Ag Econ Final Exam Study Questions

question

Which of the following distinguishes the short run from the long run in pure competition?

answer

A. Firms can enter and exit the market in the long run, but not in the short run."

question

The primary force encouraging the entry of new firms into a purely competitive industry is:

answer

B. economic profits earned by firms already in the industry.

question

In a purely competitive industry:

answer

C. there may be economic profits in the short run, but not in the long run."

question

Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm:

answer

D. should continue producing in the short run, but leave the industry in the long run if the situation persists.

question

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then:

answer

B. new firms will enter this market.

question

Long-run competitive equilibrium:

answer

D. results in zero economic profits.

question

A purely competitive firm:

answer

B. cannot earn economic profit in the long run.

question

Which of the following conditions is true for a purely competitive firm in long-run equilibrium?

answer

C. P = MC = minimum ATC.

question

Entrepreneurs in purely competitive industries:

answer

B. innovate to lower operating costs and generate short-run economic profits.

question

The process by which new firms and new products replace existing dominant firms and products is called:

answer

D. creative destruction.

question

Pure monopoly refers to:

answer

C. a single firm producing a product for which there are no close substitutes.

question

Which of the following is correct?

answer

C. A purely competitive firm is a ""price taker,"" while a monopolist is a ""price maker.""

question

Which of the following best approximates a pure monopoly?

answer

C. the only bank in a small town

question

Pure monopolists may obtain economic profits in the long run because:

answer

C. of barriers to entry.

question

Which of the following is not a barrier to entry?

answer

B. X-inefficiency

question

What do economies of scale, the ownership of essential raw materials, and patents have in common?

answer

B. They are all barriers to entry.

question

Which of the above diagrams correctly portray the demand (D) and marginal revenue (MR) curves of a purely competitive seller?

answer

C. C

question

Which of the above diagrams correctly portray a nondiscriminating pure monopolist's demand (D) and marginal revenue (MR) curves?

answer

B. B

question

The MR = MC rule:

answer

D. applies both to pure monopoly and pure competition.

question

An unregulated pure monopolist will maximize profits by producing that output at which:

answer

C. MR = MC.

question

Refer to the above diagram. To maximize profits or minimize losses this firm should produce:

answer

B. E units and charge price A.

question

Refer to the above diagram for a pure monopolist. Monopoly price will be:

answer

B. c.

question

Refer to the above diagram for a pure monopolist. Monopoly output will be:

answer

D. f.

question

Economic profit in the long run is:

answer

B. possible for a pure monopoly, but not for a pure competitor.

question

At its profit-maximizing output, a pure nondiscriminating monopolist achieves:

answer

A. neither productive efficiency nor allocative efficiency.

question

Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's:

answer

B. price would be higher, but output would be lower.

question

Price discrimination refers to:

answer

C. the selling of a given product at different prices that do not reflect cost differences.

question

A dilemma of regulation is that:

answer

D. the regulated price that achieves allocative efficiency is also likely to result in losses.

question

If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to:

answer

B. average total cost.

question

If a regulatory commission wants to establish a socially optimal price for a natural monopoly, it should select a price:

answer

A. at which the marginal cost curve intersects the demand curve.

question

Which of the following industries most closely approximates pure competition?

answer

A. agriculture

question

A purely competitive seller is:

answer

C. a "price taker."

question

Which of the following is not a characteristic of pure competition?

answer

A. price strategies by firms

question

For a purely competitive seller, price equals:

answer

D. all of these.

question

The demand curve in a purely competitive industry is _____, while the demand curve to a single firm in that industry is _____.

answer

B. downsloping, perfectly elastic

question

Marginal revenue is the:

answer

D. change in total revenue associated with the sale of one more unit of output.

question

Curve (3) in the above diagram is a purely competitive firm's:

answer

B. total revenue curve.

question

The MR = MC rule applies:

answer

A. to firms in all types of industries.

question

Refer to the above diagram for a purely competitive producer. The lowest price at which the firm should produce (as opposed to shutting down) is:

answer

B. P2.

question

Refer to the above diagram for a purely competitive producer. The firm's short-run supply curve is:

answer

B. the bcd segment and above on the MC curve.

1 of 40

question

Which of the following distinguishes the short run from the long run in pure competition?

answer

A. Firms can enter and exit the market in the long run, but not in the short run."

question

The primary force encouraging the entry of new firms into a purely competitive industry is:

answer

B. economic profits earned by firms already in the industry.

question

In a purely competitive industry:

answer

C. there may be economic profits in the short run, but not in the long run."

question

Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm:

answer

D. should continue producing in the short run, but leave the industry in the long run if the situation persists.

question

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then:

answer

B. new firms will enter this market.

question

Long-run competitive equilibrium:

answer

D. results in zero economic profits.

question

A purely competitive firm:

answer

B. cannot earn economic profit in the long run.

question

Which of the following conditions is true for a purely competitive firm in long-run equilibrium?

answer

C. P = MC = minimum ATC.

question

Entrepreneurs in purely competitive industries:

answer

B. innovate to lower operating costs and generate short-run economic profits.

question

The process by which new firms and new products replace existing dominant firms and products is called:

answer

D. creative destruction.

question

Pure monopoly refers to:

answer

C. a single firm producing a product for which there are no close substitutes.

question

Which of the following is correct?

answer

C. A purely competitive firm is a ""price taker,"" while a monopolist is a ""price maker.""

question

Which of the following best approximates a pure monopoly?

answer

C. the only bank in a small town

question

Pure monopolists may obtain economic profits in the long run because:

answer

C. of barriers to entry.

question

Which of the following is not a barrier to entry?

answer

B. X-inefficiency

question

What do economies of scale, the ownership of essential raw materials, and patents have in common?

answer

B. They are all barriers to entry.

question

Which of the above diagrams correctly portray the demand (D) and marginal revenue (MR) curves of a purely competitive seller?

answer

C. C

question

Which of the above diagrams correctly portray a nondiscriminating pure monopolist's demand (D) and marginal revenue (MR) curves?

answer

B. B

question

The MR = MC rule:

answer

D. applies both to pure monopoly and pure competition.

question

An unregulated pure monopolist will maximize profits by producing that output at which:

answer

C. MR = MC.

question

Refer to the above diagram. To maximize profits or minimize losses this firm should produce:

answer

B. E units and charge price A.

question

Refer to the above diagram for a pure monopolist. Monopoly price will be:

answer

B. c.

question

Refer to the above diagram for a pure monopolist. Monopoly output will be:

answer

D. f.

question

Economic profit in the long run is:

answer

B. possible for a pure monopoly, but not for a pure competitor.

question

At its profit-maximizing output, a pure nondiscriminating monopolist achieves:

answer

A. neither productive efficiency nor allocative efficiency.

question

Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's:

answer

B. price would be higher, but output would be lower.

question

Price discrimination refers to:

answer

C. the selling of a given product at different prices that do not reflect cost differences.

question

A dilemma of regulation is that:

answer

D. the regulated price that achieves allocative efficiency is also likely to result in losses.

question

If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to:

answer

B. average total cost.

question

If a regulatory commission wants to establish a socially optimal price for a natural monopoly, it should select a price:

answer

A. at which the marginal cost curve intersects the demand curve.

question

Which of the following industries most closely approximates pure competition?

answer

A. agriculture

question

A purely competitive seller is:

answer

C. a "price taker."

question

Which of the following is not a characteristic of pure competition?

answer

A. price strategies by firms

question

For a purely competitive seller, price equals:

answer

D. all of these.

question

The demand curve in a purely competitive industry is _____, while the demand curve to a single firm in that industry is _____.

answer

B. downsloping, perfectly elastic

question

Marginal revenue is the:

answer

D. change in total revenue associated with the sale of one more unit of output.

question

Curve (3) in the above diagram is a purely competitive firm's:

answer

B. total revenue curve.

question

The MR = MC rule applies:

answer

A. to firms in all types of industries.

question

Refer to the above diagram for a purely competitive producer. The lowest price at which the firm should produce (as opposed to shutting down) is:

answer

B. P2.

question

Refer to the above diagram for a purely competitive producer. The firm's short-run supply curve is:

answer

B. the bcd segment and above on the MC curve.

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