1. If, in the short run, a perfectly competitive firm is producing at a point where total cost is greater than total revenue, then the firm should shut down because economic profits are negative.

continue to produce as long as P > AVC.

continue to produce because accounting profits are positive.

set a higher price for its output.

set a lower price for its output.

Question 2. Retail outlets operate in which of the following market structures?

perfect competition

monopolistic competition

oligopoly

monopoly

oligopsony

Question 3. A monopolist will have a marginal revenue curve that is identical to the demand curve.

identical to the marginal cost curve.

below the demand curve.

above the marginal cost curve.

Question 4. If a monopoly firm observes an increase in total revenue following a price increase, which of the following must be true?

MR > 0

MR < 0

MR = 0

MR = TR

Question 5. For a perfectly competitive firm, the demand curve is the marginal revenue curve.

perfectly inelastic.

always equal to marginal cost.

the same as the market demand curve.

Question 6. Monopolistic competition and oligopoly are examples of monopoly.

perfect competition.

theories of consumer behavior.

imperfect competition.

the extreme cases on the market structure continuum.

Question 7. The marginal cost curve above the minimum average variable cost indicates points where the firm will realize an economic profit.

covers the area where a firm should shut down.

is equal to the firm's marginal revenue curve.

is the firm's short-run supply curve.

Question 8. If the demand curve of a monopolist is in the inelastic range, then total revenue will fall if price increases.

total revenue will be unchanged if price increases.

total revenue will rise if price increases.

total supply will increase by an equal amount if demand increases.

price will be unchanged if total revenue increases.

Question 9. In a perfectly competitive industry, if TR > TC, then in the long run firms will exit the industry.

new firms will enter the industry.

there will be no change in the number of firms.

market supply will shift to the left.

firms will make economic profits.

Question 10. The greater the price elasticity of the demand curve that the firm faces in monopolistic competition, the higher the degree of competition in the industry.

the lower the degree of competition in the industry.

the fewer substitutes for the good produced.

the easier it is for the firm to raise its price.

the less sales the firm will gain from a price decrease.