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ECON 202 FINAL EXAM STUDY GUIDE
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ECON 202 FINAL EXAM STUDY GUIDE
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CHAPTER 7 Q&A
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CHAPTER 7 Q&A
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1. A purely competitive seller is:
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A. Both a "price maker" and a "price taker."
B. Neither a "price maker" nor a "price taker."
C. A "price taker"
D. A "price maker."
B. Neither a "price maker" nor a "price taker."
C. A "price taker"
D. A "price maker."
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2. Which of the following statements applies to a purely competitive producer?
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A. It will not advertise its product.
B. In long-run equilibrium it will earn an economic profit.
C. Its product will have a brand name.
D. Its product is slightly different from those of its competitors.
B. In long-run equilibrium it will earn an economic profit.
C. Its product will have a brand name.
D. Its product is slightly different from those of its competitors.
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3. In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis. Refer to the information. For a purely competitive firm:
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A. Marginal revenue will graph as an upsloping line.
B. The demand curve will lie above the marginal revenue curve.
C. The marginal revenue curve will lie above the demand curve.
D. The demand and marginal revenue curves will coincide.
B. The demand curve will lie above the marginal revenue curve.
C. The marginal revenue curve will lie above the demand curve.
D. The demand and marginal revenue curves will coincide.
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4. If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:
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A. May be either greater or less than $5.
B. Will also be less than $5
C. Will be less than $5.
D. will be greater than $5.
B. Will also be less than $5
C. Will be less than $5.
D. will be greater than $5.
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5. For a purely competitive firm, total revenue:
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A. Is price times quantity sold.
B. Increases by a constant absolute amount as output expands.
C. Graphs as a straight upsloping line from the origin.
D. Has all of these characteristics.
B. Increases by a constant absolute amount as output expands.
C. Graphs as a straight upsloping line from the origin.
D. Has all of these characteristics.
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6. A perfectly elastic demand curve implies that the firm:
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A. Must lower price to sell more output.
B. Can sell as much output as it chooses at the existing price.
C. Must lower price to sell more output.
D. Is selling a differentiated (heterogeneous) product.
B. Can sell as much output as it chooses at the existing price.
C. Must lower price to sell more output.
D. Is selling a differentiated (heterogeneous) product.
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7. Refer to the diagram, which pertains to a purely competitive firm. Curve C represents:
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A. Total revenue and marginal revenue.
B. Marginal revenue only.
C. Total revenue and average revenue.
D. Average revenue and marginal revenue.
B. Marginal revenue only.
C. Total revenue and average revenue.
D. Average revenue and marginal revenue.
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8. Firms seek to maximize:
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A. Per unit profit.
B. Total revenue.
C. Total Profit.
D. Market share.
B. Total revenue.
C. Total Profit.
D. Market share.
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9. Refer to the short-run data. The profit-maximizing output for this firm is:
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A. Above 440 units.
B. 440 units.
C. 320 units
D. 100 units.
B. 440 units.
C. 320 units
D. 100 units.
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10. A firm reaches a break-even point (normal profit position) where:
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A. Marginal revenue cuts the horizontal axis.
B. Marginal cost intersects the average variable cost curve.
C. Total revenue equals total variable cost.
D. total revenue and total cost are equal.
B. Marginal cost intersects the average variable cost curve.
C. Total revenue equals total variable cost.
D. total revenue and total cost are equal.
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11. The MR = MC rule applies:
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A. Firms in all types of industries.
B. Only when the firm is a "price taker."
C. Only to monopolies.
D. Only to purely competitive firms.
B. Only when the firm is a "price taker."
C. Only to monopolies.
D. Only to purely competitive firms.
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12. When a firm is maximizing profit, it will necessarily be:
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A. Maximizing profit per unit of output.
B. Maximizing the difference between total revenue and total cost.
C. Minimizing total cost.
D. Maximizing total revenue.
B. Maximizing the difference between total revenue and total cost.
C. Minimizing total cost.
D. Maximizing total revenue.
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13. The MR = MC rule can be restated for a purely competitive seller as P = MC because:
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A. Each additional unit of output adds exactly its price to total revenue.
B. The firm's average revenue curve is downsloping.
C. The market demand curve is downsloping.
D. The firm's marginal revenue and total revenue curves will coincide.
B. The firm's average revenue curve is downsloping.
C. The market demand curve is downsloping.
D. The firm's marginal revenue and total revenue curves will coincide.
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14. Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation:
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A. Should close down in the short run.
B. Is maximizing its profits.
C. Is realizing a loss of $60.
D. Is realizing an economic profit of $40.
B. Is maximizing its profits.
C. Is realizing a loss of $60.
D. Is realizing an economic profit of $40.
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15. A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its:
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A. Total variable costs
B. Total costs.
C. total fixed costs.
D. marginal costs.
B. Total costs.
C. total fixed costs.
D. marginal costs.
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16. Answer the question on the basis of the following data confronting a firm: Refer to the data. If the firm's minimum average variable cost is $10, the firm's profit-maximizing level of output would be:
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A. 2
B. 3
C. 4
D. 5
B. 3
C. 4
D. 5
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17. In the short run, a purely competitive firm will always make an economic profit if:
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A. P = ATC
B. P>AVC
C. P = MC'
D. P > ATC
B. P>AVC
C. P = MC'
D. P > ATC
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18. A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should:
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A. shut down in the short run.
B. Produce because the resulting loss is less than its TFC.
C. Produce because it will realize an economic profit.
D. Liquidate its assets and go out of business.
B. Produce because the resulting loss is less than its TFC.
C. Produce because it will realize an economic profit.
D. Liquidate its assets and go out of business.
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19. The Ajax Manufacturing Company is selling in a purely competitive market. Its output is 100 units, which sell at $4 each. At this level of output total cost is $600, total fixed cost is $100, and marginal cost is $4. The firm should:
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A. Reduce output to about 80 units.
B. Expand its production.
C. Continue to produce 100 units.
D. Produce zero units of output.
B. Expand its production.
C. Continue to produce 100 units.
D. Produce zero units of output.
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20. Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market.
Refer to the data. At 6 units of output, total fixed cost is ____ and total cost is ____.
Refer to the data. At 6 units of output, total fixed cost is ____ and total cost is ____.
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A. $25; $50
B. $50; $300
C. $100; $200
D. $150; $300
B. $50; $300
C. $100; $200
D. $150; $300
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CHAPTER 8 Q&A
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CHAPTER 8 Q&A
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1. Which of the following distinguishes the short run from the long run in pure competition?
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A. Firms can enter and exit the market in the long run but not in the short run.
B. Firms attempt to maximize profits in the long run but not in the short run.
C. Firms use the MR = MC rule to maximize profits in the short run but not in the long run.
D. The quantity of labor hired can vary in the long run but not in the short run.
B. Firms attempt to maximize profits in the long run but not in the short run.
C. Firms use the MR = MC rule to maximize profits in the short run but not in the long run.
D. The quantity of labor hired can vary in the long run but not in the short run.
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2. The primary force encouraging the entry of new firms into a purely competitive industry is:
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A. normal profits earned by firms already in the industry.
B. economic profits earned by firms already in the industry.
C. government subsidies for start-up firms.
D. a desire to provide goods for the betterment of society.
People see that firms in an industry are making profit and decide that it would be worth entering the industry so that they can make those profits as well
B. economic profits earned by firms already in the industry.
C. government subsidies for start-up firms.
D. a desire to provide goods for the betterment of society.
People see that firms in an industry are making profit and decide that it would be worth entering the industry so that they can make those profits as well
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3. In a purely competitive industry:
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A. there will be no economic profits in either the short run or the long run.
B. economic profits may persist in the long run if consumer demand is strong and stable.
C. there may be economic profits in the short run but not in the long run.
D. there may be economic profits in the long run but not in the short run.
B. economic profits may persist in the long run if consumer demand is strong and stable.
C. there may be economic profits in the short run but not in the long run.
D. there may be economic profits in the long run but not in the short run.
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4. 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:
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A. minimizes losses by producing at the minimum point of its AVC curve.
B. maximizes profits by producing where MR = ATC.
C. should close down immediately.
D. should continue producing in the short run but leave the industry in the long run if the situation persists.
B. maximizes profits by producing where MR = ATC.
C. should close down immediately.
D. should continue producing in the short run but leave the industry in the long run if the situation persists.
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5. Long-run competitive equilibrium:
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A. is realized only in constant-cost industries.
B. will never change once it is realized.
C. is not economically efficient.
D. results in zero economic profits.
B. will never change once it is realized.
C. is not economically efficient.
D. results in zero economic profits.
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6. Refer to the diagrams, which pertain to a purely competitive firm producing output q and the industry in which it operates. Which of the following is correct?
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A. The diagrams portray neither long-run nor short-run equilibrium.
B. The diagrams portray both long-run and short-run equilibrium.
C. The diagrams portray short-run equilibrium but not long-run equilibrium.
D. The diagrams portray long-run equilibrium but not short-run equilibrium.
B. The diagrams portray both long-run and short-run equilibrium.
C. The diagrams portray short-run equilibrium but not long-run equilibrium.
D. The diagrams portray long-run equilibrium but not short-run equilibrium.
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7. When LCD televisions first came on the market, they sold for at least $1,000, and some for much more. Now many units can be purchased for under $400. These facts imply that:
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A. the LCD television industry was once competitive but is now monopolistic.
B. fewer firms produce LCD televisions than was the case five or ten years ago.
C. the demand curve for LCD televisions has shifted leftward.
D. the LCD television industry is a decreasing-cost industry.
As more firms entered the LCD television industry the price of the product dropped as supply increased, this is an example of a decreasing cost industry
B. fewer firms produce LCD televisions than was the case five or ten years ago.
C. the demand curve for LCD televisions has shifted leftward.
D. the LCD television industry is a decreasing-cost industry.
As more firms entered the LCD television industry the price of the product dropped as supply increased, this is an example of a decreasing cost industry
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8. Refer to the diagram showing the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's total revenue:
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A. is $10.
B. is $40.
C. is $400.
D. cannot be determined from the information provided.
B. is $40.
C. is $400.
D. cannot be determined from the information provided.
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9. The MR = MC rule applies:
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A. in the short run but not in the long run.
B. in the long run but not in the short run.
C. in both the short run and the long run.
D. only to a purely competitive firm.
B. in the long run but not in the short run.
C. in both the short run and the long run.
D. only to a purely competitive firm.
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10. Refer to the diagram. Line (1) reflects the long-run supply curve for:
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A. a constant-cost industry.
B. a decreasing-cost industry.
C. an increasing-cost industry.
D. a technologically progressive industry.
B. a decreasing-cost industry.
C. an increasing-cost industry.
D. a technologically progressive industry.
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11. Allocative efficiency is achieved when the production of a good occurs where:
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A. P = minimum ATC.
B. P = MC.
C. P = minimum AVC.
D. total revenue is equal to TFC.
B. P = MC.
C. P = minimum AVC.
D. total revenue is equal to TFC.
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12. The term productive efficiency refers to:
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A. any short-run equilibrium position of a competitive firm.
B. the production of the product mix most desired by consumers.
C. the production of a good at the lowest average total cost.
D. fulfilling the condition P = MC.
B. the production of the product mix most desired by consumers.
C. the production of a good at the lowest average total cost.
D. fulfilling the condition P = MC.
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13. Under pure competition in the long run:
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A. neither allocative efficiency nor productive efficiency is achieved.
B. both allocative efficiency and productive efficiency are achieved.
C. productive efficiency is achieved, but allocative efficiency is not.
D. allocative efficiency is achieved, but productive efficiency is not.
B. both allocative efficiency and productive efficiency are achieved.
C. productive efficiency is achieved, but allocative efficiency is not.
D. allocative efficiency is achieved, but productive efficiency is not.
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14. The diagram portrays:
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A. a competitive firm that should shut down in the short run.
B. the equilibrium position of a competitive firm in the long run.
C. a competitive firm that is realizing an economic profit.
D. the loss-minimizing position of a competitive firm in the short run.
B. the equilibrium position of a competitive firm in the long run.
C. a competitive firm that is realizing an economic profit.
D. the loss-minimizing position of a competitive firm in the short run.
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15. If production is occurring where marginal cost exceeds price, the purely competitive firm will:
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A. maximize profit, but resources will be underallocated to the product.
B. maximize profit, but resources will be overallocated to the product.
C. fail to maximize profit and resources will be overallocated to the product.
D. fail to maximize profit and resources will be underallocated to the product.
B. maximize profit, but resources will be overallocated to the product.
C. fail to maximize profit and resources will be overallocated to the product.
D. fail to maximize profit and resources will be underallocated to the product.
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16. Which of the following conditions is true for a purely competitive firm in long-run equilibrium?
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A. P > MC = minimum ATC.
B. P > MC > minimum ATC.
C. P = MC = minimum ATC.
D. P < MC < minimum ATC.
B. P > MC > minimum ATC.
C. P = MC = minimum ATC.
D. P < MC < minimum ATC.
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17. In long-run equilibrium, purely competitive markets:
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A. minimize total cost.
B. maximize the sum of consumer surplus and producer surplus.
C. yield economic profits to most sellers.
D. inevitably degenerate into monopoly in increasing-cost industries.
B. maximize the sum of consumer surplus and producer surplus.
C. yield economic profits to most sellers.
D. inevitably degenerate into monopoly in increasing-cost industries.
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18. Entrepreneurs in purely competitive industries:
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A. have no incentive to innovate because in the long run they will earn no economic profits.
B. innovate to lower operating costs and generate short-run economic profits.
C. utilize pricing strategies to generate short-run economic profits.
D. rarely try to innovate because of a lack of financial resources.
B. innovate to lower operating costs and generate short-run economic profits.
C. utilize pricing strategies to generate short-run economic profits.
D. rarely try to innovate because of a lack of financial resources.
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19. The process by which new firms and new products replace existing dominant firms and products is called:
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A. monopolistic competition.
B. mergers and acquisitions.
C. process innovation.
D. creative destruction.
B. mergers and acquisitions.
C. process innovation.
D. creative destruction.
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20. Which of the following is an example of creative destruction?
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A. An economic recession forces firms out of business.
B. Automobile production causes the wagon industry to shut down.
C. Apple earns more economic profits than other manufacturers of MP3 players.
D. Starbucks shuts down stores to create greater demand for its remaining outlets.
B. Automobile production causes the wagon industry to shut down.
C. Apple earns more economic profits than other manufacturers of MP3 players.
D. Starbucks shuts down stores to create greater demand for its remaining outlets.
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CHAPTER 9 QUESTIONARE
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CHAPTER 9 QUESTIONAIRE
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1. A purely monopolistic firm:
answer
A. Has no entry barriers
B. Faces a downsloping demand curve
C. Produces a product or service for which there are many close substitutes
D. Earns only a normal profit in the long run
B. Faces a downsloping demand curve
C. Produces a product or service for which there are many close substitutes
D. Earns only a normal profit in the long run
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2. A natural monopoly occurs when:
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A. long-run average costs decline continuously through the range of demand.
B. a firm owns or controls some resource essential to production.
C. long-run average costs rise continuously as output is increased.
D. economies of scale are obtained at relatively low levels of output.
B. a firm owns or controls some resource essential to production.
C. long-run average costs rise continuously as output is increased.
D. economies of scale are obtained at relatively low levels of output.
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3. What do economies of scale, the ownership of essential raw materials, and patents have in common?
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A. They must all be present before price discrimination can be practiced.
B. They are all barriers to entry.
C. They all help explain why a monopolist's demand and marginal revenue curves coincide.
D. They all help explain why the long-run average cost curve is U-shaped.
B. They are all barriers to entry.
C. They all help explain why a monopolist's demand and marginal revenue curves coincide.
D. They all help explain why the long-run average cost curve is U-shaped.
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4. If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue:
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A. may be either greater or less than $35.
B. will also be $35.
C. will be less than $35.
D. will be greater than $35.
B. will also be $35.
C. will be less than $35.
D. will be greater than $35.
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5. For an imperfectly competitive firm:
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A. total revenue is a straight, upsloping line because a firm's sales are independent of product price.
B. the marginal revenue curve lies above the demand curve because any reduction in price applies to all units sold.
C. the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.
D. the marginal revenue curve lies below the demand curve because any reduction in price applies only to the extra unit sold.
B. the marginal revenue curve lies above the demand curve because any reduction in price applies to all units sold.
C. the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.
D. the marginal revenue curve lies below the demand curve because any reduction in price applies only to the extra unit sold.
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6. Refer to the diagram. The quantitative difference between areas A and C for reducing the price from P1 to P2 measures:
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A. marginal cost.
B. marginal revenue.
C. monopoly price.
D. a welfare or efficiency loss.
B. marginal revenue.
C. monopoly price.
D. a welfare or efficiency loss.
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7. Answer the question on the basis of the demand schedule shown below: Refer to the data. The marginal revenue obtained from selling the third unit of output is:
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A. $6
B. $1
C. $2
D. $5
B. $1
C. $2
D. $5
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8. Refer to the two diagrams for individual firms. In Figure 1 line B represents the firm's:
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A. demand and marginal revenue curves.
B. demand curve only.
C. marginal revenue curve only.
D. average revenue curve only.
B. demand curve only.
C. marginal revenue curve only.
D. average revenue curve only.
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9. With respect to the pure monopolist's demand curve, it can be said that:
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A. the stronger the barriers to entry, the more elastic is the monopolist's demand curve.
B. price exceeds marginal revenue at all outputs greater than 1.
C. demand is perfectly inelastic.
D. marginal revenue equals price at all outputs.
B. price exceeds marginal revenue at all outputs greater than 1.
C. demand is perfectly inelastic.
D. marginal revenue equals price at all outputs.
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10. A nondiscriminating profit-maximizing monopolist:
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A. will never produce in the output range where marginal revenue is positive.
B. will never produce in the output range where demand is inelastic.
C. will never produce in the output range where demand is elastic.
D. may produce where demand is either elastic or inelastic, depending on the level of production costs.
B. will never produce in the output range where demand is inelastic.
C. will never produce in the output range where demand is elastic.
D. may produce where demand is either elastic or inelastic, depending on the level of production costs.
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11. Refer to the diagram for a nondiscriminating monopolist. Marginal revenue will be zero at output:
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A. q1.
B. q2.
C. q3.
D. q4.
B. q2.
C. q3.
D. q4.
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12. Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9. We thus know that:
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A. demand is inelastic at this price.
B. the firm is maximizing profits.
C. total revenue is increasing.
D. total revenue is at a maximum.
B. the firm is maximizing profits.
C. total revenue is increasing.
D. total revenue is at a maximum.
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13. The diagram indicates that the marginal revenue of the sixth unit of output is:
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A. -$1.
B. $1.
C. $4.
D. $24.
B. $1.
C. $4.
D. $24.
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14. Answer the question on the basis of the following table showing the demand schedule facing a nondiscriminating monopolist:
Refer to the table. The monopolist will select its profit-maximizing level of output somewhere within the:
Refer to the table. The monopolist will select its profit-maximizing level of output somewhere within the:
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A. 3-5 unit range of output.
B. 1-3 unit range of output.
C. 1-4 unit range of output.
D. 2-4 unit range of output.
B. 1-3 unit range of output.
C. 1-4 unit range of output.
D. 2-4 unit range of output.
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15. A nondiscriminating pure monopolist finds that it can sell its 50th unit of output for $50. We can surmise that the marginal:
answer
A. cost of the 50th unit is also $50.
B. revenue of the 50th unit is also $50.
C. revenue of the 50th unit is less than $50.
D. revenue of the 50th unit is greater than $50.
B. revenue of the 50th unit is also $50.
C. revenue of the 50th unit is less than $50.
D. revenue of the 50th unit is greater than $50.
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16. Refer to the data for a nondiscriminating monopolist. This firm will maximize its profit by producing:
answer
A. 3 units.
B. 4 units.
C. 5 units.
D. 6 units.
B. 4 units.
C. 5 units.
D. 6 units.
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17. Answer the question on the basis of the following demand and cost data for a pure monopolist: Refer to the data. The profit-maximizing price for the monopolist will be:
answer
A. $5.00.
B. $2.90.
C. $3.35.
D. $4.50.
B. $2.90.
C. $3.35.
D. $4.50.
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18. A pure monopolist:
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A. will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output.
B. will realize an economic profit if ATC exceeds MR at the profit-maximizing/loss-minimizing level of output.
C. will realize an economic loss if MC intersects the downsloping portion of MR.
D. always realizes an economic profit.
B. will realize an economic profit if ATC exceeds MR at the profit-maximizing/loss-minimizing level of output.
C. will realize an economic loss if MC intersects the downsloping portion of MR.
D. always realizes an economic profit.
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19. If a pure monopolist is producing at that output where P = ATC, then:
answer
A. its economic profits will be zero.
B. it will be realizing losses.
C. it will be producing less than the profit-maximizing level of output.
D. it will be realizing an economic profit.
B. it will be realizing losses.
C. it will be producing less than the profit-maximizing level of output.
D. it will be realizing an economic profit.
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20. Refer to the long-run cost diagram for a firm. If the firm produces output Q2 at an average cost of ATC3, then the firm is:
answer
A. producing the profit-maximizing output but is failing to minimize production costs.
B. incurring X-inefficiency but is realizing all existing economies of scale.
C. incurring X-inefficiency and is failing to realize all existing economies of scale.
D. producing that output with the most efficient combination of inputs and is realizing all existing economies of scale.
B. incurring X-inefficiency but is realizing all existing economies of scale.
C. incurring X-inefficiency and is failing to realize all existing economies of scale.
D. producing that output with the most efficient combination of inputs and is realizing all existing economies of scale.
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CHAPTER 10 Q&A
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CHAPTER 10 Q&A
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1. Monopolistic competition means:
answer
A. a market situation where competition is based entirely on product differentiation and advertising.
B. a large number of firms producing a standardized or homogeneous product.
C. many firms producing differentiated products.
D. a few firms producing a standardized or homogeneous product.
B. a large number of firms producing a standardized or homogeneous product.
C. many firms producing differentiated products.
D. a few firms producing a standardized or homogeneous product.
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2. Which of the following is not a basic characteristic of monopolistic competition?
answer
A. The use of trademarks and brand names.
B. Recognized mutual interdependence.
C. Product differentiation.
D. A relatively large number of sellers.
B. Recognized mutual interdependence.
C. Product differentiation.
D. A relatively large number of sellers.
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3. A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from:
answer
A. the likelihood of collusion.
B. high entry barriers.
C. product differentiation.
D. mutual interdependence in decision making.
B. high entry barriers.
C. product differentiation.
D. mutual interdependence in decision making.
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4. A monopolistically competitive firm has a:
answer
A. highly elastic demand curve.
B. highly inelastic demand curve.
C. perfectly inelastic demand curve.
D. perfectly elastic demand curve.
B. highly inelastic demand curve.
C. perfectly inelastic demand curve.
D. perfectly elastic demand curve.
question
5. In the short run, the price charged by a monopolistically competitive firm attempting to maximize profits:
answer
A. must be less than ATC.
B. must be more than ATC.
C. may be either equal to ATC, less than ATC, or more
than ATC.
D. must be equal to ATC.
B. must be more than ATC.
C. may be either equal to ATC, less than ATC, or more
than ATC.
D. must be equal to ATC.
question
6. Monopolistically competitive firms:
answer
A. Realize normal profits in the short run but losses in the long run.
B. Incur persistent losses in both the short run and long run.
C. May realize either profits or losses in the short run but realize normal profits in the long run.
D. Persistently realize economic profits in both the short run and long run.
B. Incur persistent losses in both the short run and long run.
C. May realize either profits or losses in the short run but realize normal profits in the long run.
D. Persistently realize economic profits in both the short run and long run.
question
7. Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. This firm's profit-maximizing price will be:
answer
A. $10.
B. $13.
C. $16.
D. $19.
B. $13.
C. $16.
D. $19.
question
8. Refer to the two diagrams for individual firms. In Figure 1 line B represents the firm's:
answer
A. demand and marginal revenue curves.
B. demand curve only.
C. marginal revenue curve only.
D. average revenue curve only.
B. demand curve only.
C. marginal revenue curve only.
D. average revenue curve only.
question
9. Which of the following statements concerning a monopolistically competitive industry is correct?
answer
A. If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms will shift to the right.
B. If there are short-run economic profits, firms will enter the industry and the demand curves of existing firms will shift to the right.
C. If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms will shift to the left.
D. If there are short-run economic profits, firms will leave the industry and the demand curves of the remaining firms will shift to the right.
B. If there are short-run economic profits, firms will enter the industry and the demand curves of existing firms will shift to the right.
C. If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms will shift to the left.
D. If there are short-run economic profits, firms will leave the industry and the demand curves of the remaining firms will shift to the right.
question
10. Answer the question on the basis of the following demand and cost data for a specific firm: Refer to the data. If columns (1) and (3) of the demand data shown are this firm's demand schedule, the profit-maximizing level of output will be:
answer
A. 12 units.
B. 8 units.
C. 10 units.
D. 9 units.
B. 8 units.
C. 10 units.
D. 9 units.
question
11. The term oligopoly indicates:
answer
A. A one-firm industry.
B. Many producers of a differentiated product.
C. A few firms producing either a differentiated or a homogeneous product.
D. An industry whose four-firm concentration ratio is low.
B. Many producers of a differentiated product.
C. A few firms producing either a differentiated or a homogeneous product.
D. An industry whose four-firm concentration ratio is low.
question
12. Oligopolistic industries are characterized by:
answer
A. A few dominant firms and substantial entry barriers.
B. A few dominant firms and no barriers to entry.
C. A large number of firms and low entry barriers
D. A few dominant firms and low entry barriers.
B. A few dominant firms and no barriers to entry.
C. A large number of firms and low entry barriers
D. A few dominant firms and low entry barriers.
question
13. The mutual interdependence that characterizes oligopoly arises because:
answer
A. The products of various firms are homogeneous.
B. The products of various firms are differentiated.
C. Each firm in an oligopoly depends on its own pricing strategy and that of its rivals.
D. The demand curves of firms are kinked at the prevailing price.
B. The products of various firms are differentiated.
C. Each firm in an oligopoly depends on its own pricing strategy and that of its rivals.
D. The demand curves of firms are kinked at the prevailing price.
question
14. Suppose that total sales in an industry in a particular year are $600 million and sales by the top four sellers are $200 million, $150 million, $100 million, and $50 million, respectively. We can conclude that:
answer
A. Price leadership exists in this industry.
B. The concentration ratio is more than 80 percent.'
C. This industry is a differentiated oligopoly.
D. The firms in this industry face a kinked demand curve.
B. The concentration ratio is more than 80 percent.'
C. This industry is a differentiated oligopoly.
D. The firms in this industry face a kinked demand curve.
question
15. If you sum the squares of the market shares of each firm in an industry (as measured by percent of industry sales), you are calculating the:
answer
A. Four-firm concentration ratio.
B. Herfindahl index.
C. Degree of collusion.
D. Lerner index.
B. Herfindahl index.
C. Degree of collusion.
D. Lerner index.
question
16. Assume six firms comprising an industry have market shares of 30, 30, 10, 10, 10, and 10 percent. The Herfindahl index for this industry is:
answer
A. 2,000.
B. 1,600.
C. 2,200.
D. 80.
B. 1,600.
C. 2,200.
D. 80.
question
17. Suppose the Herfindahl indexes for industries A, B, and C are 1,200, 5,000, and 7,500 respectively. These data imply that:
answer
A. Market power is greatest in industry A.
B.Market power is greatest in industry B.
C. Market power is greatest in industry C.
D. Industry A is more monopolistic than industry C.
B.Market power is greatest in industry B.
C. Market power is greatest in industry C.
D. Industry A is more monopolistic than industry C.
question
18. Refer to the data. The four-firm concentration ratio for the industry is:
answer
A. 100 percent.
B. Indeterminate since we don't know which four firms are included.
C. 80 percent.
D. 20 percent.
B. Indeterminate since we don't know which four firms are included.
C. 80 percent.
D. 20 percent.
question
19. Refer to the data. If all the firms in the industry merged into a single firm, the Herfindahl index would become:
answer
A. 100.
B. 1,000.
C. 10,000.
D. 100,000.
B. 1,000.
C. 10,000.
D. 100,000.
question
20. Refer to the data. The four-firm concentration ratio for this industry is:
answer
A. 90 percent.
B. 95 percent.
C. 100 percent.
D. Indeterminate because we don't know which four firms are included.
B. 95 percent.
C. 100 percent.
D. Indeterminate because we don't know which four firms are included.
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