breaks even.
a. True
b. False
QUESTION 5Which of the following would not bar entry into a market?
a. control by a single firm of an essential resource
b. the necessity of taking risks when starting a firm
c. patents
d. economies of scale
e. government regulations limiting the number of firms in an industry
QUESTION 6Antitrust policy is designed to
a. improve health and safety in products and in working conditions
b. regulate the firms in industries where cut-throat competition is potentially damaging
c. create monopolies by forcing competitive firms to merge
d. control price and output in industries where monopoly is desirable
e. promote competition and reduce anticompetitive behavior
QUESTION 7A perfectly competitive firm finds that: Average total cost is 25; Average variable cost is 15; Marginal cost is 20 and increasing; Price of the product is 22. This firm should
a. produce more output
b. raise the price of its product
c. reduce production without shutting down
d. shut down (reduce output to zero)
e. do nothing (it is currently maximizing profit)
QUESTION 8Barriers to entry
a. prevent monopolies from earning profit in the long run
b. prevent monopolies from earning profit in the short run
c. may allow monopolies to earn profit in the long run
d. prevent government from regulating a monopoly
e. prevent a natural monopoly from raising its price
QUESTION 9The purpose of antitrust laws is to
a. reduce anticompetitive activities
b. increase anticompetitive activities
c. guarantee worker safety
d. promote quality products
e. prevent large-scale production
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