Chapter 6: Theory of Firm (Perfect Competition) PART B: TRUE FALSE QUESTIONS PERFECT COMPETITION 1. Market structure is determined by the number and relative size of the firms in the industry. Market structure is determined by the asset size of the industry. 3. A perfectly competitive firm has some competitors but it is still able to influence the market price. 4. In perfect competition, price is determined by the market and individual firms have no control over price. 5. In perfect competition, individual firms have some control over market price. 6. In a perfectly competitive industry, each producer contributes a very small percentage of total market output. 7. If a perfectly competitive firm raises its price above the market price, it will lose all its customers. 8. The perfectly competitive market allows very easy entry and exit of firms in the market. 9. Supernormal profit is obtained when average revenue is greater than average cost. 10. In perfect competition, price is determined by the market and individual firms have no control over price. 11. In perfect competition, individual firms have some control over market price. 12. In a perfectly competitive industry, each producer contributes a very small percentage of total market output. 13. If a perfectly competitive firm raises its price above the market price, it will lose all its customers. 14. The perfectly competitive market allows very easy entry and exit of firms in the market. 15. Supernormal profit is obtained when average revenue is greater than average cost. MONOPOLY 1. A monopoly is a single firm that produces the entire market supply of a particular good or service. 2. Monopoly is a market structure in which there is only one buyer of a product for which there are no close substitutes. 3. A monopolist's marginal revenue is below market price. 4. All monopoly power that is based on barriers to entry is subject to decay in the long run that based on government franchise. 5. Monopolists always make economic profits. 6. Monopolists are price takers. 7. A monopolist will shut down in the short run if price is everywhere less than average total cost