question
Which of the following is an argument in favor of a competitive market structure rather than a monopoly?
a. Monopolies have greater ability to pursue research and design
b. The lure of monopoly power provides a greater incentive for invention and innovation
c. Monopolies produce less at a higher price than competitive markets, ceteris paribus
d. Economies of scale allow a single firm to produce at lower costs, ceteris paribus
a. Monopolies have greater ability to pursue research and design
b. The lure of monopoly power provides a greater incentive for invention and innovation
c. Monopolies produce less at a higher price than competitive markets, ceteris paribus
d. Economies of scale allow a single firm to produce at lower costs, ceteris paribus
answer
c
question
Consider the costs and revenues for Nick's balloon store. Suppose instead of selling balloons, he could work at CSU and earn $15,000 teaching. Nick's economic profit is:
Nick's Balloon Store: Costs and Revenues
Building Rent: $20,000
Wages (employees): $5,000
Electricity: $1,000
Rubber: $15,000
String: $2,000
Balloon Sales: $55,000
a. $12,000
b. $55,000
c. $2,000
d. -$3000
Nick's Balloon Store: Costs and Revenues
Building Rent: $20,000
Wages (employees): $5,000
Electricity: $1,000
Rubber: $15,000
String: $2,000
Balloon Sales: $55,000
a. $12,000
b. $55,000
c. $2,000
d. -$3000
answer
a
question
The pricing strategy in which one firm is allowed to establish the market price for all firms in the market is called
a. Price discrimination
b. Price leadership
c. The profit-maximizing rule
d. Marginal cost pricing
a. Price discrimination
b. Price leadership
c. The profit-maximizing rule
d. Marginal cost pricing
answer
b?
question
In economics, a production function:
a. Is a mathematical representation of how much output can be generated given various combinations of input
b. Is a mathematical representation of the total cost of producing a given level if output
c. Shows us the minimum amount of output that can be generated given various combinations of inputs
d. illustrates the labor-leisure tradeoff for a consumer
a. Is a mathematical representation of how much output can be generated given various combinations of input
b. Is a mathematical representation of the total cost of producing a given level if output
c. Shows us the minimum amount of output that can be generated given various combinations of inputs
d. illustrates the labor-leisure tradeoff for a consumer
answer
a?
question
A firm that makes zero economic profits:
a. Will go bankrupt and exit the industry
b. Does not cover its variable costs and should shut down in the short run
c. Covers all of its costs, but should exit the market in the long run
d. Covers all of its costs and is just as well off as their best alternative
a. Will go bankrupt and exit the industry
b. Does not cover its variable costs and should shut down in the short run
c. Covers all of its costs, but should exit the market in the long run
d. Covers all of its costs and is just as well off as their best alternative
answer
c? d?
question
Which of the following is likely to be a monopolist?
a. A drug firm that has a patent granting the exclusive right to produce a drug
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 producer of airplanes
d. An Indonesian restaurant in a large city
a. A drug firm that has a patent granting the exclusive right to produce a drug
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 producer of airplanes
d. An Indonesian restaurant in a large city
answer
a
question
Consider figure 23.2. We would expect in long run equilibrium:
a. Firms will enter, and market price will decrease
b. Firms will enter, and market price will increase
c. Firms will exit, and market prices will remain the same
d. Not enough information
a. Firms will enter, and market price will decrease
b. Firms will enter, and market price will increase
c. Firms will exit, and market prices will remain the same
d. Not enough information
answer
c
question
Monopolistically competitive firms have a "monopoly" element to them because
a. There is only one seller
b. There are high barriers to entry
c. Brand loyalty gives them a guaranteed a number of customers
d. The cross-price elasticity of demand is very high
a. There is only one seller
b. There are high barriers to entry
c. Brand loyalty gives them a guaranteed a number of customers
d. The cross-price elasticity of demand is very high
answer
c
question
When firms are interdependent, as in an oligopoly,
a. One firm can ignore other companies in the market when making decisions
b. The profit of one firm depends on how its rivals respond to its strategic decisions
c. They act completely independently of one another
d. The the market is perfectly competitive
a. One firm can ignore other companies in the market when making decisions
b. The profit of one firm depends on how its rivals respond to its strategic decisions
c. They act completely independently of one another
d. The the market is perfectly competitive
answer
b
question
In the figure below, total revenue at the profit-maximizing rate of output is
a. $6
b. $20
c. $120
d. $100
a. $6
b. $20
c. $120
d. $100
answer
b
question
A U-shaped average total cost curve implies:
a. First diminishing returns, and then increasing returns
b. First marginal cost below average total cost, and then marginal cost above average total cost
c. Total costs are minimized in the short run
d. Marginal costs equal to zero
a. First diminishing returns, and then increasing returns
b. First marginal cost below average total cost, and then marginal cost above average total cost
c. Total costs are minimized in the short run
d. Marginal costs equal to zero
answer
b
question
In a competitive market,
a. Buyers don't have market power but sellers do
b. Sellers don't have market power but buyers do
c. Neither buyers nor sellers have market power
d. Buyers and sellers both have market power
a. Buyers don't have market power but sellers do
b. Sellers don't have market power but buyers do
c. Neither buyers nor sellers have market power
d. Buyers and sellers both have market power
answer
c
question
Given the payoff matrix below, if the probability of Company B charging a low price when you charge a high price is 10%, what is the expected payoff for Company A to charge a high price?
a. -$17,222
b. $43,000
c. -$500
d. -$4,500
a. -$17,222
b. $43,000
c. -$500
d. -$4,500
answer
?
question
The demand curve for a perfectly competitive firm:
a. Is upward sloping
b. Is horizontal
c. Is downward sloping
d. Depends on marginal cost
a. Is upward sloping
b. Is horizontal
c. Is downward sloping
d. Depends on marginal cost
answer
c
question
If a perfectly competitive firm is producing at its profit-maximizing output in the short run and fixed costs decline, the firm should:
a. Use less capital, but increase output by hiring more labor
b. Not change output
c. Reduce output
d. Increase output
a. Use less capital, but increase output by hiring more labor
b. Not change output
c. Reduce output
d. Increase output
answer
b
question
The primary difference between oligopoly and monopolistic competition is that oligopolies do not
a. Have high concentration ratios
b. Have many competitors
c. Have high barriers to entry
d. Confront a downward-sloping demand curve
a. Have high concentration ratios
b. Have many competitors
c. Have high barriers to entry
d. Confront a downward-sloping demand curve
answer
b
question
Karen's pumpkin patch has a total cost of $20,000 when it is not producing any pumpkins. This means that:
a. Variable costs are $20,000
b. Fixed costs are $20,000
c. Karen's business cannot be represented by a typical production function
d. Fixed costs are zero
a. Variable costs are $20,000
b. Fixed costs are $20,000
c. Karen's business cannot be represented by a typical production function
d. Fixed costs are zero
answer
b
question
Refer to the chart below. Using the profit maximization rule, a non-price-discriminating monopolist will produce
a. 10 units
b. 20 units
c. 30 units
d. 40 units
e. 50 units
a. 10 units
b. 20 units
c. 30 units
d. 40 units
e. 50 units
answer
...
question
A cartel is
a. Identical to a monopoly
b. Legal in the United States
c. An organization intended to increase competition in an industry
d. A public agreement between firms or countries to restrict production and raise prices
a. Identical to a monopoly
b. Legal in the United States
c. An organization intended to increase competition in an industry
d. A public agreement between firms or countries to restrict production and raise prices
answer
d
question
If an additional unit of labor costs $12 and has a marginal physical product of 12 units of output, the marginal cost is:
a. $12
b. $144
c. $1
d. Not enough information
a. $12
b. $144
c. $1
d. Not enough information
answer
?
question
Your uncle has a farm producing string beans. You find out from market research that the market for string beans is perfectly competitive, and the current market price is a $2 a pound. You advise your uncle:
a. He can sell more money by increasing his advertising budget
b. He can make more money by charging slightly higher prices to your consumers
c. He should sell beans for $2 per pound
d. If he produces too many beans, the market price will go down
a. He can sell more money by increasing his advertising budget
b. He can make more money by charging slightly higher prices to your consumers
c. He should sell beans for $2 per pound
d. If he produces too many beans, the market price will go down
answer
?
question
Which of the following is the same for a monopolist and a perfectly competitive firm?
a. The amount of output produced
b. Economic profits
c. The goal of maximizing profits
d. Efficiency of production at the profit-maximizing output
a. The amount of output produced
b. Economic profits
c. The goal of maximizing profits
d. Efficiency of production at the profit-maximizing output
answer
a?
question
Assume an oligopolist confronts two possible demand curves for its own output, as illustrated in the Figure. The first (A) prevails if other oligopolists don't match price changes. The second (B) prevails if rivals do match price changes.
Assuming the rival firms behave as predicted in the kinked demand curve model, what change in total revenue for a firm when the price is reduced from $11 to $9?
a. -$9
b. $9
c. -$11
d. $16
Assuming the rival firms behave as predicted in the kinked demand curve model, what change in total revenue for a firm when the price is reduced from $11 to $9?
a. -$9
b. $9
c. -$11
d. $16
answer
?
question
The short run supply curve for a perfectly competitive firm:
a. Is the MC curve above the min AVC
b. Is the MC curve above the min ATC
c. Is the AVC curve above the min ATC
d. Is vertical because it is a price-taker
a. Is the MC curve above the min AVC
b. Is the MC curve above the min ATC
c. Is the AVC curve above the min ATC
d. Is vertical because it is a price-taker
answer
b?
question
A profit-maximizing monopolist produces the rate of output where
a. Price = Marginal cost
b. Marginal revenue = Marginal cost
c. Marginal revenue = Price
d. Marginal revenue = Average total cost
a. Price = Marginal cost
b. Marginal revenue = Marginal cost
c. Marginal revenue = Price
d. Marginal revenue = Average total cost
answer
b
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