21. A competitive market has all of the following characteristics except
a. The buyers and sellers are price makers
b. Firms can freely enter and exit the market
c. There are many buyers and sellers in the market
d. Goods offered by the sellers are very similar
23. The firm shuts down if the revenue it would earn from producing is less than its variable costs of production
26. In the long run, the competitive firm will exit the market when
a. Price falls below variable costs
b. Price falls below marginal cost
c. Price falls below fixed cost
d. Price is raised above variable and fixed costs
27. All is true about monopoly analysis except
a. It is not unnatural for businesses or people in general to wish to monopolize their area of expertise.
b. Electrical utilities are considered natural monopolies
c. The argument against monopolies is that they keep prices too high and production too low
d. Antitrust legislation, both here and abroad, is never used to curb monopoly business behavior
28. Copyrights and patents are examples of government approved monopolization
29. Monopolies are exclusive sellers because they have barriers preventing other firms from entering their market. All of the following are barriers except
a. Control of certain resources
b. Favored Government regulation
c. Control of advertising
d. Control over the knowledge
Ans 21: a. The buyers and sellers are price makers: The industry is the price maker and buyers and sellers are the price takers.
Ans 23: b. false: When revenue goes below variable cost, then firms shut down the production. when price goes below average variable cost.
Ans 26: b. Price falls below marginal cost :This is true for long run. But for short run, when price goes below average variable cost, firms shut down the production.
Ans 27: d. Antitrust legislation, both here and abroad, is never used to curb monopoly business behavior: False statement. These laws help the consumers to be protected against monopoly behavior of firms.
Ans 28: a. True :Yes, the patent and copyrights gives a special right to own a resource and gives a monopoly right.
Ans 29: c. Control of advertising : False, this is not the case under monopoly.
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