question
Assume that the price elasticity of demand is -2 for a certain firm's product. If the firm raises price, the firm's managers can expect total revenue to:
answer
Decrease
question
When a one percent change in price causes a change in quantity demanded greater than one percent, demand for the product is
answer
relatively elastic
question
If a firm decreases the price of its product and finds its total revenue flow also decreases, then
answer
the demand for this product is price inelastic
question
A price elasticity of zero corresponds to a demand curve that is:
answer
Vertical
question
Suppose the demand for a product is QXd = 10 - lnPX then product X is
answer
Unitary elastic
question
The demand for good X has been estimated by QXd =12 - 3PX + 4PY. Suppose that good X sells at $2 per unit and good Y sells for $1 per unit. Calculate the own price elasticity.
answer
-0.6
question
The own-price elasticity of demand for apples is -1.2. If the price of apples falls by 5%, what will happen to the quantity of apples demanded?
answer
It will increase 6%
question
Demand is perfectly elastic when the absolute value of the own price elasticity of demand is:
answer
Infinite
question
If the cross-price elasticity between good A & B is negative, we know the goods are:
answer
Complements
question
A firm using two inputs (call them "capital" and "labor") has an efficient combination of capital and labor levels when
answer
the ratio of the marginal product of capital over the price of capital equals the ratio of the marginal product of labor over the price of labor.
question
Assume a firm employs 10 workers and pays each $15 per hour. Also assume that the marginal product of an 11th worker would be 5 additional units of output per hour and that the price the firm receives for its good is $4 per unit. In the short run,
answer
the firm should hire at least one additional worker.
question
In the short run, the marginal cost of producing a good increases as output flow increases because
answer
the marginal product of the variable inputs decreases as the amounts used increase.
question
Suppose the marginal product of labor is 8 and the marginal product of capital is 2. If the wage rate is $4 and the price of capital is $2, then in order to minimize costs the firm should use
answer
More labor and less capital
question
Suppose the production function is Q = min {K, 2L}. How much output is produced when 4 units of labor and 9 units of capital are employed?
answer
8
question
Suppose the production function is given by Q = 3K + 4L. What is the average product of capital when 10 units of capital and 10 units of labor are employed?
answer
7
question
For the cost function C(Q) = 100 + 2Q + 3Q2, the marginal cost of producing 2 units of output is
answer
14
question
If a firm's production function is Leontief and the wage rate goes up the
answer
Cost minimizing combination of capital and labor does not change
question
Leontief production function
answer
A production function that assumes that inputs are used in fixed proportions.
question
You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 20, and MPK = 40 the firm:
answer
Should use more L and less K to cost minimize
question
Which of the following conditions is true when a producer minimizes the cost of producing a given level of output?
answer
The MRTS is equal to the ratio of input prices and the marginal product per dollar spent on all inputs is equal
question
As the usage of an input increases, marginal product
answer
Initially increases then begins to decline
question
Economies of scope exist when
answer
C(Q1) + C(Q2) > C(Q1,Q2)
question
Cost complementary exits in a multiproduct cost function when
answer
The marginal cost of producing one output is reduced when the output of another product is increased
question
Which of the following are measures of industry concentration?
answer
Four-firm concentration ratio and HHI index
question
A firm has a marginal cost of $20 and charges a price of $40. The Lerner index for this firm is:
answer
0.50
question
An industry is comprised of 20 firms, each with an equal market share. What is the 4-firm concentration ratio of this industry?
answer
0.2
question
An unregulated industry has a Lerner index of zero. These numbers:
answer
Are consistent with the industry being perfectly competitive
question
The industry elasticity of demand for gadgets is -2, while the elasticity of demand for an individual gadget manufacturer's product is -2. Based on the Rothschild approach to measuring market power, we conclude that
answer
There is significant monopoly power in this industry
question
A Herfindahl index of 10,000 suggests
answer
Monopoly
question
A Herfindahl index of 0 suggests
answer
perfect competition
question
A Lerner index of 0 suggests
answer
perfect competition
question
A student figured out that the HHI for an industry was 15,000. What is the proper conclusion?
answer
The student made some computational errors
question
As a general rule of thumb, industries with a Herfindahl index below ______ are considered to be competitive, while those above ______ are considered non-competitive.
answer
1,000, 1,800
question
An electronic company takes over one of its original suppliers in a merger. This is an example of:
answer
Vertical integration
question
An electronic company purchases a food company. This is an example of:
answer
Conglomerate integration
question
A frozen food company buys a fresh food company. This takeover is an example of:
answer
Horizontal integration
question
A firm has a marginal cost of $18 and charges a price of $27. The Lerner index for this firm is:
answer
0.33
question
At the output flow level where MC = MR
answer
total profit flow is maximized.
question
Which of the following is true for a price-maker seller (a monopolist or a member of an oligopoly or monopolistic competition) that is maximizing its profit or minimizing its loss?
answer
P > MR
question
Assume a firm in a perfectly competitive market has the short-run total cost function TC = 100 + 160Q + 3Q2. If the market price is $196, what should it do?
answer
produce 6 units per time period.
question
If firms are earning positive economic profit in a monopolistically competitive market, which of the following is most likely to happen in the long run?
answer
new firms will enter the market, driving economic profit to zero
question
The main difference between perfect competition and monopolistic competition is
answer
the degree of product differentiation.
question
Which of the following is true under monopoly?
answer
P > MC
question
In a competitive industry with identical firms, long run equilibrium is characterized by
a. P = AC
b. P = MC
c. MR = MC
D. All of the statements associated with this question are correct
a. P = AC
b. P = MC
c. MR = MC
D. All of the statements associated with this question are correct
answer
All of the statements associated with this question are correct
question
Which of the following is true? a. A monopolist produces on the inelastic portion of its demand b. A monopolist always earns an economic profit c. The more inelastic the demand, the closer marginal revenue is to price d. In the short run a monopoly will shutdown if P < AVC
answer
In the short run a monopoly will shutdown if P < AVC
question
Which of the following is true under monopoly?
a. Profits are always positive
b. P > minimum of ATC
c. P = MR
d. None of the statements associated with this question are correct
a. Profits are always positive
b. P > minimum of ATC
c. P = MR
d. None of the statements associated with this question are correct
answer
None of the statements associated with this question are correct
question
In the long-run, monopolistically competitive firms:
answer
Have excess capacity
question
If a monopolistically competitive firm's marginal cost increases, then in order to maximize profits the firm will
answer
Reduce output and increase price
question
Which of the following market structures would you expect to yield the greatest product variety?
answer
Monopolistic Competition
question
The primary difference between Monopolistic Competition and Perfect Competition is
a. The ease of entry and exit into the industry
b. The number of firms in the market
c. All of the statements associated with this question are correct
d. None of the statements associated with this question are correct
a. The ease of entry and exit into the industry
b. The number of firms in the market
c. All of the statements associated with this question are correct
d. None of the statements associated with this question are correct
answer
None of the statements associated with this question are correct
question
Differentiated goods are a feature of a:
answer
Monopolistically competitive market
question
Firms have market power in:
answer
Monopolistically competitive markets and monopolistic markets
question
There is no market supply curve in
answer
Monopolistically competitive and monopolistic markets
question
Which of the following statements concerning monopoly is NOT true?
a. A market may be monopolistic because there are some legal barriers
b. A monopoly has market power
c. A monopoly is always undesirable
d. There is some deadweight loss in a monopolistic market
a. A market may be monopolistic because there are some legal barriers
b. A monopoly has market power
c. A monopoly is always undesirable
d. There is some deadweight loss in a monopolistic market
answer
A monopoly is always undesirable
question
Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets? a. Firms produce homogeneous goods b. There is free entry c. Long run profits are zero d. There is free entry and long run profits are zero
answer
There is free entry and long run profits are zero
question
The source(s) of monopoly power for a monopoly may be: a. Economies of scale b. Economies of scope
c. Patents
d. All of the statements associated with this question are correct
c. Patents
d. All of the statements associated with this question are correct
answer
All of the statements associated with this question are correct
question
Economies of scale exist whenever:
answer
Average total costs decline as output increases
question
Which of the following is a correct representation of the profit maximization condition for a monopoly?
a. P = MR
b. MC = MR
c. P = ATC + MR
d. MR = MC + ATC
a. P = MR
b. MC = MR
c. P = ATC + MR
d. MR = MC + ATC
answer
MC = MR
question
In the long-run, monopolistically competitive firms produce a level of output such that
a. P > MC
b. P = ATC
c. ATC > minimum of average costs
d. All of the statements associated with this question are correct
a. P > MC
b. P = ATC
c. ATC > minimum of average costs
d. All of the statements associated with this question are correct
answer
All of the statements associated with this question are correct
question
Which of the following is (are) basic feature(s) of a perfectly competitive industry?
a. Buyers and sellers have perfect information
b. There are no transaction costs
c. There is free entry and exit in the market
d. All of the statement associated with this question are correct
a. Buyers and sellers have perfect information
b. There are no transaction costs
c. There is free entry and exit in the market
d. All of the statement associated with this question are correct
answer
All of the statement associated with this question are correct
question
In the long-run, perfectly competitive firms produce a level of output such that:
answer
P = MC and P = minimum of AC
question
A perfectly competitive firm faces a:
answer
Perfectly elastic demand function
question
"Monopolistic competition is literally a kind of competition. Hence, there is no deadweight loss in a monopolistically competitive market."
answer
The statement is incorrect
question
Which of the following is true under monopoly?
a. P > ATC
b. P > MC
c. P = MR
d. P = ATC
a. P > ATC
b. P > MC
c. P = MR
d. P = ATC
answer
P > MC
question
Differentiated goods are not a feature of a
answer
Perfectly competitive market and monopolistic market
question
In the long-run, monopolistically competitive firms charge prices
answer
Above the minimum of average total cost
question
Lerner Index
answer
(P-MC)/P
a measure of a firm's markup, or its level of market power
a measure of a firm's markup, or its level of market power
question
HHI (Herfindahl-Hirschman Index)
answer
a way of measuring industry concentration, equal to the sum of the squares of market shares for all firms in the industry
question
4 firm concentration ratio
answer
output of four largest firms / total output in the industry
question
Cobb-Douglas production function
answer
A production function that assumes some degree of substitutability among inputs.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
