Economics Chapter 7

Which of the following statements is not true of firms in perfect competition?

• All producers charge the same price

• All producers make the same product

• Each firm tries to sell more by reducing its price

• There are no barriers to entry

The demand curve facing an individual firm in perfect competition is a horizontal line.

• True

• False

A firm operating in the ______ market structure has no market power.

• Oligopoly

• Monopolistic Competition

• Monopoly

• Perfect Competition

A monopoly must lower the price of its product in order to

• sell more output

• earn a profit

• shift the demand curve

• match the competition

By definition, all monopolies earn substantial profits.

• True

• False

Most monopolies tend to last for a long time.

• True

• False

Firms in monopolistic competition

• all produce exactly the same product

• all charge the same price

• all earn the same profit

• all work to differentiate their products

One problem for society resulting from monopoly is that the monopoly may have too much influence on the political system.

• True

• False

Which of the following is not a way in which sellers in monopolistic competition differentiate their products?

• physical differences

• location and services

• collusion

• product image

A firm experiences _____ can lower its average cost by selling more of the good.

• Economies of Scale

• Barriers to entry

• Excess Capacity

• antitrust activity