ECO2023 Microeconomics Final Exam

question

The Latin term "ceteris paribus" means

answer

Other Things Equal

question

A person should consume more of something when its marginal

answer

benefit exceeds its marginal cost

question

Economics may best be defined as the

answer

Social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.

question

A normative statement is one that

answer

is based on value of judgments

question

Which of the following is a positive statement?
A: Summer evenings are nice when it cools off to around 70 degrees.
B: The temperature is 92 degrees today.
C: A humidity level of 90 percent is too high.
D: It is too hot to run outside when the temperature exceeds 80 degrees.

answer

B: The temperature is 92 degrees today.

question

Microeconomics is concerned with...

answer

a detailed examination of specific economic units that make up the economic system.

question

The four factors of production are:

answer

Land, Labor, Capital, and Entrepreneurial ability.

question

The main function of the entrepreneur is to

answer

innovate

question

The fallacy of composition is essentially the error of

answer

generalizing from the particular to the general.

question

A caller to a radio talk show states that oil companies are "greedy price gougers." This is an example of

answer

loaded terminology

question

Private Property

answer

encourages owners to maintain or improve their property so as to preserve or enhance value.

question

Command systems are also known as

answer

communism

question

The "coincidence of wants" problem associated with barter refers to the fact that

answer

for exchange to occur, each seller must have a product that some buyer wants

question

The invisible hand refers to the

answer

notion that, under competition, decisions motivated by self-interest promote the social interest

question

The two basic markets shown by the simple circular flow model are

answer

product and resource

question

In what type of business do the owners bear no personal financial responsibility for the company's debts and obligations?

answer

Corporations

question

The law of demand states that, other things equal,

answer

price and quantity demanded are inversely related.

question

If the demand curve for product B shifts to the right as the price of product A declines, then

answer

A and B are complementary goods

question

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the

answer

income effect

question

the relationship between quantity supplied and price is _________, and the relationship between quantity demanded and price is ___________.

answer

direct; inverse

question

Allocative efficiency refers to

answer

the production of the product mix most wanted by society.

question

Data from the registrar's office at Gigantic State University indicate that over the past 20 years tuition and enrollment have both increased. From this information we can conclude that

answer

factors such as school-age population, incomes, and preferences for education have increased over the 20-year period.

question

Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?
A: a decrease in demand
B: an increase in demand
C: a decrease in supply
D: an increase in supply

answer

D: an increase in supply

question

If the supply and demand curves for a product both decrease, then equilibrium

answer

quantity must decline, but equilibrium price may rise, fall, or remain unchanged

question

Which of the following is a determinant of supply?
A: product taxes and subsidies
B: tastes and preferences of buyers
C: consumer income
D: price of a complementary good

answer

A: product taxes and subsidies

question

(Consider This) In 1975, McDonald's introduced its Egg McMuffin breakfast sandwich, which remains popular and profitable today. This longevity illustrates the idea of

answer

consumer sovereignty

question

Money is not an economic resource because

answer

money, as such, does not produce anything

question

Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is

answer

negative, and therefore these goods are complements

question

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore, demand for X in this price range

answer

is elastic

question

In which of the following instances will total revenue decline?
A: Price rises and demand is elastic
B: Price rises and demand is inelastic
C: Price falls and demand is elastic
D: Price rises and supply is elastic

answer

A: Price rises and demand is elastic

question

If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will

answer

increase the quantity demanded by about 25 percent

question

The price elasticity of demand coefficient measures

answer

buyer responsiveness to price changes

question

Movie theaters charge lower prices to see a movie in the afternoon than in the evening because there is an

answer

elastic demand to see movies in the afternoon

question

The income elasticity of demand for store brand macaroni and cheese is -3.00, this means that

answer

store brand macaroni and cheese is an inferior good

question

The price of gold is often volatile because

answer

supply is relatively inelastic, so changes in demand have a large effect on price

question

The main reason for the high price of antiques is that

answer

supply is relatively inelastic and demand increases over time

question

The demand for cheerios cereal is more price-elastic than demand for cereals as a whole. This is best explained by the fact that

answer

there are more substitutes for Cheerios than for cereals as a whole

question

Which of the following is an example of market failure?
A: positive externalities
B: public goods
C: negative externalities
D: all of these

answer

D: all of these

question

Consumer surplus

answer

is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price

question

The utility of a good or service

answer

is the satisfaction or pleasure one gets from consuming it

question

A perfectly inelastic demand curve

answer

graphs as a line parallel to the vertical axis

question

The trains of the Transcontinental Railway Company, when shipping goods, sometimes emit sparks that start fires along the tracks and damage the property of others. If Transcontinental does not pay for the damage it causes, what has occurred?

answer

Supply-side market failure

question

Supply-side market failure occur when

answer

supply curves don't reflect the full cost of producing a good or service

question

The diamond-water paradox arises because

answer

essential goods may be cheap, while nonessential goods may be expensive

question

How did Apple overcome consumers' diminishing marginal utility for the iPads?

answer

Apple introduced new features to entice previous buyers to purchase new modles

question

Which of the following sets of personal characteristics best reflects what behavioral economists assume about how people make decisions?

answer

People have preferences that depend on context, avoid and are bad at computation, often give in to temptation, and are often selfless in their behavior

question

Susie knows that too many sugary treats, while delicious when eaten, have long-term adverse effects on weight and health. Based on this information, a behavioral economist would expect Susie to

answer

eat more sugary treats than is optimal, as she likely gives more weight to present events and outcomes than to ones in the future

question

Which of the following best explains the difference between neoclassical economics and behavioral economics?

answer

Neoclassical economics assumes that people are rational in their decision making, while behavioral economics believes people make systematic errors.

question

Which of the following individuals received a Nobel Prize in economics for his work in behavioral economics?

answer

Daniel Kahneman

question

Why, according to behavioral economics, would supermarkets place gum, candy, and other small convenience items near the cash registers?

answer

Many of these are small items that people will buy on an impulse

question

Augi carefully plans out an early morning exercise routine to lose weight and get fit. When it's time to work out, however, Augi just "doesn't feel up to it" and decided to sleep in. Behavioral economics would say that Augi

answer

used System 2 of her brain to formulate her workout plan, but gave in to System 1 when she chose to sleep in

question

Jennifer buys a piece of costume jewelry for $33, for which she was willing to pay $42. The minimum acceptable price the seller, Nathan, was $30. Jennifer experiences

answer

a consumer surplus of $9, and Nathan experiences a producer surplus of $3

question

Marginal utility is the

answer

change in total utility obtained by consuming one more unit of a good

question

When someone tries to "multitask" despite mounting evidence that multitasking is actually inefficient, this illustrates

answer

confirmation bias

question

Achoring

answer

can influence decision making with irrelevant information

question

One major consequence of the overconfidence effect is that

answer

bad decisions can be made because people will act without pausing to see whether their intuition is correct or not

question

High-end retailers spend a lot on architecture, displays, and packaging in order to take advantage of the

answer

framing effect

question

Producer surplus is the difference between

answer

the minimum prices producers are willing to accept for a product and the higher equilibrium price

question

When gasoline at $3.60/gallon looks relatively cheap after a period of $5/gallon gas, that's an illustration of the

answer

framing effect

question

People's tendency to prefer the "default" option over other options is known in the prospect theory as

answer

status quo bias

question

Some behavioral economists explain the so-called endowment effect to be a consequence of people's tendency to

answer

feel looses more intensely than gains

question

Upon buying a car with airbags, Indy begins to drive recklessly. This is an example of the

answer

moral hazard problem

question

Which of the following is an example of a public good

answer

a weather warning system

question

The two main characteristics of a public good are

answer

non-rivalry and nonexcludablility

question

Market failure is said to occur whenever

answer

private markets do not allocate resources in the most economically desirable way

question

Which of the following statements is CORRECT?
A: Marginal cost is the price or cost of an extra variable input (for example, an additional worker or machine) divided by its marginal product
B: Marginal cost measures the cost per unit of output associated with any level of production
C: Average total cost is the difference between average variable cost and average fixed cost
D: When marginal product rises, marginal cost must also rise

answer

A: Marginal cost is the price or cost of an extra variable input (for example, an additional worker or machine) divided by its marginal product

question

Which of the following statements is CORRECT?
A: The long-run supply curve for a purely competitive industry will be less elastic than the industry's short-run curve.
B: The long-run supply curve for a purely competitive decreasing-cost industry will be up-sloping
C: The long-run supply curve for a purely competitive increasing-cost industry will be up-sloping
D: The long-run supply curve for a purely competitive increasing-cost industry will be perfectly elastic.

answer

C: The long-run supply curve for a purely competitive increasing-cost industry will be up-sloping

question

In the short run, a purely competitive seller will shut down if

answer

price is less than average variable cost at all outputs

question

Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?

answer

use of savings to pay operating expenses instead of generating interest income

question

Assume a purely competitive increasing-cost industry is initially in long-run equilibrium and that an increase in consumer demand occurs. After all economic adjustments have been completed, product price will be

answer

higher, and total output will be larger than originally

question

In a purely competitive industry

answer

there may be economic profits in the short run but not in the long run

question

If a variable input is added to some fixed input, beyond some pint the resulting extra output will decline. This statement describes

answer

the law of diminishing returns

question

The following is cost information for the Creamy Crisp Donut Company
Entrepreneur's potential earnings as a salaried worker = $50,000
Annual lease on building = $22,000
Annual revenue from operations = $380,000
Payments to workers = $120,000
Utilities (electricity, water, disposal) cost = $8,000
Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000
Entrepreneur's forgone interest on personal funds used to finance the business = $6,000

Creamy Cirsp's implicit cost, including a normal profit are

answer

$136,000

question

Suppose that an industry's long-run supply curve is down-sloping. This suggests that

answer

it is a decreasing-cost industry

question

A purely competitive firm is precluded from making economic profits in the long run because

answer

of unimpeded entry to the industry

question

Suppose that, when producing 10 units of output, a firm's AVC is $22, its AFC is $5, and its MC is $30. This firm's

answer

total cost is $270

question

Suppose that a business incurred implicit costs of $500,000 and explicit cost of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting

answer

profits were $0 and its economic losses were $500,000

question

Total fixed cost (TFC)

answer

does not change as total output increases or decreases

question

Which of the following is the most likely to be a fixed cost?
A: shipping charges
B: wages for unskilled labor
C: expenditures for raw materials
D: property insurance premiums

answer

D: property insurance premiums

question

Assume that in the short run a firm is producing 100 units of output, has average total cost of $200, and has average variable cost of $150. The firm's TOTAL FIXED cost are

answer

$5,000

question

In contrast to American firms, Japanese firms frequently make lifetime employment commitments to their workers and agree not to lay them off when product demand is weak. Other things being equal, we would expect Japanese firms to

answer

continue to produce in the short run at lower prices than would American firms

question

A constant-cost industry is one in which

answer

if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth

question

Which of the following industries most closely approximates pure competition?

answer

agriculture

question

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

answer

Firms can enter and exit market in the long run but not int he short run

question

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a monopolistic competitor?
A: Pittsburgh Plate Glass
B: Microsoft
C: Ford Motor Company
D: Subway Sandwiches

answer

A: Pittsburgh Plate Glass

question

Network effects and simultaneous consumption tend to foster the development of

answer

net social benifits

question

The consumer Wi-Fi-Service providers market is best described as a

answer

monopoly

question

Pure monopoly refers to

answer

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

question

A monopolistically competitive firm has a

answer

highly inelastic demand curve

question

OPEC provides an example of

answer

an international cartel

question

If an monopolist engages in price discrimination, it will

answer

charge a higher price where individual demand is inelastic and a lower price where individual demand is elastic

question

Industries X and Y both have four-firm concentration ratios of 32 percent, but the Herfindahl index for X is 256, while that for Y is 264. These data suggest

answer

That X is more technologically progressive than Y

question

In the long-run, a pure monopolist will maximize profits by producing that output at which marginal cost is equal to

answer

average total cost

question

The MR=MC rule

answer

applies to both a pure monopoly and pure competition

question

A monopoly results in productive inefficiency because at the profit-maximizing out level,

answer

MC is not at its minimum level

question

The incentive to cheat within a cartel increases with an increase in the following factors, except

answer

the cost differences among firms

question

Concentration ratios measure the

answer

degree to which product price exceeds marginal cost in various industries

question

Collusion refers to a situation where rival firms decide to

answer

combine their operations and merge with each other

question

In the short run, the price charged by monopolistically competitive firm attempting to maximize profits

answer

must be less than ATC

question

Which of the following is correct?

answer

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

question

In the long run, a profit-maximizing monopolistically competitive firm sets it price

answer

equal to marginal cost

question

The term oligopoly indicates

answer

many producers of a differentiated product

question

Which of the following best approximates a pure monopoly?

answer

the only grocery store in a small isolated town

question

The effects of advertising on a firm's profits and efficiency

answer

may be positive or negative

question

In an oligopolistic market

answer

thethe industry is monopolistically competitive

question

Monopolistic competition means

answer

a market situation where competition is based entirely on product differentiation and advertising

question

If the four-firm concentration ratio for industry X is 80,

answer

the four largest firms account for 80 percent of total sales

question

X-inefficiency refers to a situation in which a firm

answer

fails to achieve the minimum average total costs attainable at each level of output

question

Oligopolistic firms engage in collusion to

answer

realize allocative efficiency, that is, The P=MC level of output

question

The automobile, household appliance, and automobile tire industries are all illustrations of

answer

differentiated oligopoly

question

If a pure monopolist can price discriminate by separating buyers into two or more groups,

answer

the firm will face multiple marginal revenue curves

question

In the short-run equilibrium, a monopolist's profits

answer

are positive if the product's elasticity of demand is less than 1

question

The Herfindahl index for a pure monopolist is

answer

10,000

question

Which of the following is not a barrier to entry?

answer

ownership of essential resources

question

Mergers of firms in an industry tend to

answer

transform monopolistic competition into oligopoly

1 of 115

question

The Latin term "ceteris paribus" means

answer

Other Things Equal

question

A person should consume more of something when its marginal

answer

benefit exceeds its marginal cost

question

Economics may best be defined as the

answer

Social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.

question

A normative statement is one that

answer

is based on value of judgments

question

answer

B: The temperature is 92 degrees today.

question

Microeconomics is concerned with...

answer

a detailed examination of specific economic units that make up the economic system.

question

The four factors of production are:

answer

Land, Labor, Capital, and Entrepreneurial ability.

question

The main function of the entrepreneur is to

answer

innovate

question

The fallacy of composition is essentially the error of

answer

generalizing from the particular to the general.

question

A caller to a radio talk show states that oil companies are "greedy price gougers." This is an example of

answer

loaded terminology

question

Private Property

answer

encourages owners to maintain or improve their property so as to preserve or enhance value.

question

Command systems are also known as

answer

communism

question

The "coincidence of wants" problem associated with barter refers to the fact that

answer

for exchange to occur, each seller must have a product that some buyer wants

question

The invisible hand refers to the

answer

notion that, under competition, decisions motivated by self-interest promote the social interest

question

The two basic markets shown by the simple circular flow model are

answer

product and resource

question

In what type of business do the owners bear no personal financial responsibility for the company's debts and obligations?

answer

Corporations

question

The law of demand states that, other things equal,

answer

price and quantity demanded are inversely related.

question

If the demand curve for product B shifts to the right as the price of product A declines, then

answer

A and B are complementary goods

question

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the

answer

income effect

question

the relationship between quantity supplied and price is _________, and the relationship between quantity demanded and price is ___________.

answer

direct; inverse

question

Allocative efficiency refers to

answer

the production of the product mix most wanted by society.

question

Data from the registrar's office at Gigantic State University indicate that over the past 20 years tuition and enrollment have both increased. From this information we can conclude that

answer

factors such as school-age population, incomes, and preferences for education have increased over the 20-year period.

question

answer

D: an increase in supply

question

If the supply and demand curves for a product both decrease, then equilibrium

answer

quantity must decline, but equilibrium price may rise, fall, or remain unchanged

question

Which of the following is a determinant of supply?
A: product taxes and subsidies
B: tastes and preferences of buyers
C: consumer income
D: price of a complementary good

answer

A: product taxes and subsidies

question

(Consider This) In 1975, McDonald's introduced its Egg McMuffin breakfast sandwich, which remains popular and profitable today. This longevity illustrates the idea of

answer

consumer sovereignty

question

Money is not an economic resource because

answer

money, as such, does not produce anything

question

Suppose that a 20 percent increase in the price of normal good Y causes a 10 percent decline in the quantity demanded of normal good X. The coefficient of cross elasticity of demand is

answer

negative, and therefore these goods are complements

question

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore, demand for X in this price range

answer

is elastic

question

answer

A: Price rises and demand is elastic

question

If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will

answer

increase the quantity demanded by about 25 percent

question

The price elasticity of demand coefficient measures

answer

buyer responsiveness to price changes

question

Movie theaters charge lower prices to see a movie in the afternoon than in the evening because there is an

answer

elastic demand to see movies in the afternoon

question

The income elasticity of demand for store brand macaroni and cheese is -3.00, this means that

answer

store brand macaroni and cheese is an inferior good

question

The price of gold is often volatile because

answer

supply is relatively inelastic, so changes in demand have a large effect on price

question

The main reason for the high price of antiques is that

answer

supply is relatively inelastic and demand increases over time

question

The demand for cheerios cereal is more price-elastic than demand for cereals as a whole. This is best explained by the fact that

answer

there are more substitutes for Cheerios than for cereals as a whole

question

Which of the following is an example of market failure?
A: positive externalities
B: public goods
C: negative externalities
D: all of these

answer

D: all of these

question

Consumer surplus

answer

is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price

question

The utility of a good or service

answer

is the satisfaction or pleasure one gets from consuming it

question

A perfectly inelastic demand curve

answer

graphs as a line parallel to the vertical axis

question

answer

Supply-side market failure

question

Supply-side market failure occur when

answer

supply curves don't reflect the full cost of producing a good or service

question

The diamond-water paradox arises because

answer

essential goods may be cheap, while nonessential goods may be expensive

question

How did Apple overcome consumers' diminishing marginal utility for the iPads?

answer

Apple introduced new features to entice previous buyers to purchase new modles

question

Which of the following sets of personal characteristics best reflects what behavioral economists assume about how people make decisions?

answer

People have preferences that depend on context, avoid and are bad at computation, often give in to temptation, and are often selfless in their behavior

question

Susie knows that too many sugary treats, while delicious when eaten, have long-term adverse effects on weight and health. Based on this information, a behavioral economist would expect Susie to

answer

eat more sugary treats than is optimal, as she likely gives more weight to present events and outcomes than to ones in the future

question

Which of the following best explains the difference between neoclassical economics and behavioral economics?

answer

Neoclassical economics assumes that people are rational in their decision making, while behavioral economics believes people make systematic errors.

question

Which of the following individuals received a Nobel Prize in economics for his work in behavioral economics?

answer

Daniel Kahneman

question

Why, according to behavioral economics, would supermarkets place gum, candy, and other small convenience items near the cash registers?

answer

Many of these are small items that people will buy on an impulse

question

answer

used System 2 of her brain to formulate her workout plan, but gave in to System 1 when she chose to sleep in

question

Jennifer buys a piece of costume jewelry for $33, for which she was willing to pay $42. The minimum acceptable price the seller, Nathan, was $30. Jennifer experiences

answer

a consumer surplus of $9, and Nathan experiences a producer surplus of $3

question

Marginal utility is the

answer

change in total utility obtained by consuming one more unit of a good

question

When someone tries to "multitask" despite mounting evidence that multitasking is actually inefficient, this illustrates

answer

confirmation bias

question

Achoring

answer

can influence decision making with irrelevant information

question

One major consequence of the overconfidence effect is that

answer

bad decisions can be made because people will act without pausing to see whether their intuition is correct or not

question

High-end retailers spend a lot on architecture, displays, and packaging in order to take advantage of the

answer

framing effect

question

Producer surplus is the difference between

answer

the minimum prices producers are willing to accept for a product and the higher equilibrium price

question

When gasoline at $3.60/gallon looks relatively cheap after a period of $5/gallon gas, that's an illustration of the

answer

framing effect

question

People's tendency to prefer the "default" option over other options is known in the prospect theory as

answer

status quo bias

question

Some behavioral economists explain the so-called endowment effect to be a consequence of people's tendency to

answer

feel looses more intensely than gains

question

Upon buying a car with airbags, Indy begins to drive recklessly. This is an example of the

answer

moral hazard problem

question

Which of the following is an example of a public good

answer

a weather warning system

question

The two main characteristics of a public good are

answer

non-rivalry and nonexcludablility

question

Market failure is said to occur whenever

answer

private markets do not allocate resources in the most economically desirable way

question

answer

A: Marginal cost is the price or cost of an extra variable input (for example, an additional worker or machine) divided by its marginal product

question

answer

C: The long-run supply curve for a purely competitive increasing-cost industry will be up-sloping

question

In the short run, a purely competitive seller will shut down if

answer

price is less than average variable cost at all outputs

question

Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?

answer

use of savings to pay operating expenses instead of generating interest income

question

answer

higher, and total output will be larger than originally

question

In a purely competitive industry

answer

there may be economic profits in the short run but not in the long run

question

If a variable input is added to some fixed input, beyond some pint the resulting extra output will decline. This statement describes

answer

the law of diminishing returns

question

answer

$136,000

question

Suppose that an industry's long-run supply curve is down-sloping. This suggests that

answer

it is a decreasing-cost industry

question

A purely competitive firm is precluded from making economic profits in the long run because

answer

of unimpeded entry to the industry

question

Suppose that, when producing 10 units of output, a firm's AVC is $22, its AFC is $5, and its MC is $30. This firm's

answer

total cost is $270

question

Suppose that a business incurred implicit costs of $500,000 and explicit cost of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting

answer

profits were $0 and its economic losses were $500,000

question

Total fixed cost (TFC)

answer

does not change as total output increases or decreases

question

Which of the following is the most likely to be a fixed cost?
A: shipping charges
B: wages for unskilled labor
C: expenditures for raw materials
D: property insurance premiums

answer

D: property insurance premiums

question

Assume that in the short run a firm is producing 100 units of output, has average total cost of $200, and has average variable cost of $150. The firm's TOTAL FIXED cost are

answer

$5,000

question

answer

continue to produce in the short run at lower prices than would American firms

question

A constant-cost industry is one in which

answer

if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth

question

Which of the following industries most closely approximates pure competition?

answer

agriculture

question

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

answer

Firms can enter and exit market in the long run but not int he short run

question

answer

A: Pittsburgh Plate Glass

question

Network effects and simultaneous consumption tend to foster the development of

answer

net social benifits

question

The consumer Wi-Fi-Service providers market is best described as a

answer

monopoly

question

Pure monopoly refers to

answer

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

question

A monopolistically competitive firm has a

answer

highly inelastic demand curve

question

OPEC provides an example of

answer

an international cartel

question

If an monopolist engages in price discrimination, it will

answer

charge a higher price where individual demand is inelastic and a lower price where individual demand is elastic

question

Industries X and Y both have four-firm concentration ratios of 32 percent, but the Herfindahl index for X is 256, while that for Y is 264. These data suggest

answer

That X is more technologically progressive than Y

question

In the long-run, a pure monopolist will maximize profits by producing that output at which marginal cost is equal to

answer

average total cost

question

The MR=MC rule

answer

applies to both a pure monopoly and pure competition

question

A monopoly results in productive inefficiency because at the profit-maximizing out level,

answer

MC is not at its minimum level

question

The incentive to cheat within a cartel increases with an increase in the following factors, except

answer

the cost differences among firms

question

Concentration ratios measure the

answer

degree to which product price exceeds marginal cost in various industries

question

Collusion refers to a situation where rival firms decide to

answer

combine their operations and merge with each other

question

In the short run, the price charged by monopolistically competitive firm attempting to maximize profits

answer

must be less than ATC

question

Which of the following is correct?

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

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In the long run, a profit-maximizing monopolistically competitive firm sets it price

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equal to marginal cost

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The term oligopoly indicates

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many producers of a differentiated product

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Which of the following best approximates a pure monopoly?

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the only grocery store in a small isolated town

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The effects of advertising on a firm's profits and efficiency

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may be positive or negative

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In an oligopolistic market

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thethe industry is monopolistically competitive

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Monopolistic competition means

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a market situation where competition is based entirely on product differentiation and advertising

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If the four-firm concentration ratio for industry X is 80,

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the four largest firms account for 80 percent of total sales

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X-inefficiency refers to a situation in which a firm

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fails to achieve the minimum average total costs attainable at each level of output

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Oligopolistic firms engage in collusion to

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realize allocative efficiency, that is, The P=MC level of output

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The automobile, household appliance, and automobile tire industries are all illustrations of

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differentiated oligopoly

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If a pure monopolist can price discriminate by separating buyers into two or more groups,

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the firm will face multiple marginal revenue curves

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In the short-run equilibrium, a monopolist's profits

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are positive if the product's elasticity of demand is less than 1

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The Herfindahl index for a pure monopolist is

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10,000

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Which of the following is not a barrier to entry?

answer

ownership of essential resources

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Mergers of firms in an industry tend to

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transform monopolistic competition into oligopoly

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