True or False Questions about Microeconomics

1. Tell whether each of the following statements is true or false. If a statement is false, explain why.
a. Because the firm in perfect competition faces a horizontal demand curve for its product, the principle of diminishing marginal product does not apply to a firm in perfect competition.
b.Marginal Cost is the slope of both the Total Fixed Cost curve and the Total Variable Cost curve.
c.For a firm in perfect competition, Price equals Marginal Revenue in both the short run and the long run.
d.If the demand curve for a monopolist’s product fits the equation P equals 45 minus Q, and Total Cost equals 5Q, the profit-maximizing level of output if the firm charges all customers the same price is 20.
e.Both a monopolist and a firm in monopolistic competition maximize profit by producing the level of output at which Marginal Revenue equals Marginal Cost.
f.In the short run, a firm in perfect competition should shut down if Price is not at least equal to Average Fixed Cost.
g.A per-unit tax on output causes an increase in the profit-maximizing level of output of a monopolist.
h.In the short run, Average Cost for a firm in monopolistic competition may be above or below the Price of the product.
i.A per-unit tax on output shifts the demand curve for a monopolist’s product to the left.
j.A lump-sum tax reduces the profit of a profit-maximizing monopolist.
k.In the theory of the kinked demand curve, the firm assumes that if it raises its price, its competitors will not raise their prices.
l.When a monopolist practices first-degree (perfect) price discrimination, there is no Consumer Surplus.
2. Define monopolistic competition. Use an appropriate diagram to illustrate the long-run position of a firm in monopolistic competition. Explain your diagram, and explain how the long-run results of monopolistic competition compare with those of perfect competition and with those of monopoly.
3.Use an appropriate diagram to illustrate the effects of a per-unit tax on output on a profit-maximizing monopolist. Explain your diagram thoroughly.