question
1. Profit
a. Is always a number greater than zero
b. Must be reported to Wall Street quarterly
c. Is the difference between total revenue and total cost
d. Is the difference between variable costs and fixed costs
a. Is always a number greater than zero
b. Must be reported to Wall Street quarterly
c. Is the difference between total revenue and total cost
d. Is the difference between variable costs and fixed costs
answer
a. Is the difference between total revenue and total cost
question
1. The demand curve confronting a competitive firm
a. Equals the marginal revenue curve
b. Is horizontal, as is the market demand curve
c. Slopes downward while the market demand curve is horizontal
d. Slopes downward and the marginal revenue curve is below it
a. Equals the marginal revenue curve
b. Is horizontal, as is the market demand curve
c. Slopes downward while the market demand curve is horizontal
d. Slopes downward and the marginal revenue curve is below it
answer
a. Equals the marginal revenue curve
question
1. A perfectly competitive market results in efficiency because
a. MC < P
b. Price rises high enough to equal marginal cost
c. Price is driven down to minimum ATC
d. Zero economic profit is achieved
a. MC < P
b. Price rises high enough to equal marginal cost
c. Price is driven down to minimum ATC
d. Zero economic profit is achieved
answer
a. Price is driven down to minimum ATC
question
1. Accounting costs and economic costs differ because
a. Accounting costs exceed economic costs whenever any factor is not paid an explicit wage
b. Accounting costs include implicit costs, and economic costs do not
c. Accounting costs include explicit costs and economic costs do not
d. Economic costs include the opportunity costs of all resources used, while accounting costs include actual dollar outlays
a. Accounting costs exceed economic costs whenever any factor is not paid an explicit wage
b. Accounting costs include implicit costs, and economic costs do not
c. Accounting costs include explicit costs and economic costs do not
d. Economic costs include the opportunity costs of all resources used, while accounting costs include actual dollar outlays
answer
a. Economic costs include the opportunity costs of all resources used, while accounting costs include actual dollar outlays
question
1. Oligopolists have a mutual interest in coordinating production decisions in order to maximize joint
a. Costs
b. Revenues
c. Market share
d. Profits
a. Costs
b. Revenues
c. Market share
d. Profits
answer
a. Profits
question
1. In a competitive market where firms are earning economic profits, which of the following should be expected as the industry moves to long-run equilibrium, ceteris paribus?
a. A higher price and fewer firms
b. A higher price and more firms
c. A lower price and more firms
d. A lower price and fewer firms
a. A higher price and fewer firms
b. A higher price and more firms
c. A lower price and more firms
d. A lower price and fewer firms
answer
a. A lower price and more firms
question
1. The marginal revenue of a monopolist falls below price because the firm
a. Is not limited by market demand
b. Has an upward sloping marginal cost curve
c. Confronts a downward-sloping demand curve
d. Faces a market demand curve that is inelastic
a. Is not limited by market demand
b. Has an upward sloping marginal cost curve
c. Confronts a downward-sloping demand curve
d. Faces a market demand curve that is inelastic
answer
a. Confronts a downward-sloping demand curve
question
1. A monopolistically competitive firm can raise its price somewhat without fear of great change in unit sales because of
a. Inelastic demand
b. Economies of scale
c. Brand loyalty
d. Large market shares of firms in the market
a. Inelastic demand
b. Economies of scale
c. Brand loyalty
d. Large market shares of firms in the market
answer
a. Brand loyalty
question
1. To determine market supply, the quantities
a. Demanded at each price by each demander are subtracted from the quantities supplied at each price by each supplier
b. Demanded at each price by each demander and supplied at each price by each supplier are added together
c. Demanded at each price by each demander are added together
d. Supplied at each price by each supplier are added together
a. Demanded at each price by each demander are subtracted from the quantities supplied at each price by each supplier
b. Demanded at each price by each demander and supplied at each price by each supplier are added together
c. Demanded at each price by each demander are added together
d. Supplied at each price by each supplier are added together
answer
a. Supplied at each price by each supplier are added together
question
1. In making a production decision, an entrepreneur
a. Can change both fixed and variable inputs
b. Decides whether to enter or exit the market
c. Determines plants and equipment
d. Decides what level of output will maximize profits
a. Can change both fixed and variable inputs
b. Decides whether to enter or exit the market
c. Determines plants and equipment
d. Decides what level of output will maximize profits
answer
a. Decides what level of output will maximize profits
question
1. Monopolistic competition results in allocative
a. Efficiency and productive efficiency
b. Inefficiency and productive inefficiency
c. Efficiency and productive inefficiency
d. Inefficiency and productive efficiency
a. Efficiency and productive efficiency
b. Inefficiency and productive inefficiency
c. Efficiency and productive inefficiency
d. Inefficiency and productive efficiency
answer
a. Inefficiency and productive inefficiency
question
1. Which of the following is characteristic of a perfectly competitive market?
a. Marginal revenue lower than price for each firm
b. Exit of small firms when profits are high for larger firms
c. Zero economic profit in the long run
d. A small number of firms
a. Marginal revenue lower than price for each firm
b. Exit of small firms when profits are high for larger firms
c. Zero economic profit in the long run
d. A small number of firms
answer
a. Zero economic profit in the long run
question
1. In Figure 24.2, a profit maximizing monopolist will charge a price of
a. $4.00
b. $4.70
c. $5.50
d. $6.40
a. $4.00
b. $4.70
c. $5.50
d. $6.40
answer
a. $5.50
question
1. Which of the following market structures will have higher prices in the long run than perfect competition, ceteris paribus?
a. Monopoly, but not oligopoly or monopolistic competition
b. Monopolistic competition and monopoly, but no oligopoly
c. Monopolistic competition, monopoly but not oligopoly
d. Oligopoly and monopoly, but not monopolistic competition
a. Monopoly, but not oligopoly or monopolistic competition
b. Monopolistic competition and monopoly, but no oligopoly
c. Monopolistic competition, monopoly but not oligopoly
d. Oligopoly and monopoly, but not monopolistic competition
answer
a. Monopolistic competition, monopoly but not oligopoly
question
1. The marginal cost curve
a. Is the short run supply curve for a competitive firm at prices above the AVC curve
b. Is not affected by changes in the price of variable inputs
c. Is the long run supply curve for a competitive firm at prices below the AVC curve
d. Slopes downward to the right as output increases
a. Is the short run supply curve for a competitive firm at prices above the AVC curve
b. Is not affected by changes in the price of variable inputs
c. Is the long run supply curve for a competitive firm at prices below the AVC curve
d. Slopes downward to the right as output increases
answer
a. Is the short run supply curve for a competitive firm at prices above the AVC curve
question
1. A perfectly competitive firm should expand output when
a. P < ATC
b. P > ATC
c. P > MC
d. P < MC
a. P < ATC
b. P > ATC
c. P > MC
d. P < MC
answer
a. P > MC
question
1. If long run economic losses are being experienced in a competitive market,
a. Normal profit will fall to zero as firms enter
b. More firms will enter the market
c. The market supply curve will shift to the right
d. Equilibrium price will rise as firms exit
a. Normal profit will fall to zero as firms enter
b. More firms will enter the market
c. The market supply curve will shift to the right
d. Equilibrium price will rise as firms exit
answer
a. Equilibrium price will rise as firms exit
question
1. The entry of firms into a market
a. Shifts the market demand curve to the left
b. Increases the equilibrium price
c. Shifts the market supply curve to the left
d. Reduces the profits of existing firms in the market
a. Shifts the market demand curve to the left
b. Increases the equilibrium price
c. Shifts the market supply curve to the left
d. Reduces the profits of existing firms in the market
answer
a. Reduces the profits of existing firms in the market
question
1. Suppose there are three firms in a market. The largest firm has sales of $50 million, and each of the other two firms has sales of $25 million. The Herfindahl-Hirschman Index of this industry is
a. 3,125
b. 2,500
c. 2,550
d. 3,750
a. 3,125
b. 2,500
c. 2,550
d. 3,750
answer
a. 3,750
question
1. Which of the following is an investment decision in a competitive market
a. The price to charge
b. Entry or exit
c. The shutdown decision
d. The rate of output to produce
a. The price to charge
b. Entry or exit
c. The shutdown decision
d. The rate of output to produce
answer
a. Entry or exit
question
1. A monopolist has market power because it
a. Is regulated by the government
b. Faces a downward sloping demand curve for its own output
c. Can raise price as much as it wishes and not lose any customers
d. Is a price taker
a. Is regulated by the government
b. Faces a downward sloping demand curve for its own output
c. Can raise price as much as it wishes and not lose any customers
d. Is a price taker
answer
a. Faces a downward sloping demand curve for its own output
question
1. Refer to Table 25.2. Assume there are only four firms in the pool sweeper industry. What is the market share for North Star?
a. 5 percent
b. 20 percent
c. 10 percent
d. 50 percent
a. 5 percent
b. 20 percent
c. 10 percent
d. 50 percent
answer
a. 50 percent
question
1. Other things being equal, as more firms enter a market, the market supply curve
a. Shifts to the left
b. Intersects the demand curve at a higher price
c. Becomes more inelastic
d. Shifts to the right
a. Shifts to the left
b. Intersects the demand curve at a higher price
c. Becomes more inelastic
d. Shifts to the right
answer
a. Shifts to the right
question
1. When economic profits exist in the market for a particular product, this is a signal to producers that
a. The market is oversupplied with this product
b. Price is at the minimum of the ATC curve
c. Consumers would like more scarce resources devoted to the production of this product
d. The best mix of goods and services is being produced with society's scarce resources
a. The market is oversupplied with this product
b. Price is at the minimum of the ATC curve
c. Consumers would like more scarce resources devoted to the production of this product
d. The best mix of goods and services is being produced with society's scarce resources
answer
a. Consumers would like more scarce resources devoted to the production of this product
question
1. The decision to start or expand a business is known as the
a. Profit maximization decision
b. Production decision
c. Investment decision
d. Output decision
a. Profit maximization decision
b. Production decision
c. Investment decision
d. Output decision
answer
a. Investment decision
question
1. A kinked demand curve indicates that rival oligopolists match all
a. Advertising reductions
b. Price reductions
c. Increased advertising
d. Price increases
a. Advertising reductions
b. Price reductions
c. Increased advertising
d. Price increases
answer
a. Price reductions
question
1. Suppose a firm has an annual budget of $200,000 in wages and salaries, $75,000 in materials, $30,000 in new equipment, $20,000 in rented property, and $35,000 in interest costs on capital. The owner/manager does not choose to pay himself, but he could receive income of $90,000 by working elsewhere. The firm earns revenues of $360,000 per year. What is the economic profit for the firm described above?
a. $90,000
b. $0
c. $200,000
d. -$90,000
a. $90,000
b. $0
c. $200,000
d. -$90,000
answer
a. -$90,000
question
1. Refer to Figure 23.2 for a perfectly competitive firm. This firm will maximize profits by producing the level of output that corresponds to point
a. A
b. B
c. C
d. D
a. A
b. B
c. C
d. D
answer
a. C
question
1. A perfectly competitive firm is a price taker because
a. Market supply is upward sloping
b. The price of the product is determined by many buyers and sellers
c. Its products are differentiated
d. It has market power
a. Market supply is upward sloping
b. The price of the product is determined by many buyers and sellers
c. Its products are differentiated
d. It has market power
answer
a. The price of the product is determined by many buyers and sellers
question
1. The long run is
a. Approximately one year
b. A period long enough for all inputs to be variable
c. The period required to produce a unit of the firm's output
d. A period longer than one year
a. Approximately one year
b. A period long enough for all inputs to be variable
c. The period required to produce a unit of the firm's output
d. A period longer than one year
answer
a. A period long enough for all inputs to be variable
question
1. Examples of barriers to entry include
a. Standardized products
b. Price taking
c. Patents
d. Economic profits
a. Standardized products
b. Price taking
c. Patents
d. Economic profits
answer
a. Patents
question
1. Refer to Figure 22.3 for a perfectly competitive firm. Which of the following statements is true for this firm between the prices $10 and $15?
a. The firm is experiencing economic profits because the market price is greater than or equal to the minimum AVC
b. The firm is experiencing zero economic profits
c. The firm is experiencing economic losses and should shut down
d. The firm is experiencing economic losses but should continue to produce
a. The firm is experiencing economic profits because the market price is greater than or equal to the minimum AVC
b. The firm is experiencing zero economic profits
c. The firm is experiencing economic losses and should shut down
d. The firm is experiencing economic losses but should continue to produce
answer
a. The firm is experiencing economic losses but should continue to produce
question
1. Which of the following characterizes a firm that is in long-run perfectly competitive equilibrium where profits are maximized?
a. Price exceeds marginal cost
b. Price equals marginal cost
c. Positive economic profit
d. Price equals minimum ATC
a. Price exceeds marginal cost
b. Price equals marginal cost
c. Positive economic profit
d. Price equals minimum ATC
answer
a. Price equals minimum ATC
question
1. Price leadership
a. Helps achieve monopoly profit for the market
b. Accounts for kinked oligopoly behavior
c. Results in prefatory pricing
d. Results in inflexible prices
a. Helps achieve monopoly profit for the market
b. Accounts for kinked oligopoly behavior
c. Results in prefatory pricing
d. Results in inflexible prices
answer
a. Helps achieve monopoly profit for the market
question
1. Which of the following is likely to be a monopolist?
a. An Indonesian restaurant in a large city
b. A large firm like GM which has a substantial portion of the car market
c. The Boeing company which is one of the largest producers of airplanes
d. A drug firm that has a patent granting it the exclusive right to produce a drug
a. An Indonesian restaurant in a large city
b. A large firm like GM which has a substantial portion of the car market
c. The Boeing company which is one of the largest producers of airplanes
d. A drug firm that has a patent granting it the exclusive right to produce a drug
answer
a. A drug firm that has a patent granting it the exclusive right to produce a drug
question
1. The exit of firms from a market, ceteris paribus
a. Shifts the market demand curve to the left
b. Shifts the market supply curve to the right
c. Has no effect on the economic losses of remaining firms in the market
d. Increases the equilibrium price in the market
a. Shifts the market demand curve to the left
b. Shifts the market supply curve to the right
c. Has no effect on the economic losses of remaining firms in the market
d. Increases the equilibrium price in the market
answer
a. Increases the equilibrium price in the market
question
1. Refer to Figure 22.3 for a perfectly competitive firm. If the market price is $15,
a. The firm should shut down
b. The firm should produce 39 units
c. The firm will have above normal profits
d. Economic profits will be zero
a. The firm should shut down
b. The firm should produce 39 units
c. The firm will have above normal profits
d. Economic profits will be zero
answer
a. Economic profits will be zero
question
1. Short run profits are maximized at the rate of output where
a. Average total costs are minimized
b. Marginal revenue is zero
c. Marginal revenue is equal to marginal cost
d. Total revenue is maximized
a. Average total costs are minimized
b. Marginal revenue is zero
c. Marginal revenue is equal to marginal cost
d. Total revenue is maximized
answer
a. Marginal revenue is equal to marginal cost
question
1. If a firm decides to make this investment decision to expand its capacity then it must have discovered that
a. P > AVC
b. P > ATC
c. P = AVC
d. P = ATC
a. P > AVC
b. P > ATC
c. P = AVC
d. P = ATC
answer
a. P > ATC
question
1. In which of the following types of market does a single firm have the most market power
a. Oligopoly
b. Monopoly
c. Monopolistic competition
d. Perfect competition
a. Oligopoly
b. Monopoly
c. Monopolistic competition
d. Perfect competition
answer
a. Monopoly
question
1. A cartel is
a. A type of market structure
b. An organization intended to increase competition in an industry
c. Not illegal in the United States
d. A public agreement between firms or countries to restrict production and raise prices
a. A type of market structure
b. An organization intended to increase competition in an industry
c. Not illegal in the United States
d. A public agreement between firms or countries to restrict production and raise prices
answer
a. A public agreement between firms or countries to restrict production and raise prices
question
1. Refer to Figure 22.3 for a perfectly competitive firm. This firm should shut down at any price below
a. $10
b. $15
c. $4
d. $23
a. $10
b. $15
c. $4
d. $23
answer
a. $10
question
1. In Figure 24.1 total cost is represented by the area
a. ABGHE
b. CDFE
c. ABFE
d. ABDC
a. ABGHE
b. CDFE
c. ABFE
d. ABDC
answer
a. CDFE
question
1. Which of the following is characteristic of a perfectly competitive market?
a. High barriers to entry
b. Long run economic profit
c. Identical products
d. A small number of firms
a. High barriers to entry
b. Long run economic profit
c. Identical products
d. A small number of firms
answer
a. Identical products
question
1. When a producer can control the market price for the good it sells, the producer
a. Is a perfectly competitive firm
b. Is certain to make a profit
c. Is an entrepreneur
d. Has market power
a. Is a perfectly competitive firm
b. Is certain to make a profit
c. Is an entrepreneur
d. Has market power
answer
a. Has market power
question
1. In a competitive market, if the market price is equal to the minimum point of the firm's ATC curve, the firm may seek to earn economic profits by
a. Decreasing production costs through technological improvements
b. Decreasing price
c. Producing at the rate of output when price equals demand
d. Increasing price
a. Decreasing production costs through technological improvements
b. Decreasing price
c. Producing at the rate of output when price equals demand
d. Increasing price
answer
a. Decreasing production costs through technological improvements
question
1. The demand curve for each perfectly competitive firm is
a. Vertical
b. Horizontal
c. Downward sloping
d. Upward sloping
a. Vertical
b. Horizontal
c. Downward sloping
d. Upward sloping
answer
a. Horizontal
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
