Exam 7: Market Structure: Perfect Competition, Monopoly, and Monopolistic Competition

Selling expenses include any marketing expenditures that are intended to increase the demand for a product.

If more firms enter a perfectly competitive industry, market equilibrium price will increase.

A depreciation of the U.S. dollar relative to foreign currencies will make

One problem with the theory of monopolistic competition is that it is difficult to define a market and to identify the firms that comprise it.

If a firm in a perfectly competitive industry charges a higher price than that charged by other firms in the industry it will be unable to sell any of its output.

If a perfectly competitive firm is in long-run equilibrium, then market price is equal to short-run marginal cost, short-run average total cost, long-run marginal cost, and long-run average total cost.

If an imperfectly competitive firm has a linear demand curve, then its marginal revenue curve has the same price intercept as its demand curve.

The difference between the total amount that consumers would be willing to pay for a given level of consumption and the amount that they actually have to pay is called consumers' surplus.

Product variation is the result of quality control problems.

Product price on a competitive market is determined by the intersection of the market demand curve with the market supply curve.

If a monopolist earns $5,000 when it sells 100 units of output and $5,025 when it sells 101 units of output, then the marginal revenue of the 101st unit is $25.

The efficient market hypothesis asserts that the price of a share of a firm's stock reflects the value implied by available information about the profitability of the firm.

Economists define a market as a place where buyers go to purchase units of a commodity.

If a perfectly competitive firm is producing a level of output where its marginal cost is greater than market price, it should raise its price.

If profit maximizing firms in a perfectly competitive industry will produce 14,000 units per day if the market price is $23 and consumers will purchase 14,000 units per day if the market price is $20, then the market equilibrium quantity must be greater than 14,000.

A firm should increase expenditures on marketing and product variation up to the point where an additional dollar spent generates a marginal revenue of no less than one dollar.

If an imperfectly competitive firm has a linear demand curve, then its marginal revenue curve has a quantity intercept that is half that of the demand curve.

If profit maximizing firms in a perfectly competitive industry are producing 14,000 units per day, but can only sell 12,000 units per day at the current market price of $23, then the market equilibrium price must be greater than $23.

The combination of product homogeneity and perfect knowledge ensure that a single price will prevail on a perfectly competitive market.

An increase the number of U.S. dollars required to purchase one British pound would be a depreciation of the U.S. dollar and an appreciation of the British pound.