question
C
answer
Consider the following information about a business Diane opened last year: price = $6, quantity sold = 15,000; implicit cost = $35,000; explicit cost = $60,000. What was Diane's economic profit?
a. $55,000
b. $5,000
c. -$5,000
d. $30,000
e. There is not enough information provided to answer this question.
a. $55,000
b. $5,000
c. -$5,000
d. $30,000
e. There is not enough information provided to answer this question.
question
D
answer
You paid $25 for your ticket to the football game, only to see your favorite team losing 28-0 at the end of the first quarter. That $25 should now be regarded as a(n) __________ cost that economists say should be __________ in your decision on whether or not to stay at the game.
a. explicit; included
b. explicit; disregarded
c. sunk; included
d. sunk; disregarded
a. explicit; included
b. explicit; disregarded
c. sunk; included
d. sunk; disregarded
question
C
answer
At 200 units of output, total cost is $48,000 and total variable cost is $30,000. What does total fixed cost equal at 200 units?
a. $38,000
b. $900
c. $18,000
d. $90
e. There is not enough information provided to answer this question.
a. $38,000
b. $900
c. $18,000
d. $90
e. There is not enough information provided to answer this question.
question
A
answer
Refer to Exhibit 22-1. The numbers that go in blanks A and B are, respectively,
a. 20 and 30.
b. 0 and 21.
c. 20 and 25
d. 1 and 2.
e. 20 and 21.
a. 20 and 30.
b. 0 and 21.
c. 20 and 25
d. 1 and 2.
e. 20 and 21.
question
C
answer
There are 30 students in a class. The average grade for 29 of the students is 87. The grade of the remaining student is 84. Given this student's grade, the average grade of the 30-student class will be
a. 87.
b. higher than 87.
c. lower than 87.
d. 84.
a. 87.
b. higher than 87.
c. lower than 87.
d. 84.
question
B
answer
Refer to Exhibit 22-2. What is the average total cost of producing 140 units of output?
a. $1.00
b. $1.43
c. $4.23
d. $10.00
e. There is not enough information provided to answer the question.
a. $1.00
b. $1.43
c. $4.23
d. $10.00
e. There is not enough information provided to answer the question.
question
D
answer
The main difference between the short run and the long run is that
a. firms earn losses in the long run.
b. the long run always refers to a time period of one year or longer.
c. in the long run, only one variable can be fixed.
d. in the short run, one or more inputs are fixed.
none of the above
a. firms earn losses in the long run.
b. the long run always refers to a time period of one year or longer.
c. in the long run, only one variable can be fixed.
d. in the short run, one or more inputs are fixed.
none of the above
question
C
answer
Exhibit 22-8 shows how output varies with the only variable input used in its production. The table indicates that diminishing marginal returns set in with the hiring of which unit of labor?
a. first
b. second
c. third
d. fourth
e. fifth
a. first
b. second
c. third
d. fourth
e. fifth
question
B
answer
Refer to Situation 22-4. What are Joe's economic profits?
a. $0
b. $25,000
c. -$25,000
d. $40,000
e. $75,000
a. $0
b. $25,000
c. -$25,000
d. $40,000
e. $75,000
question
B
answer
Refer to Situation 22-4. What are Joe's economic profits?
a. $0
b. $25,000
c. -$25,000
d. $40,000
e. $75,000
a. $0
b. $25,000
c. -$25,000
d. $40,000
e. $75,000
question
D
answer
"As additional units of a variable input are added to a fixed input, eventually the marginal physical product of the variable input will decline." This is a statement of the
a. law of supply.
b. average-marginal rule.
c. law of diminishing marginal utility.
d. law of diminishing marginal returns.
a. law of supply.
b. average-marginal rule.
c. law of diminishing marginal utility.
d. law of diminishing marginal returns.
question
B
answer
The marginal physical product (MPP) of a variable input is
a. total output divided by the quantity of the input used.
b. the change in total output that results from changing the variable input by one unit.
c. the change in total revenue that results from changing the variable input by one unit.
d. the change in total output that results from changing the fixed input by one unit.
e. the change in total costs that results from a change in output.
a. total output divided by the quantity of the input used.
b. the change in total output that results from changing the variable input by one unit.
c. the change in total revenue that results from changing the variable input by one unit.
d. the change in total output that results from changing the fixed input by one unit.
e. the change in total costs that results from a change in output.
question
D
answer
Minimum efficient scale refers to the
a. smallest plant size a firm can utilize and still maintain production.
b. lowest point on a given SRATC curve.
c. output level at which the LRATC curve touches each SRATC curve.
d. lowest output level at which average total costs are minimized.
a. smallest plant size a firm can utilize and still maintain production.
b. lowest point on a given SRATC curve.
c. output level at which the LRATC curve touches each SRATC curve.
d. lowest output level at which average total costs are minimized.
question
C
answer
The short run is
a. a period of time in which all inputs are fixed.
b. a period of time in which all inputs are variable.
c. a period of time in which some inputs are fixed.
d. always less than a year.
e. a and d
a. a period of time in which all inputs are fixed.
b. a period of time in which all inputs are variable.
c. a period of time in which some inputs are fixed.
d. always less than a year.
e. a and d
question
D
answer
Diseconomies of scale are present when the __________ average total cost curve is __________.
a. short-run; falling
b. short-run; rising
c. long-run; falling
d. long-run; rising.
e. b and d
a. short-run; falling
b. short-run; rising
c. long-run; falling
d. long-run; rising.
e. b and d
question
C
answer
John purchases a baseball card for $10 that turns out to be so rare that a collector offers to buy it from him for $2,000. Instead, John decides to give the card to his sister (an avid baseball-card collector) as a birthday present. The opportunity cost of John's generosity is
a. $10, the purchase price.
b. $0, because at the time the decision is made, $10 are sunk cost, i.e., at that point there is no cost to John of giving the card away.
c. $2,000, the amount offered by the collector.
$1,005, the average of $10 and $2,000.
a. $10, the purchase price.
b. $0, because at the time the decision is made, $10 are sunk cost, i.e., at that point there is no cost to John of giving the card away.
c. $2,000, the amount offered by the collector.
$1,005, the average of $10 and $2,000.
question
B
answer
The vertical distance between the AVC and ATC curves is equal to
a. marginal cost.
b. average fixed cost.
c. accounting profit.
d. economic profit.
e. none of the above
a. marginal cost.
b. average fixed cost.
c. accounting profit.
d. economic profit.
e. none of the above
question
D
answer
If output rises from 123 units to 143 units as another worker is hired, and the additional worker receives $15 in wages, it follows that marginal cost is
a. $15.00
b. $20.00
c. $1.33
d. $0.75
e. none of the above
a. $15.00
b. $20.00
c. $1.33
d. $0.75
e. none of the above
question
C
answer
Which of the following is true of average fixed costs in the long run?
a. Average fixed costs start increasing.
b. Average fixed costs are above average variable costs.
c. Average fixed costs are equal to zero since there are no fixed costs in the long run.
d. Average fixed costs intersect the marginal cost curve at its minimum point.
e. a and b.
a. Average fixed costs start increasing.
b. Average fixed costs are above average variable costs.
c. Average fixed costs are equal to zero since there are no fixed costs in the long run.
d. Average fixed costs intersect the marginal cost curve at its minimum point.
e. a and b.
question
A
answer
A cost that is incurred when an actual monetary payment is made is a(n) __________ cost.
a. explicit
b. implicit
c. positive
d. expressed
a. explicit
b. implicit
c. positive
d. expressed
question
A
answer
A "price taker" is a firm that
a. does not have the ability to control the price of the product it sells.
b. does have the ability, although limited, to control the price of the product it sells.
c. can raise the price of the product it sells and still sell some units of its product.
d. sells a differentiated product.
none of the above
a. does not have the ability to control the price of the product it sells.
b. does have the ability, although limited, to control the price of the product it sells.
c. can raise the price of the product it sells and still sell some units of its product.
d. sells a differentiated product.
none of the above
question
C
answer
Refer to Exhibit 23-1. The data in this table are relevant to a perfectly competitive firm because
a. its total revenue is different at different levels of quantities sold.
b. its total revenue is the same at all levels of quantities sold.
c. it doesn't have to lower price to sell additional units of the product.
d. marginal revenue is greater than price.
a. its total revenue is different at different levels of quantities sold.
b. its total revenue is the same at all levels of quantities sold.
c. it doesn't have to lower price to sell additional units of the product.
d. marginal revenue is greater than price.
question
C
answer
A perfectly competitive firm will increase its production as long as
a. total revenue is less than total cost.
b. the total revenue curve is rising.
c. marginal revenue is greater than marginal cost.
d. the marginal revenue curve is rising.
a. total revenue is less than total cost.
b. the total revenue curve is rising.
c. marginal revenue is greater than marginal cost.
d. the marginal revenue curve is rising.
question
A
answer
Consider the following data: equilibrium price = $8.50, quantity of output produced = 100 units, average total cost = $10, and average variable cost = $9. What will the firm do and why?
Shut down in the short run, because price is below average variable cost.
a. Shut down in the short run, because it will be taking a loss of $100.
b. Continue to produce in the short run, because price is greater than average variable cost.
c. Continue to produce in the short run, because firms are always stuck with having to produce in the short run.
d. none of the above
Shut down in the short run, because price is below average variable cost.
a. Shut down in the short run, because it will be taking a loss of $100.
b. Continue to produce in the short run, because price is greater than average variable cost.
c. Continue to produce in the short run, because firms are always stuck with having to produce in the short run.
d. none of the above
question
A
answer
Why must profits be zero in long-run competitive equilibrium?
a. If profits are not zero, firms will enter or exit the industry.
b. If profits are not zero, firms will produce higher-quality goods.
c. If profits are not zero, marginal revenue will rise.
d. If profits are not zero, marginal cost will rise.
a. If profits are not zero, firms will enter or exit the industry.
b. If profits are not zero, firms will produce higher-quality goods.
c. If profits are not zero, marginal revenue will rise.
d. If profits are not zero, marginal cost will rise.
question
B
answer
Marginal revenue is defined as
a. the difference between costs and revenues.
b. the change in total revenue caused by selling one additional unit of output.
c. price times quantity.
d. total revenue divided by the level of output.
total revenue minus the level of output.
a. the difference between costs and revenues.
b. the change in total revenue caused by selling one additional unit of output.
c. price times quantity.
d. total revenue divided by the level of output.
total revenue minus the level of output.
question
C
answer
Refer to Exhibit 23-7. At the profit-maximizing output level, average total cost is
a. $2.00.
b. $4.50.
c. $5.00.
d. $6.00.
e. This cannot be determined based on the information provided.
a. $2.00.
b. $4.50.
c. $5.00.
d. $6.00.
e. This cannot be determined based on the information provided.
question
C
answer
The profit-maximization rule is as follows:
a. Produce the quantity of output at which price equals average total cost (unit cost).
b. Produce as much output as can be sold.
c. Produce the quantity of output at which marginal revenue equals marginal cost.
d. Produce the quantity of output at which marginal revenue equals unit cost.
e. Produce the quantity of output at which total cost is minimized.
a. Produce the quantity of output at which price equals average total cost (unit cost).
b. Produce as much output as can be sold.
c. Produce the quantity of output at which marginal revenue equals marginal cost.
d. Produce the quantity of output at which marginal revenue equals unit cost.
e. Produce the quantity of output at which total cost is minimized.
question
B
answer
In long-run competitive equilibrium, firms
a. earn positive economic profits.
b. have no incentive to make any changes.
c. earn losses on some units of the good they produce and sell.
d. do not produce the quantity of output at which MR = MC.
e. b and c
a. earn positive economic profits.
b. have no incentive to make any changes.
c. earn losses on some units of the good they produce and sell.
d. do not produce the quantity of output at which MR = MC.
e. b and c
question
B
answer
When an industry is described as a decreasing-cost, increasing-cost, or constant-cost industry, the "cost" that is being referred to is
a. marginal cost.
b average total cost.
c. average variable cost.
d. sunk cost.
e. fixed cost.
a. marginal cost.
b average total cost.
c. average variable cost.
d. sunk cost.
e. fixed cost.
question
B
answer
The price at which a perfectly competitive firm sells its product is determined by
a. the individual seller based on his costs of production and his profit margin.
b. all sellers and buyers of the product, collectively.
c. the buyers of the product, because there are so many sellers that they cannot agree on a price.
d. the government, because there are so many buyers and sellers of the product that together they cannot agree on the price.
a. the individual seller based on his costs of production and his profit margin.
b. all sellers and buyers of the product, collectively.
c. the buyers of the product, because there are so many sellers that they cannot agree on a price.
d. the government, because there are so many buyers and sellers of the product that together they cannot agree on the price.
question
B
answer
Refer to Exhibit 23-1. The dollar amounts that go in blanks A and B are, respectively,
a. $1 and $14.
b. $14 and $14.
c. $0.139 and $0.137.
d. $14 and $7.
a. $1 and $14.
b. $14 and $14.
c. $0.139 and $0.137.
d. $14 and $7.
question
B
answer
Refer to Exhibit 23-2. What quantity does the profit-maximizing or loss-minimizing firm produce?
a Q1, where "what is coming in" on the last unit is greater than "what is going out."
b. Q2, where the difference between "what is coming in" on the last unit and "what is going out" is zero.
c. Q3, where marginal cost is greater than marginal revenue.
d. Q4, which maximizes the excess of marginal cost over marginal revenue.
a Q1, where "what is coming in" on the last unit is greater than "what is going out."
b. Q2, where the difference between "what is coming in" on the last unit and "what is going out" is zero.
c. Q3, where marginal cost is greater than marginal revenue.
d. Q4, which maximizes the excess of marginal cost over marginal revenue.
question
B
answer
Consider the following data: equilibrium price = $10, quantity of output produced = 100 units, average total cost = $13, and average variable cost = $7. What will the firm do and why?
A. Shut down in the short run, because it is taking a loss of $200.
B. Continue to produce in the short run, because price is greater than average variable cost.
C. Shut down in the short run, because average variable cost is less than average total cost.
D. Continue to produce in the short run, because firms are always stuck with having to produce in the short run.
A. Shut down in the short run, because it is taking a loss of $200.
B. Continue to produce in the short run, because price is greater than average variable cost.
C. Shut down in the short run, because average variable cost is less than average total cost.
D. Continue to produce in the short run, because firms are always stuck with having to produce in the short run.
question
C
answer
Resource allocative efficiency occurs when a firm
a. minimizes costs of production yet charges the highest possible price.
b. produces the quantity of output at which price exceeds average total cost by the greatest amount.
c. produces the quantity of output at which price equals marginal cost.
d. produces the quantity of output at which price equals average total cost.
e. produces the quantity of output at which price equals average variable cost.
a. minimizes costs of production yet charges the highest possible price.
b. produces the quantity of output at which price exceeds average total cost by the greatest amount.
c. produces the quantity of output at which price equals marginal cost.
d. produces the quantity of output at which price equals average total cost.
e. produces the quantity of output at which price equals average variable cost.
question
D
answer
Which of the assumptions in the theory of perfect competition assures us that economic profit will be zero in the long run?
a. buyers and sellers having all relevant information
b. firms producing homogeneous goods
c. too few buyers
d. easy entry and exit
e. smallness of firms with respect to the market
a. buyers and sellers having all relevant information
b. firms producing homogeneous goods
c. too few buyers
d. easy entry and exit
e. smallness of firms with respect to the market
question
D
answer
Refer to Exhibit 23-7. The perfectly competitive, profit-maximizing firm will produce __________ units of output.
a. 10
b. 30
c. 50
d. 60
e. 70
a. 10
b. 30
c. 50
d. 60
e. 70
question
D
answer
Refer to Exhibit 23-7. At the profit-maximizing output level, the firm's total revenue is
a. $60.00.
b. $225.00.
c. $300.00.
d. $360.00.
e. $420.00.
a. $60.00.
b. $225.00.
c. $300.00.
d. $360.00.
e. $420.00.
question
C
answer
Refer to Exhibit 23-9. Following an increase in market demand from D1 to D2, the firm's profits in the short run will
a. remain the same at P1 times q1.
b. remain the same at zero.
c. increase by less than (P2 - P1) times q2.
d. increase by (P2 - P1) times q3.
a. remain the same at P1 times q1.
b. remain the same at zero.
c. increase by less than (P2 - P1) times q2.
d. increase by (P2 - P1) times q3.
question
B
answer
Refer to Exhibit 23-10. What price does this firm charge for its product?
a. $10
b. $20
c. $15
d. $30
e. There is not enough information to answer this question.
a. $10
b. $20
c. $15
d. $30
e. There is not enough information to answer this question.
question
B
answer
A natural monopoly exists when
a. a monopolist produces a product, the main component of which is a natural resource.
b. economies of scale are so large that only one firm can survive and achieve low unit costs.
c. a firm is the exclusive owner of a key resource necessary to produce the firm's product.
d. there are no close substitutes for a firm's product.
a. a monopolist produces a product, the main component of which is a natural resource.
b. economies of scale are so large that only one firm can survive and achieve low unit costs.
c. a firm is the exclusive owner of a key resource necessary to produce the firm's product.
d. there are no close substitutes for a firm's product.
question
C
answer
In maximizing profits, a single-price monopolist will charge a price that is
a. less than marginal cost.
b. equal to marginal cost.
c. greater than marginal cost.
d. There is not enough information to answer the question.
a. less than marginal cost.
b. equal to marginal cost.
c. greater than marginal cost.
d. There is not enough information to answer the question.
question
A
answer
A monopolist can sell 16,000 units at a price of $100 per unit. Lowering price by $1 raises the quantity demanded by 500 units. What is the change in total revenue resulting from this price change?
a. $33,500
b. $12,500
c. $65,500
d. -$33,500
a. $33,500
b. $12,500
c. $65,500
d. -$33,500
question
A
answer
If a monopolist practices perfect price discrimination, then it will have
a. a greater total revenue and sell a greater output than if it were not practicing price discrimination.
b. a smaller total revenue and sell a smaller output than if it were not practicing price discrimination.
c. the same total revenue but sell a larger output than if it were not practicing price discrimination.
d. the same total revenue but sell a smaller output than if it were not practicing price discrimination.
a. a greater total revenue and sell a greater output than if it were not practicing price discrimination.
b. a smaller total revenue and sell a smaller output than if it were not practicing price discrimination.
c. the same total revenue but sell a larger output than if it were not practicing price discrimination.
d. the same total revenue but sell a smaller output than if it were not practicing price discrimination.
question
B
answer
"X-inefficiency" refers to
a. the fact that a monopolist wastes resources searching for the price at which it will sell its product.
b. the fact that monopolists don't have to produce at the lowest possible costs in order to survive.
c. the fact that perfectly competitive firms do not earn a profit in the long run and are not a good investment.
d. the difference between what consumers would be willing to pay for additional output from a monopolist and the additional cost of providing that output.
a. the fact that a monopolist wastes resources searching for the price at which it will sell its product.
b. the fact that monopolists don't have to produce at the lowest possible costs in order to survive.
c. the fact that perfectly competitive firms do not earn a profit in the long run and are not a good investment.
d. the difference between what consumers would be willing to pay for additional output from a monopolist and the additional cost of providing that output.
question
C
answer
Which of the following is true of price and marginal revenue for the first unit of output sold by a monopolist?
a. Price is greater than marginal revenue.
b. Price is less than marginal revenue.
c. Price is equal to marginal revenue.
d. This answer could be a or b, depending on whether it is a single-price or a price discriminating monopolist.
a. Price is greater than marginal revenue.
b. Price is less than marginal revenue.
c. Price is equal to marginal revenue.
d. This answer could be a or b, depending on whether it is a single-price or a price discriminating monopolist.
question
C
answer
Refer to Exhibit 24-8. A profit-maximizing single-price monopolist will produce which quantity of output?
a. 3 units
b. 4 units
c. 5 units
d. 6 units
e. There is not enough information given to answer this question.
a. 3 units
b. 4 units
c. 5 units
d. 6 units
e. There is not enough information given to answer this question.
question
D
answer
One difference between a perfectly competitive firm and a monopoly firm is
a. a perfectly competitive firm maximizes profit by producing the quantity of output at which MR = MC, and the monopoly firm does not.
b. a monopoly firm is resource allocative efficient, and a perfectly competitive firm is not.
c. the monopoly firm charges the highest per-unit price for its product, and the perfectly competitive firm does not.
d. the demand curve and the marginal revenue curve are the same for the perfectly competitive firm, but they are not the same for the monopoly firm.
e. c and d
a. a perfectly competitive firm maximizes profit by producing the quantity of output at which MR = MC, and the monopoly firm does not.
b. a monopoly firm is resource allocative efficient, and a perfectly competitive firm is not.
c. the monopoly firm charges the highest per-unit price for its product, and the perfectly competitive firm does not.
d. the demand curve and the marginal revenue curve are the same for the perfectly competitive firm, but they are not the same for the monopoly firm.
e. c and d
question
C
answer
"Rent seeking" refers to
a. trying to pay the lowest rent possible for an apartment or house.
b. trying to lower rent that is paid on a factory in order to lower fixed costs.
c. the actions of individuals who spend resources to influence public policy in the hope of transferring income to themselves from others.
d. the fact that the deadweight loss triangle is a genuine cost of monopoly.
e. none of the above
a. trying to pay the lowest rent possible for an apartment or house.
b. trying to lower rent that is paid on a factory in order to lower fixed costs.
c. the actions of individuals who spend resources to influence public policy in the hope of transferring income to themselves from others.
d. the fact that the deadweight loss triangle is a genuine cost of monopoly.
e. none of the above
question
C
answer
The perfectly competitive firm produces the quantity of output at which __________, and the single-price monopolist produces the quantity of output at which __________. The perfectly price-discriminating monopolist is like the __________ in this regard.
a. P = MC; P > MC; single-price monopolist
b. P > MC; P = MC; perfectly competitive firm
c. P = MC; P > MC; perfectly competitive firm
d. P > MC; P = MC; single-price monopolist
a. P = MC; P > MC; single-price monopolist
b. P > MC; P = MC; perfectly competitive firm
c. P = MC; P > MC; perfectly competitive firm
d. P > MC; P = MC; single-price monopolist
question
B
answer
A monopoly may exist because
a, government has refused to grant a public franchise.
b. one firm has the exclusive ownership of a necessary resource.
c. the firm is so large and is currently experiencing such vast diseconomies of scale that it can out-compete all newcomers.
d. a and b
e. a, b, and c
a, government has refused to grant a public franchise.
b. one firm has the exclusive ownership of a necessary resource.
c. the firm is so large and is currently experiencing such vast diseconomies of scale that it can out-compete all newcomers.
d. a and b
e. a, b, and c
question
C
answer
If a monopolist wishes to sell an additional unit of the good, then
a. it must raise its price to signal consumers that its product is now a more important part of their budget, and they will purchase more.
b. like a competitive firm, it can simply make more output available and not lower price.
c. it must lower price.
d. it can raise price and not worry that sales will decrease.
e. a and d
a. it must raise its price to signal consumers that its product is now a more important part of their budget, and they will purchase more.
b. like a competitive firm, it can simply make more output available and not lower price.
c. it must lower price.
d. it can raise price and not worry that sales will decrease.
e. a and d
question
C
answer
Which of the following is not a necessary condition of price discrimination?
a. The seller must be a price searcher.
b. The seller must be able to distinguish between customers willing to pay different prices.
c. It must cost the seller more to service some customers than others.
d. Reselling the product must be extremely costly or must not be possible
a. The seller must be a price searcher.
b. The seller must be able to distinguish between customers willing to pay different prices.
c. It must cost the seller more to service some customers than others.
d. Reselling the product must be extremely costly or must not be possible
question
A
answer
If a perfectly competitive firm and a single-price monopolist face the same demand and cost curves, then
a. the competitive firm will attain resource-allocative efficiency, but the monopolist will not.
b. the competitive firm will attain resource-allocative efficiency, but the monopolist may or may not, depending upon the demand for its product.
c. the competitive firm will not attain resource-allocative efficiency, but the monopolist will.
d. both the competitive firm and the monopolist will attain resource-allocative efficiency.
e. neither the competitive firm nor the monopolist will attain resource-allocative efficiency.
a. the competitive firm will attain resource-allocative efficiency, but the monopolist will not.
b. the competitive firm will attain resource-allocative efficiency, but the monopolist may or may not, depending upon the demand for its product.
c. the competitive firm will not attain resource-allocative efficiency, but the monopolist will.
d. both the competitive firm and the monopolist will attain resource-allocative efficiency.
e. neither the competitive firm nor the monopolist will attain resource-allocative efficiency.
question
C
answer
Refer to Exhibit 24-1. If the product is produced under single-price monopoly, what quantity will be produced and what price will be charged in order to maximize profit?
a. Q2 units at P1
b. Q1 units at P1
c. Q1 units at P2
d. Q2 units at P2
a. Q2 units at P1
b. Q1 units at P1
c. Q1 units at P2
d. Q2 units at P2
question
C
answer
Refer to Exhibit 24-3. The level of output the profit-maximizing perfectly price-discriminating monopolist produces is
a. q1.
b. q2.
c. q3.
d. q4.
a. q1.
b. q2.
c. q3.
d. q4.
question
C
answer
Refer to Exhibit 24-7. Let D be the demand curve facing a perfectly price-discriminating monopolist. The lowest price this monopolist will charge is
a. $60.
b. $45.
c. $30.
d. $0.
a. $60.
b. $45.
c. $30.
d. $0.
question
D
answer
Refer to Exhibit 24-8. A profit-maximizing single-price monopolist will set the price at
a. $90 per unit.
b. $82 per unit.
c. $65 per unit.
d. $75 per unit.
e. There is not enough information provided to answer this question.
a. $90 per unit.
b. $82 per unit.
c. $65 per unit.
d. $75 per unit.
e. There is not enough information provided to answer this question.
question
B
answer
Two economists are walking down the street. One sees a $10 bill lying on the sidewalk and asks, "Isn't that a $10 bill?" "Obviously not," says the other. "If it were, someone would have already picked it up." This joke tells us how economists think. Specifically, economists believe
a. that money is the most important thing to people.
b. that if the opportunity for gain exists, it won't last for long; someone will grab it quickly.
c. that money is so important to people that no one would ever have dropped a $10 bill on the sidewalk.
d. that the marginal benefits of stooping down to pick up a $10 bill are less than the marginal costs of doing so.
e. since no none has ever seen a $10 bill on the sidewalk, one can't exist there now.
a. that money is the most important thing to people.
b. that if the opportunity for gain exists, it won't last for long; someone will grab it quickly.
c. that money is so important to people that no one would ever have dropped a $10 bill on the sidewalk.
d. that the marginal benefits of stooping down to pick up a $10 bill are less than the marginal costs of doing so.
e. since no none has ever seen a $10 bill on the sidewalk, one can't exist there now.
question
A
answer
Which of the following is the best example of price discrimination?
a, a cellular telephone company charging lower rates to weekend callers than weekday callers
b. a gas station charging less per gallon to customers who pay cash than customers who use a credit card
c. an auto insurance company charging a higher premium to a seventeen year old boy with a driving record that includes three accidents than the premium charged to a middle-aged driver with a clean driving record
d. a private attorney charging higher fees to clients receiving special services than clients receiving regular services
a, a cellular telephone company charging lower rates to weekend callers than weekday callers
b. a gas station charging less per gallon to customers who pay cash than customers who use a credit card
c. an auto insurance company charging a higher premium to a seventeen year old boy with a driving record that includes three accidents than the premium charged to a middle-aged driver with a clean driving record
d. a private attorney charging higher fees to clients receiving special services than clients receiving regular services
question
B
answer
Some monopolistic competitors earn positive economic profits in the long run because
a. there are high barriers to entry in monopolistic competition.
b. they have successfully differentiated their products from their competitors' products.
c. there is easy entry and exit.
d. b and c
none of the above
a. there are high barriers to entry in monopolistic competition.
b. they have successfully differentiated their products from their competitors' products.
c. there is easy entry and exit.
d. b and c
none of the above
question
C
answer
The demand curve facing a monopolistic competitor will be more elastic than the demand curve facing a monopolist because
a. there are barriers to exit for the monopolist, but not for the monopolistic competitor.
b. the monopolistic competitor attains resource-allocative efficiency, but the monopolist does not.
c. there are substitute goods for what the monopolistic competitor produces, but not for what the monopolist produces.
d the monopolist is a price searcher, but the monopolistic competitor is not.
a. there are barriers to exit for the monopolist, but not for the monopolistic competitor.
b. the monopolistic competitor attains resource-allocative efficiency, but the monopolist does not.
c. there are substitute goods for what the monopolistic competitor produces, but not for what the monopolist produces.
d the monopolist is a price searcher, but the monopolistic competitor is not.
question
A
answer
The excess capacity theorem states that a monopolistic competitor
a. will produce an output level smaller than the one that would minimize its unit costs.
b. will produce an output level where MR > MC.
c. generally does not attain long run equilibrium, and thus charges a higher price than it should.
d. typically produces too much of a good at too low a quality.
a. will produce an output level smaller than the one that would minimize its unit costs.
b. will produce an output level where MR > MC.
c. generally does not attain long run equilibrium, and thus charges a higher price than it should.
d. typically produces too much of a good at too low a quality.
question
D
answer
Which of the following is an assumption of the theory of oligopoly?
a. There are barriers to entry.
b. There are many sellers and many buyers.
c. Firms produce and sell either homogeneous or differentiated products.
d. a and c
e. none of the above
a. There are barriers to entry.
b. There are many sellers and many buyers.
c. Firms produce and sell either homogeneous or differentiated products.
d. a and c
e. none of the above
question
B
answer
Total industry sales are $30 million. The top four firms (A, B, C, and D) account for sales of $5 million, $3.2 million, $0.8 million and $0.4 million, respectively. What is the four-firm concentration ratio?
a. 9.40
b. 0.31
c. 0.01
d. 0.94
a. 9.40
b. 0.31
c. 0.01
d. 0.94
question
B
answer
The major economic objective of cartels is to
a. impose their political will on others.
b. restrict output, push up price, and increase profits.
c. reduce costs.
d. develop new ways of doing things.
e. b and d
a. impose their political will on others.
b. restrict output, push up price, and increase profits.
c. reduce costs.
d. develop new ways of doing things.
e. b and d
question
A
answer
Refer to Exhibit 25-3. Which of the following points represents the profit-maximizing quantity and price of a monopolistic competitor?
a. A
b. B
c. C
d. D
e. E
a. A
b. B
c. C
d. D
e. E
question
C
answer
Refer to Exhibit 25-3. What output is productively efficient?
a. Q1
b. Q2
c. Q3
d. It is not labeled on the diagram.
e. It is not determinable without more information.
a. Q1
b. Q2
c. Q3
d. It is not labeled on the diagram.
e. It is not determinable without more information.
question
C
answer
One of the key characteristics of oligopoly is that
a. firms are independent of each other.
b. firms face different cost conditions.
c. each firm is aware that its actions will influence other firms and that the actions of the other firms affect it.
d. it is easy to enter the industry.
e. none of the above
a. firms are independent of each other.
b. firms face different cost conditions.
c. each firm is aware that its actions will influence other firms and that the actions of the other firms affect it.
d. it is easy to enter the industry.
e. none of the above
question
B
answer
Refer to Exhibit 25-7. A monopolistic competitive firm that seeks to maximize profits will sell __________ units and charge a price of __________ .
a. 200;$ 9
b. 400; $7
c. 500; $6
d. 100; $10
e. 7; $400
a. 200;$ 9
b. 400; $7
c. 500; $6
d. 100; $10
e. 7; $400
question
C
answer
A significant difference between perfect competition and monopolistic competition is that
a. a perfectly competitive firm is a price searcher, while a monopolistic competitive firm is a price taker.
b. a perfectly competitive firm faces a downward-sloping demand curve, while a monopolistic competitive firm faces a perfectly elastic demand curve.
c. a perfectly competitive firm sells a homogeneous product, while a monopolistic competitive firm sells a differentiated product.
d. a perfectly competitive firm sets price above marginal cost, while a monopolistic competitive firm sets price equal to marginal cost.
a. a perfectly competitive firm is a price searcher, while a monopolistic competitive firm is a price taker.
b. a perfectly competitive firm faces a downward-sloping demand curve, while a monopolistic competitive firm faces a perfectly elastic demand curve.
c. a perfectly competitive firm sells a homogeneous product, while a monopolistic competitive firm sells a differentiated product.
d. a perfectly competitive firm sets price above marginal cost, while a monopolistic competitive firm sets price equal to marginal cost.
question
B
answer
A monopolistic competitor that seeks to maximize profits or minimize losses will produce the quantity of output at which
a.its per-unit costs are the lowest.
b.MR = MC, and charge the highest possible per-unit price for it.
c. MC = ATC, and charge the highest possible per-unit price for it.
d.P = MC, and charge the highest possible per-unit price for it.
e. none of the above
a.its per-unit costs are the lowest.
b.MR = MC, and charge the highest possible per-unit price for it.
c. MC = ATC, and charge the highest possible per-unit price for it.
d.P = MC, and charge the highest possible per-unit price for it.
e. none of the above
question
B
answer
What market structure allows the good being produced to be either homogeneous or differentiated?
a. monopolistic competition
b. oligopoly
c. monopoly
d. perfect competition
e. none of the above
a. monopolistic competition
b. oligopoly
c. monopoly
d. perfect competition
e. none of the above
question
B
answer
As a result of easy entry and exit in the monopolistic competitive market, in the long run one may find that
Question options:
a. price equals minimum average total cost.
b. price equals average total cost.
c. price equals marginal cost.
d. price equals marginal revenue.
e. demand and marginal revenue are the same.
Question options:
a. price equals minimum average total cost.
b. price equals average total cost.
c. price equals marginal cost.
d. price equals marginal revenue.
e. demand and marginal revenue are the same.
question
A
answer
The "prisoner's dilemma" game illustrates a case in which
a. individually rational behavior leads to a collectively inefficient outcome.
b. what is irrational individual behavior turns out to be ultra-irrational group behavior.
c.the whole is greater than the sum of the parts.
d. none of the above
a. individually rational behavior leads to a collectively inefficient outcome.
b. what is irrational individual behavior turns out to be ultra-irrational group behavior.
c.the whole is greater than the sum of the parts.
d. none of the above
question
C
answer
A cartel is an organization of firms
a. dominated by one firm, which is usually referred to as the price leader.
b. that attempts to increase total (or industry) demand for their product.
c. that reduces output and increases price in an effort to increase joint profits.
d. that deliberately attempts to disrupt the market for political reasons.
a. dominated by one firm, which is usually referred to as the price leader.
b. that attempts to increase total (or industry) demand for their product.
c. that reduces output and increases price in an effort to increase joint profits.
d. that deliberately attempts to disrupt the market for political reasons.
question
C
answer
A concentration ratio indicates the
a.number of firms in an industry.
b. number of large firms in an industry compared to the number of large firms in another related industry.
c. percentage of total sales accounted for by the (for example) four largest firms.
d. percentage of sellers in an industry relative to the number of buyers.
e. percentage of sellers in an industry protected by barriers to entry relative to the number of sellers that wish to enter.
a.number of firms in an industry.
b. number of large firms in an industry compared to the number of large firms in another related industry.
c. percentage of total sales accounted for by the (for example) four largest firms.
d. percentage of sellers in an industry relative to the number of buyers.
e. percentage of sellers in an industry protected by barriers to entry relative to the number of sellers that wish to enter.
question
B
answer
Which of the following statements is true?
a. Monopolistic competitive firms will earn economic profits in the long run because of their ability to control the price of the product.
b. Monopolistic competitive firms that earn economic profits in the short run commonly will find their profits competed away in the long run.
c. Monopolistic competitive firms will earn zero economic profits in both the short and the long run.
d. Monopolistic competitive firms must earn economic profits in the long run, or they will shut down.
e. Monopolistic competitive firms must earn economic profits in the short run, or they will shut down.
a. Monopolistic competitive firms will earn economic profits in the long run because of their ability to control the price of the product.
b. Monopolistic competitive firms that earn economic profits in the short run commonly will find their profits competed away in the long run.
c. Monopolistic competitive firms will earn zero economic profits in both the short and the long run.
d. Monopolistic competitive firms must earn economic profits in the long run, or they will shut down.
e. Monopolistic competitive firms must earn economic profits in the short run, or they will shut down.
question
B
answer
The monopolistic competitive firm produces the output at which
a. price equals marginal cost.
b. marginal revenue equals marginal cost.
c. there is resource allocative efficiency.
d. average total cost is at a minimum.
a. price equals marginal cost.
b. marginal revenue equals marginal cost.
c. there is resource allocative efficiency.
d. average total cost is at a minimum.
question
A
answer
In a monopolistic competitive industry,
a. each firm in the industry produces a slightly differentiated product.
b.there are barriers to entry
c. there are barriers to exit.
d. there are few sellers.
a. each firm in the industry produces a slightly differentiated product.
b.there are barriers to entry
c. there are barriers to exit.
d. there are few sellers.
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