Question 1 The four types of market structures we study in economics are perfect

Question

Question 1

The four types of market structures we study in economics are perfect competition, monopolies, oligopolies, and corporations.

True

False

Question 2

Marginal costs will start to fall before average costs start to fall.

True

False

Question 3

A perfectly competitive industry is characterized by a few producers, all producers produce a homogeneous product, and there is free mobility of resources.

True

False

Question 4

One of the objectives of the monopolist is to squeeze out smaller competitors from the market.

True

False

Question 5

Unlike the perfect competitor, who is a price taker, the monopolist is facedwith a demand curve such that he/she can charge whatever price he/shewishes.

True

False

Question 6

A monopolist is different from a perfect competitor by the monopolist'sprice being equal to average revenue.

True

False

Question 7

Average fixed costs diminish continuously as output increases.

True

False

Question 8

The monopolist produces a product for which there are no close substitutegoods.

True

False

Question 9

Economies of scale is when the cost of producing a unit increases as itsoutput rate increases.

True

False

Question 10

The long-run average cost curve will be derived by adding up all the shortrun average total cost curves.

True

False

Explanation / Answer

1. Yes its true. In Ecomonics we have studied four types of market structure namely Perfect competion wherein all the firms produce or sell similar output and if any firm try to increase then it wont have any impact on its sales infact its sale will be reduced as consumers can get the same product at lesser price from other sellers. So in this a firm can ern only a normal profit; Second is Monopoly one firm dominates the market and can earn abnormal profits; third is monopolisitic Competetion products are not identical. Each firm differentiates its product from others through some combination of differences in product quality, features and marketing; Last is Oligolpoly few firms competing and each firm must consider the actions and responses of other firms in setting price and business strategy.

2. False. MC and AC both will together but MC will fall by more than AC.

3. False there are larger number of producers in Perfectly competitive market. And one seller cannot decide the price. Quantity they produce is where MR=MC.

4. True. Market power is the result of network effects or synergies. But it is best to remember that changes in technology and consumer tastes ca usually reduce market power overtime.

5. True. But that is also subject to Regulations.

6. True. Monolpolist price is equal to AR. Infact in PC also, Price is = AR. Difference is P=MR=AR under perfect competition. But under Monopoly MR is not equal to AR.

7. True. As we produce more and more ouput FC gets divided into more and more units resulting in lower FC/unit.

8. True. As no subsitute thats why Monlopolist can charge any price and demand can be reduced if price is increased but cant be zero as there is no substitute.

9. False. Economoes of scale persists when you utilise the plant capacity to a level where AC is lowest.

10. True. By adding all the plants capacity where the cost is lowest.

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