question
For which market model are there a very large number of firms?
a) monopolistic competition
b) oligopoly
c) Pure monopoly
d) pure competition
a) monopolistic competition
b) oligopoly
c) Pure monopoly
d) pure competition
answer
D) Pure competition
question
In which market model is the individual seller of a product a price taker?
a) Pure competition
b) Pure monopoly
c) Monopolistic competition
d) Oligopoly
a) Pure competition
b) Pure monopoly
c) Monopolistic competition
d) Oligopoly
answer
a) Pure competition
question
Which industry comes closest to being purely competitive?
a) Agriculture
b) Retail Trade
c) Electric
d) Automobile
a) Agriculture
b) Retail Trade
c) Electric
d) Automobile
answer
A) Agriculture
question
In a purely competitive industry,
a) each existing firm will engage in various forms of non-price competition
b) New firms are firms are free to enter and exiting firms are able to leave the industry very easily
c) Individual firms have a price policy
d) each firm produces a differentiated product
a) each existing firm will engage in various forms of non-price competition
b) New firms are firms are free to enter and exiting firms are able to leave the industry very easily
c) Individual firms have a price policy
d) each firm produces a differentiated product
answer
B) New firms are firms are free to enter and exiting firms are able to leave the industry very easily
question
The demand schedule or curve confronted by the individual purely competitive firm is:
a)Perfectly inelastic
b) Inelastic, but not perfectly inelastic
c) Perfectly elastic
d) Elastic but not perfectly elastic
a)Perfectly inelastic
b) Inelastic, but not perfectly inelastic
c) Perfectly elastic
d) Elastic but not perfectly elastic
answer
C) Perfectly elastic
question
Total revenue for producing 10 units of output is $6. Total revenue for producing 11 units of output is $8. Given this information, the:
a) Average revenue for producing 11 units is $2
b) Average revenue for producing 11 units is $8
c) Marginal revenue for producing the 11th unit is $2
d) marginal revenue for producing the 11th unit is $8
a) Average revenue for producing 11 units is $2
b) Average revenue for producing 11 units is $8
c) Marginal revenue for producing the 11th unit is $2
d) marginal revenue for producing the 11th unit is $8
answer
C) Marginal revenue for producing the 11th unit is $2
question
In pure competition, product price is:
a) Greater than marginal revenue
b) Equal to marginal revenue
c) Equal to total revenue
d) Greater than total revenue
a) Greater than marginal revenue
b) Equal to marginal revenue
c) Equal to total revenue
d) Greater than total revenue
answer
B) Equal to marginal revenue
question
The Zebra inc. is selling in a purely competitive market. Its output is 250 units, which sell for $2 each. At this level of output, marginal cost is $2 and average variable cost is $2.25. The firm should:
a) Produce zero units of output
b) Decrease outputs to 200 units
c) Continue to produce 250 units
d) Increase output to maximize profits
a) Produce zero units of output
b) Decrease outputs to 200 units
c) Continue to produce 250 units
d) Increase output to maximize profits
answer
A) Produce zero units of output
question
A purely competitive firm will produce in the short-run the output at which marginal cost and marginal revenue are equal provided that the price of the product is greater than its average variable cost of production
T or F
T or F
answer
True
question
The short-run supply curve of the purely competitive firm is the segment of the firms short run marginal cost curve that lies above the firms average variable cost curve.
T or F
T or F
answer
True
question
Pure competition in the long run in an industry is most affected by:
a) The fixed costs of firms
b) The normal profit of firms
c) The entry and exit of firms
d) The identical cost of firms
a) The fixed costs of firms
b) The normal profit of firms
c) The entry and exit of firms
d) The identical cost of firms
answer
C) The entry and exit of firms
question
For a purely competitive firm in the long-run equilibrium,
a) MR= MC= Min ATC
b) MR= MC= Maximum ATC
c) P> MR> ATC
d) MR>MC
a) MR= MC= Min ATC
b) MR= MC= Maximum ATC
c) P> MR> ATC
d) MR>MC
answer
A) MR= MC= Min ATC
question
The long run supply curve for an increasing cost industry in pure competition is down sloping
T or F
T or F
answer
False
question
The long run supply curve in a constant cost industry will be
a) Perfectly elastic
b) Perfectly inelastic
c) Unit elastic
d) Income elastic
a) Perfectly elastic
b) Perfectly inelastic
c) Unit elastic
d) Income elastic
answer
A) Perfectly elastic
question
In a decreasing- cost industry, the long-run
a) Demand curve would be perfectly inelastic
b) Demand curve would be perfectly elastic
c) Supply curve would be up-sloping
d) Supply curve would be down-sloping
a) Demand curve would be perfectly inelastic
b) Demand curve would be perfectly elastic
c) Supply curve would be up-sloping
d) Supply curve would be down-sloping
answer
D) Supply curve would be down-sloping
question
Increasing cost industries find that their costs rise a consequence of an increased demand for their product because of:
a) The diseconomies of scale
b) Diminishing returns
c) Higher resource prices
d) A decreased supply of the product
a) The diseconomies of scale
b) Diminishing returns
c) Higher resource prices
d) A decreased supply of the product
answer
C) Higher resource prices
question
When a purely competitive industry is in long-run equilibrium, which statement is true?
a) Firms in the industry are earning normal profits
b) Price and long run average total cost are not equal to each other
c) Marginal cost is at its min level
d) Marginal cost is equal to total revenue
a) Firms in the industry are earning normal profits
b) Price and long run average total cost are not equal to each other
c) Marginal cost is at its min level
d) Marginal cost is equal to total revenue
answer
A) Firms in the industry are earning normal profit
question
The idea of the invisible hand operating in the competitive market system means that:
a) There is a unity of private and social interests that promote efficiency
b) The industries in this system are described as decreasing cost industries
c) There is an over allocation of resources to the production of goods and services
d) Productive efficiency is more important than allocative efficiency
a) There is a unity of private and social interests that promote efficiency
b) The industries in this system are described as decreasing cost industries
c) There is an over allocation of resources to the production of goods and services
d) Productive efficiency is more important than allocative efficiency
answer
A) There is a unity of private and social interests that promote efficiency
question
The elimination of the market positions of firms and their products by new firms with new products and innovative ways of doing business would be most closely associated with the concept of:
a) Consumer Surplus
b) Producer Surplus
c) Creative destruction
d) An increasing-cost industry
a) Consumer Surplus
b) Producer Surplus
c) Creative destruction
d) An increasing-cost industry
answer
C) Creative destruction
question
The Long run equilibrium for firms in pure competition is for marginal revenue to equal marginal cost and for price to equal the minimum of average total cost
T or F
T or F
answer
True
question
A monopolist seeks maximum total profits, not maximum unit profits
T of F
T of F
answer
True
question
Which would defining characteristics of pure monopoly?
a) The firms foes no advertising and it sells a standardized product
b) No close substitutes for the product exist and there is one seller
c) The firm can easily enter into or exit the industry and profits are guaranteed
d) The firm holds a patent and is technologically progressive
a) The firms foes no advertising and it sells a standardized product
b) No close substitutes for the product exist and there is one seller
c) The firm can easily enter into or exit the industry and profits are guaranteed
d) The firm holds a patent and is technologically progressive
answer
B) No close substitutes for the product exist and there is one seller
question
A barrier to entry that significantly contributes to the establishment of a monopoly would be?
a) Economies of scale
b) Price taking behavior
c) Technological progress
d) X-inefficiency
a) Economies of scale
b) Price taking behavior
c) Technological progress
d) X-inefficiency
answer
A) Economies of scale
question
The demand curve for the pure monopolist is?
a) Perfectly price elastic
b) Perfectly price inelastic
c) Downsloping
d) Upsloping
a) Perfectly price elastic
b) Perfectly price inelastic
c) Downsloping
d) Upsloping
answer
C) Downsloping
question
Which is true with respect to the demand data confronting a monopolist?
a) Marginal revenue is greater than average revenue
b) Marginal revenue decreases as average revenue decreases
c) Demand is perfectly price elastic
d) Average revenue increases as the output of the firm increases
a) Marginal revenue is greater than average revenue
b) Marginal revenue decreases as average revenue decreases
c) Demand is perfectly price elastic
d) Average revenue increases as the output of the firm increases
answer
B) Marginal revenue decreases as average revenue decreases
question
The supply curve for a pure monopolist
a) Is the portion of the marginal cost curve that lies above the average variable cost curve
b) Is perfectly price elastic at the market price
c) Is upsloping
d) Does not exist
a) Is the portion of the marginal cost curve that lies above the average variable cost curve
b) Is perfectly price elastic at the market price
c) Is upsloping
d) Does not exist
answer
D) Does not exist
question
The analysis of monopoly indicates that the monopolist:
a) Will charge the highest price it can get
b) Will seek to maximize total profit
c) Is guaranteed an economic profit
d) Is interested in only normal profit
a) Will charge the highest price it can get
b) Will seek to maximize total profit
c) Is guaranteed an economic profit
d) Is interested in only normal profit
answer
B) Will seek to maximize total profit
question
Which will tend to increase the inefficiencies of the monopoly producer?
a) Price taking behavior
b) Rent seeking behavior
c) Economies of scale
d) Simultaneous consumption
a) Price taking behavior
b) Rent seeking behavior
c) Economies of scale
d) Simultaneous consumption
answer
B) Rent seeking behavior
question
Which is one of the conditions that must be met before a seller finds that price discrimination is workable?
a) The demand for the product is perfectly elastic
b) The seller must be able to segment the market
c) The buyer must be able to resell the product
d) The product must be a service
a) The demand for the product is perfectly elastic
b) The seller must be able to segment the market
c) The buyer must be able to resell the product
d) The product must be a service
answer
B) The seller must be able to segment the market
question
A monopolist can segment two groups of buyers of its product based on elasticity of demand. Assume that ATC remains constant, the monopolist will maximize profit by charging:
a) The highest price to all customers
b) The lowest price to all customers
c) A higher price to customers with an elastic demand and a lower price to customers with an inelastic demand
d) A lower price to customers with an elastic demand and a higher price to customers with an inelastic demand
a) The highest price to all customers
b) The lowest price to all customers
c) A higher price to customers with an elastic demand and a lower price to customers with an inelastic demand
d) A lower price to customers with an elastic demand and a higher price to customers with an inelastic demand
answer
D) A lower price to customers with an elastic demand and a higher price to customers with an inelastic demand
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