question
T/F Perfect competition is the only market structure with a perfectly elastic demand curve
answer
T
question
The long run equilibrium position of a perfectly competitive firm is that of economic:
A. Loss
B. Profit
C. Break-even
D. Monopoy
A. Loss
B. Profit
C. Break-even
D. Monopoy
answer
C
question
T/F Whether or not there is monopoly power never depends upon how narrowly or broadly one defines the market
answer
F
question
Marginal cost cuts __________ at its _________________
A. Average cost, minimum
B. Average revenue, maximum
C. Marginal cost, minimum
D. Average product labor, maximum
A. Average cost, minimum
B. Average revenue, maximum
C. Marginal cost, minimum
D. Average product labor, maximum
answer
A
question
Firms exist to save on transactions costs
answer
Transactions cost theory of the firm
question
This concept relates labor or some other input to output
answer
Production function
question
In theory, these are u-shaped. In practice they may be L-shaped or flat
answer
Long-run average cost curves
question
This concept treats firms like black boxes who buy inputs and sell outputs
answer
Neoclassical theory of the firm
question
Has absolutely NO market power
answer
Perfectly competitive firm
question
This concept applies only to producers, not consumers
answer
Diminishing marginal productivity
question
Tend to be historical (long memory) rather than recent (short memory)
answer
Average measures
question
This is one way to lower agency costs for a firm
answer
Employee stock ownership plans
question
T/F Bad advertising increases average cost faster and/or further than it increases demand
answer
T
question
Which of the following models is very much like monopoly in the short-run and perfect competition in the long-run?
A. Monopolistic competition
B. Perfect cometition
C. Oligopoly
D. Monopoly
A. Monopolistic competition
B. Perfect cometition
C. Oligopoly
D. Monopoly
answer
A
question
In economics, which of the following is the period when all inputs are variable?
A. Short-run
B. Long-run
C. Intermediate-run
D. None of the above
A. Short-run
B. Long-run
C. Intermediate-run
D. None of the above
answer
B
question
In the agency theory of the firm, which stakeholder group most closely aligns to the role of "principal" in a modern corporation
A. Stockholders
B. Accountants
C. Managers
D. None of the above
A. Stockholders
B. Accountants
C. Managers
D. None of the above
answer
A
question
T/F A firm would never rationally want to operate at higher than the optimal scale of production
answer
F
question
Which of the following is an example of an implicit cost?
A. Surveillance cameras
B. Opportunity cost of owner's salary
C. Internal audits
D. All of the above
A. Surveillance cameras
B. Opportunity cost of owner's salary
C. Internal audits
D. All of the above
answer
D
question
Which of the following tends to be more dynamic rather than static?
A. Average cost
B. Total revenue
C. Marginal product of labor
D. None of the above
A. Average cost
B. Total revenue
C. Marginal product of labor
D. None of the above
answer
C
question
For which of the following types of inputs does the principle of diminishing returns hold?
I. land
II. labor
III. capital
IV. entrepreneurship
A. I only
B. II only
C. I, II, and III only
D. II and III only
E. II, III, and IV only
D. I, II, III, and IV
I. land
II. labor
III. capital
IV. entrepreneurship
A. I only
B. II only
C. I, II, and III only
D. II and III only
E. II, III, and IV only
D. I, II, III, and IV
answer
D
question
What is the goal of a firm in the neoclassical theory of the firm?
A. Minimize total cost
B. Maximize total profit
C. Maximum total revenue
D. Save on transactions costs
A. Minimize total cost
B. Maximize total profit
C. Maximum total revenue
D. Save on transactions costs
answer
B
question
Jim has been an Art History Major and has fifteen hours credit in art. He doesn't like art, but doesn't want the hours he has taken to be wasted. Why might you tell Jim to drop his Art History major?
A. In the long-run, there are always substitutes.
B. For an elastically demanded good, increasing price decreases total revenue.
C. To maximize profit, produce that quantity for which marginal revenue equals marginal cost.
D. None of the above
A. In the long-run, there are always substitutes.
B. For an elastically demanded good, increasing price decreases total revenue.
C. To maximize profit, produce that quantity for which marginal revenue equals marginal cost.
D. None of the above
answer
D
question
Which of these is a dimension along which a firm may differentiate its product/service?
A. Service before the sale
B. Demographically
C. Geographically
D. All of the above
A. Service before the sale
B. Demographically
C. Geographically
D. All of the above
answer
D
question
Under which of the following conditions will a firm be maximizing profit?
A. Total revenue = total cost
B. Marginal revenue = marginal cost
C. Average revenue = average cost
D. All of the above
A. Total revenue = total cost
B. Marginal revenue = marginal cost
C. Average revenue = average cost
D. All of the above
answer
B
question
Which of the following factors will tend to make a local, isolated, company operate less like a monopolist and more like a competitor?
A. Low transportation costs
B. Government franchise
C. Competing firms in neighboring towns exiting the market
D. None of the above
A. Low transportation costs
B. Government franchise
C. Competing firms in neighboring towns exiting the market
D. None of the above
answer
A
question
Which of the following is the reason why most economists oppose monopoly?
A. Economic profit
B. Deadweight loss
C. Lower consumer surplus
D. None of the above
A. Economic profit
B. Deadweight loss
C. Lower consumer surplus
D. None of the above
answer
B
question
This occurs with scales of production that are in the rising part of LRAC
answer
Diseconomies of scale
question
This marketing tactic has been used by Walmart to eliminate competitors
answer
Predatory pricing
question
This kind of firm has economies of scale (LRAC never rises)
answer
Natural monopoly
question
Perfect competition is a good approximation for how this situation works
answer
Financial markets
question
Prof. A Sen said that this all that is necessary for political freedom
answer
Freedom of the press
question
Market structure in which a single firm is the entire industry.
answer
Monopoly
question
Which two of the following assumptions are most important in explaining how economic profit disappears in perfect competition in the long-run?
I. Many, small firms
II. Free flow of information
III. No barriers to entry or exit.
IV. Identical (homogeneous) products
A. I and II only
B. I and III only
C. II and III only
D. II and IV only
I. Many, small firms
II. Free flow of information
III. No barriers to entry or exit.
IV. Identical (homogeneous) products
A. I and II only
B. I and III only
C. II and III only
D. II and IV only
answer
c
question
Which of the following sources of market power is NOT considered a marketing tactic?
A. Predatory pricing
B. Ownership f a scarce resource
C. Price discrimination
D. Vertical integration
A. Predatory pricing
B. Ownership f a scarce resource
C. Price discrimination
D. Vertical integration
answer
B
question
T/F Even if there were no real-world approximations of perfect competition, it would still be a useful model as an ideal or point of departure.
answer
T
question
Which of the following does perfect competition best describe?
A. Walmart and dollar stores
B. Microsoft
C. A public utility like entergy
D. Farming
A. Walmart and dollar stores
B. Microsoft
C. A public utility like entergy
D. Farming
answer
D
question
What is always the source of "true, or pure, monopolies" in which the seller enjoys perfectly inelastic (vertical) demand?
A. Economies of scale
B. Marketing tactics
C. Ownership of scarce resources
D. Government franchise or agency
A. Economies of scale
B. Marketing tactics
C. Ownership of scarce resources
D. Government franchise or agency
answer
D
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