question
A perfectly competitive firm
a) chooses its price to maximize profits.
b) sets its price to undercut other firms selling similar products.
c) takes its price as given by market conditions.
d) picks the price that yields the largest market share.
a) chooses its price to maximize profits.
b) sets its price to undercut other firms selling similar products.
c) takes its price as given by market conditions.
d) picks the price that yields the largest market share.
answer
takes its price as given by market conditions
question
A competitive firm maximizes profit by choosing the quantity at which
a) average total cost is at its minimum.
b) marginal cost equals the price.
c) average total cost equals the price.
d) marginal cost equals average total cost.
a) average total cost is at its minimum.
b) marginal cost equals the price.
c) average total cost equals the price.
d) marginal cost equals average total cost.
answer
marginal cost equals the price
question
A competitive firm's short-run supply curve is its ___________ cost curve above its
___________ cost curve.
a. average total, marginal
b. average variable, marginal
c. marginal, average total
d. marginal, average variable
___________ cost curve.
a. average total, marginal
b. average variable, marginal
c. marginal, average total
d. marginal, average variable
answer
marginal, average variable
question
If a profit-maximizing, competitive firm is producing a quantity at which marginal cost is
between average variable cost and average total cost, it will
a) keep producing in the short run but exit the market in the long run.
b) shut down in the short run but return to production in the long run.
c) shut down in the short run and exit the market in the long run.
d) keep producing both in the short run and in the long run.
between average variable cost and average total cost, it will
a) keep producing in the short run but exit the market in the long run.
b) shut down in the short run but return to production in the long run.
c) shut down in the short run and exit the market in the long run.
d) keep producing both in the short run and in the long run.
answer
keep producing in the short run but exit the market in the long run
question
In the long-run equilibrium of a competitive market with identical firms, what is the
relationship between price P, marginal cost MC, and average total cost ATC?
a. P > MC and P > ATC.
b. P > MC and P = ATC
c. P = MC and P > ATC.
d. P = MC and P = ATC.
relationship between price P, marginal cost MC, and average total cost ATC?
a. P > MC and P > ATC.
b. P > MC and P = ATC
c. P = MC and P > ATC.
d. P = MC and P = ATC.
answer
P = MC and P = ATC
question
A firm is a natural monopoly if it exhibits the following as its output increases:
a. decreasing marginal revenue
b. increasing marginal cost
c. decreasing average revenue
d. decreasing average total cost
a. decreasing marginal revenue
b. increasing marginal cost
c. decreasing average revenue
d. decreasing average total cost
answer
decreasing average total cost
question
For a profit-maximizing monopoly that charges the same price to all consumers, what is the
relationship between price P, marginal revenue MR, and marginal cost MC?
a. P = MR and MR = MC.
b. P > MR and MR = MC.
c. P = MR and MR > MC.
d. P > MR and MR > MC
relationship between price P, marginal revenue MR, and marginal cost MC?
a. P = MR and MR = MC.
b. P > MR and MR = MC.
c. P = MR and MR > MC.
d. P > MR and MR > MC
answer
P > MR and MR = MC
question
If a monopoly's fixed costs increase, its price will _________ and its profit will _________.
a. increase, decrease
b. decrease, increase
c. increase, stay the same
d. stay the same, decrease
a. increase, decrease
b. decrease, increase
c. increase, stay the same
d. stay the same, decrease
answer
stay the same, decrease
question
Compared to the social optimum, a monopoly firm chooses
a) a quantity that is too low and a price that is too high.
b) a quantity that is too high and a price that is too low.
c) a quantity and a price that are both too high.
d) a quantity and a price that are both too low.
a) a quantity that is too low and a price that is too high.
b) a quantity that is too high and a price that is too low.
c) a quantity and a price that are both too high.
d) a quantity and a price that are both too low.
answer
a quantity that is too low and a price that is too high
question
In economics, a firm that faces no competitors is referred to as _________________.
A. an oligopoly
B. a monopoly
C. a perfect competitor
D. an oligopolizor
A. an oligopoly
B. a monopoly
C. a perfect competitor
D. an oligopolizor
answer
a monopoly
question
________________________ arises where many firms are competing in a market to sell similar but
differentiated products. (SKIPPED)
a) Oligopolistic competition
b) Perfect competition
c) Monopolistic competition
d) Monogopolised competition
differentiated products. (SKIPPED)
a) Oligopolistic competition
b) Perfect competition
c) Monopolistic competition
d) Monogopolised competition
answer
Monopolistic competition
question
. ______________ include all of the costs of production that increase with the quantity produced.
A. Fixed costs
B. Variable costs
C. Average costs
D. Average variable costs
A. Fixed costs
B. Variable costs
C. Average costs
D. Average variable costs
answer
Variable costs
question
____________________________ occur when the marginal gain in output diminishes as each
additional unit of input is added.
A. Diminishing variable product
B. Diminishing average product
C. Diminishing marginal product
D. Diminishing marginal costs
additional unit of input is added.
A. Diminishing variable product
B. Diminishing average product
C. Diminishing marginal product
D. Diminishing marginal costs
answer
Diminishing marginal product
question
If a firm is experiencing _____________________, then as the quantity of output rises, the average cost of production rises.
A) decreasing returns to scale
B) consent returns to scale
C) economies of scale
D) increasing returns to scale
A) decreasing returns to scale
B) consent returns to scale
C) economies of scale
D) increasing returns to scale
answer
decreasing returns to scale
question
_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the
sale price.
A. Total revenue
B. Total profits
C. Average profit margin
D. Total cost
sale price.
A. Total revenue
B. Total profits
C. Average profit margin
D. Total cost
answer
Total revenue
question
In order to calculate marginal cost, the change in ______________ is divided by the amount of
change in quantity.
A) either total cost or average cost
B) increasing marginal returns
C) either total cost or variable cost
D) decreasing marginal returns
change in quantity.
A) either total cost or average cost
B) increasing marginal returns
C) either total cost or variable cost
D) decreasing marginal returns
answer
either total cost or variable cost
question
Which of the following should typically be ignored because spending has already been made and cannot be changed?
A. variable costs
B. sunk costs
C. marginal costs
D. average marginal costs
A. variable costs
B. sunk costs
C. marginal costs
D. average marginal costs
answer
sunk costs
question
When __________________ exist, doubling of all inputs will result in more than doubling output,
which means __________________________________________.
A) economies of scale; a larger factory can produce at a lower average cost than a smaller company.
B) economies of scale; a smaller factory can produce at a lower average cost than a larger company.
C) low labor inputs; larger scale of production leads to higher costs.
D) labor inputs; economies-of-scale curve is U-shaped.
which means __________________________________________.
A) economies of scale; a larger factory can produce at a lower average cost than a smaller company.
B) economies of scale; a smaller factory can produce at a lower average cost than a larger company.
C) low labor inputs; larger scale of production leads to higher costs.
D) labor inputs; economies-of-scale curve is U-shaped.
answer
economies of scale; a larger factory can produce at a lower average cost than a smaller company
question
A firm that holds a monopoly position in the market place is
A. a price maker
B. a price taker
C. monopolistically competitive
D. subject to infinite market forces
A. a price maker
B. a price taker
C. monopolistically competitive
D. subject to infinite market forces
answer
a price maker
question
The slope of the demand curve for a monopoly firm is
A) horizontal, parallel to the x-axis
B) vertical, parallel to the y-axis
C) upward sloping
D) downward sloping
A) horizontal, parallel to the x-axis
B) vertical, parallel to the y-axis
C) upward sloping
D) downward sloping
answer
downward sloping
question
The marginal revenue curve for a monopolist the market demand
curve.
A. always rises above
B. always lies beneath
C. always runs parallel
D. always is the same
curve.
A. always rises above
B. always lies beneath
C. always runs parallel
D. always is the same
answer
always lies beneath
question
The shape of the perceived demand curve for a perfectly competitive firm reflects that firm's
ability to
A) sell any quantity it wishes at the prevailing market price.
B) raise its price without losing all of its customers.
C) choose any combination of price and quantity.
D) lose fewer customers than a monopoly that raised its prices.
ability to
A) sell any quantity it wishes at the prevailing market price.
B) raise its price without losing all of its customers.
C) choose any combination of price and quantity.
D) lose fewer customers than a monopoly that raised its prices.
answer
sell any quantity it wishes at the prevailing market price
question
"As a recent graduate from TAMIU, you have landed a job in production management for Universal Clones, Inc. You are responsible for the entire company on weekends. Your costs are shown below."
Quantity Average Total Cost
500 200
501 201
Your current level of production is 500 units. All 500 units have been ordered by your regular
customers.
"The phone rings. It's a new customer who wants to buy one unit of your product. This means
you would have to increase production to 501 units. Your new customer offers you $450 to
produce the extra unit." Question: Should you accept this offer?
Quantity Average Total Cost
500 200
501 201
Your current level of production is 500 units. All 500 units have been ordered by your regular
customers.
"The phone rings. It's a new customer who wants to buy one unit of your product. This means
you would have to increase production to 501 units. Your new customer offers you $450 to
produce the extra unit." Question: Should you accept this offer?
answer
You should not accept the offer
question
Look at Figure 1.
If the market price is $20, what is the firm's profit-maximizing output?
A) 750 units
B) 1,100 units
C) 1,350 units
D) 1,800 units
If the market price is $20, what is the firm's profit-maximizing output?
A) 750 units
B) 1,100 units
C) 1,350 units
D) 1,800 units
answer
1,350 units
question
Look at figure 1
If the market price is $20, what is the amount of the firm's profit?
A) $5,400
B) $6,750
C) $8,100
D) $16,200
If the market price is $20, what is the amount of the firm's profit?
A) $5,400
B) $6,750
C) $8,100
D) $16,200
answer
$6,750
question
Look at figure 1
If the market price is $20, what is the average profit at the profit-maximizing quantity?
A) $5
B) $6
C) $9
D) $20
If the market price is $20, what is the average profit at the profit-maximizing quantity?
A) $5
B) $6
C) $9
D) $20
answer
$5
question
Look at figure 1
The firm's manager suggests that the firm's goal should be to maximize average profit. In that
case, what is the output level and what is the average profit that will achieve the manager's goal?
A) Q = 1,350 units, average profit = $5
B) Q = 1,100 units, average profit = $6
C) Q = 1,350 units, average profit = $9
D) Q = 1,800 units, average profit = $20
The firm's manager suggests that the firm's goal should be to maximize average profit. In that
case, what is the output level and what is the average profit that will achieve the manager's goal?
A) Q = 1,350 units, average profit = $5
B) Q = 1,100 units, average profit = $6
C) Q = 1,350 units, average profit = $9
D) Q = 1,800 units, average profit = $20
answer
Q = 1,100 units, average profit = $6
question
Look at figure 1
The firm's manager suggests that the firm's goal should be to maximize average profit. If the
firm does this, what is the amount of profit that it will earn?
A) $6,600
B) $6,750
C) $12,150
D) $36,000
The firm's manager suggests that the firm's goal should be to maximize average profit. If the
firm does this, what is the amount of profit that it will earn?
A) $6,600
B) $6,750
C) $12,150
D) $36,000
answer
$6,600
question
Look at figure 1
What is the amount of the firm's fixed cost of production?
A) $5,400
B) $6,750
C) $8,100
D) It cannot be determined.
What is the amount of the firm's fixed cost of production?
A) $5,400
B) $6,750
C) $8,100
D) It cannot be determined.
answer
$5,400
question
Look at figure 1
If the firm's fixed cost increases by $1,000 due to a new environmental regulation, what
happens in the diagram above?
A) All the cost curves shift upward.
B) Only the average variable cost and average total cost curves shift upward; marginal cost is not
affected.
C) Only the average total cost curve shifts upward; the marginal cost and average variable cost
curves are not affected.
D) None of the curves shifts; only the fixed cost curve, which is not shown here, is affected.
If the firm's fixed cost increases by $1,000 due to a new environmental regulation, what
happens in the diagram above?
A) All the cost curves shift upward.
B) Only the average variable cost and average total cost curves shift upward; marginal cost is not
affected.
C) Only the average total cost curve shifts upward; the marginal cost and average variable cost
curves are not affected.
D) None of the curves shifts; only the fixed cost curve, which is not shown here, is affected.
answer
Only the average total cost curve shifts upward; the marginal cost and average variable cost
curves are not affected
curves are not affected
question
Look at figure 1
The figure shows the cost structure of a firm in a perfectly competitive market. If the firm's
fixed cost increases by $1,000 due to a new environmental regulation, what happens to its profitmaximizing
output level?
A) It increases.
B) It decreases.
C) It remains the same.
D) It could increase, decrease, or remain constant, depending on whether the firm is able to cut
costs somewhere else.
The figure shows the cost structure of a firm in a perfectly competitive market. If the firm's
fixed cost increases by $1,000 due to a new environmental regulation, what happens to its profitmaximizing
output level?
A) It increases.
B) It decreases.
C) It remains the same.
D) It could increase, decrease, or remain constant, depending on whether the firm is able to cut
costs somewhere else.
answer
It remains the same
question
Look at figure 1
What is the minimum price the firm requires to produce output?
A) $20
B) $14
C) $5
D) It cannot be determined
What is the minimum price the firm requires to produce output?
A) $20
B) $14
C) $5
D) It cannot be determined
answer
$5
question
Look at figure 2
Based upon the information shown, what price will Bearclaws charge to maximize profits?
a. $7.
b. $10.50.
c. $14.
d. $12.
Based upon the information shown, what price will Bearclaws charge to maximize profits?
a. $7.
b. $10.50.
c. $14.
d. $12.
answer
$14
question
Look at figure 2
Based upon the information shown, how many units will Bearclaws produce to maximize profits?
a. 70.
b. 90.
c. 105.
d. 130.
Based upon the information shown, how many units will Bearclaws produce to maximize profits?
a. 70.
b. 90.
c. 105.
d. 130.
answer
70
question
Look at figure 2
Based upon the information shown, what is total revenue for Bearclaws, given that it maximizes
profits?
a. $900.
b. $980.
c. $490.
d. $1080.
Based upon the information shown, what is total revenue for Bearclaws, given that it maximizes
profits?
a. $900.
b. $980.
c. $490.
d. $1080.
answer
$980
question
Look at figure 2
Based upon the information shown, what are total costs for Bearclaws, given that it maximizes profits?
a. $700.
b. $980.
c. $490.
d. $784.
Based upon the information shown, what are total costs for Bearclaws, given that it maximizes profits?
a. $700.
b. $980.
c. $490.
d. $784.
answer
$700
question
Look at figure 2
Given that Bearclaws chooses the profit maximizing price and quantity, what profit level will it
obtain?
a. $700.
b. $980.
c. $490.
d. $280.
Given that Bearclaws chooses the profit maximizing price and quantity, what profit level will it
obtain?
a. $700.
b. $980.
c. $490.
d. $280.
answer
$280
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