Microeconomics Exams After the midterm

question

Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?

answer

depreciation charges on company-owned equipment

question

Implicit and explicit costs are different in that:

answer

the former refer to nonexpenditure costs and the latter to out-of-pocket costs.

question

Implicit costs are:

answer

nonexpenditure costs.

question

Economic profits are calculated by subtracting:

answer

explicit and implicit costs from total revenue.

question

The basic characteristic of the short run is that:

answer

the firm does not have sufficient time to change the size of its plant.

question

Which of the following is a short-run adjustment?

answer

A local bakery hires two additional bakers.

question

To economists the main difference between the short run and the long run is that:

answer

in the long run all resources are variable, while in the short run at least one resource is fixed.

question

The short run is characterized by:

answer

at least one fixed resource.

question

The long run is characterized by:

answer

the ability of the firm to change its plant size.

question

If a variable input is added to some fixed input, beyond some point the resulting extra output will decline. This statement describes:

answer

the law of diminishing returns.

question

Fixed cost is:

answer

any cost which does not change when the firm changes its output.

question

Which of the following is most likely to be a fixed cost?

answer

property insurance premiums

question

Which of the following is most likely to be a variable cost?

answer

fuel and power payments

question

If you operated a small bakery, which of the following would be a variable cost in the short run?

answer

baking supplies (flour, salt, etc.)

question

Marginal cost is the:

answer

change in total cost that results from producing one more unit of output.

question

Average fixed cost:

answer

declines continually as output increases.

question

If a firm decides to produce no output in the short run, its costs will be:

answer

its fixed costs.

question

Fixed costs are associated with:

answer

the short run only.

question

Total cost minus total variable cost equals:

answer

total fixed cost.

question

In the long run:

answer

all costs are variable costs.

question

Diseconomies of scale:

answer

pertain to the long run.

question

Which of the following industries most closely approximates pure competition?

answer

agriculture

question

Economists use the term imperfect competition to describe:

answer

those markets which are not purely competitive

question

A purely competitive seller is:

answer

a "price taker."

question

The demand schedule or curve confronted by the individual purely competitive firm is:

answer

perfectly elastic.

question

A perfectly elastic demand curve implies that the firm:

answer

can sell as much output as it chooses at the existing price.

question

Marginal revenue for a purely competitive firm:

answer

is equal to price.

question

Firms seek to maximize:

answer

total profit.

question

If a purely competitive firm shuts down in the short run:

answer

it will realize a loss equal to its total fixed costs.

question

In the short run a purely competitive seller will shut down if product price:

answer

is less than AVC

question

A purely competitive firm's short-run supply curve is:

answer

its marginal cost curve above average variable cost.

question

A constant-cost industry is one in which:

answer

resource prices remain unchanged as output is increased.

question

Under pure competition in the long run:

answer

both allocative efficiency and productive efficiency are achieved.

question

Pure monopoly means:

answer

a single firm producing a product for which there are no close substitutes.

question

Which of the following is correct?

answer

A purely competitive firm is a "price taker," while a monopolist is a "price maker."

question

A pure monopolist is:

answer

a one-firm industry

question

In the short run, a monopolist's economic profits:

answer

may be positive or negative depending on market demand and cost conditions.

question

There is some evidence to suggest that X-inefficiency is:

answer

more likely to occur in monopolistic firms than in competitive firms.

question

Monopolistic competition means:

answer

many firms producing differentiated products.

question

Under monopolistic competition entry to the industry is:

answer

more difficult than under pure competition but not nearly as difficult as under pure monopoly.

question

The restaurant, legal assistance, and clothing industries are each illustrations of:

answer

monopolistic competition.

question

In the short run a monopolistically competitive firm's economic profit:

answer

may be positive, zero, or negative.

question

The term oligopoly indicates:

answer

a few firms producing either a differentiated or a homogeneous product.

question

In an oligopolistic market:

answer

products may be standardized or differentiated.

question

The automobile, household appliance, and automobile tire industries are all illustrations of:

answer

differentiated oligopoly.

question

The copper, aluminum, cement, and industrial alcohol industries are examples of:

answer

homogeneous oligopoly.

question

Which of the following is the best example of oligopoly?

answer

automobile manufacturing

question

Homogeneous oligopoly exists where a small number of firms are:

answer

producing virtually identical products.

question

Which of the following is a unique feature of oligopoly?

answer

mutual interdependence

question

Concentration ratios measure the:

answer

percentage of total sales accounted for by the four largest firms in the industry.

question

If the four-firm concentration ratio for industry X is 80:

answer

the four largest firms account for 80 percent of total sales.

question

An industry having a four-firm concentration ratio of 85 percent:

answer

is an oligopoly.

question

OPEC provides an example of:

answer

an international cartel.

question

The Clayton Act of 1914:

answer

outlawed price discrimination, tying contracts, intercorporate stockholding, and interlocking directorates that lessen competition.

question

The Sherman Act was designed to:

answer

make monopoly and acts that restrain trade illegal.

question

The function of investigating instances of fraudulent advertising has been assigned to the:

answer

Federal Trade Commission.

question

Which of the following gave the Federal Trade Commission responsibility to protect the public against false and misleading advertising?

answer

Wheeler-Lea Act of 1938

question

The basic issue in the DuPont cellophane case was:

answer

defining the relevant market.

1 of 58

question

Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?

answer

depreciation charges on company-owned equipment

question

Implicit and explicit costs are different in that:

answer

the former refer to nonexpenditure costs and the latter to out-of-pocket costs.

question

Implicit costs are:

answer

nonexpenditure costs.

question

Economic profits are calculated by subtracting:

answer

explicit and implicit costs from total revenue.

question

The basic characteristic of the short run is that:

answer

the firm does not have sufficient time to change the size of its plant.

question

Which of the following is a short-run adjustment?

answer

A local bakery hires two additional bakers.

question

To economists the main difference between the short run and the long run is that:

answer

in the long run all resources are variable, while in the short run at least one resource is fixed.

question

The short run is characterized by:

answer

at least one fixed resource.

question

The long run is characterized by:

answer

the ability of the firm to change its plant size.

question

If a variable input is added to some fixed input, beyond some point the resulting extra output will decline. This statement describes:

answer

the law of diminishing returns.

question

Fixed cost is:

answer

any cost which does not change when the firm changes its output.

question

Which of the following is most likely to be a fixed cost?

answer

property insurance premiums

question

Which of the following is most likely to be a variable cost?

answer

fuel and power payments

question

If you operated a small bakery, which of the following would be a variable cost in the short run?

answer

baking supplies (flour, salt, etc.)

question

Marginal cost is the:

answer

change in total cost that results from producing one more unit of output.

question

Average fixed cost:

answer

declines continually as output increases.

question

If a firm decides to produce no output in the short run, its costs will be:

answer

its fixed costs.

question

Fixed costs are associated with:

answer

the short run only.

question

Total cost minus total variable cost equals:

answer

total fixed cost.

question

In the long run:

answer

all costs are variable costs.

question

Diseconomies of scale:

answer

pertain to the long run.

question

Which of the following industries most closely approximates pure competition?

answer

agriculture

question

Economists use the term imperfect competition to describe:

answer

those markets which are not purely competitive

question

A purely competitive seller is:

answer

a "price taker."

question

The demand schedule or curve confronted by the individual purely competitive firm is:

answer

perfectly elastic.

question

A perfectly elastic demand curve implies that the firm:

answer

can sell as much output as it chooses at the existing price.

question

Marginal revenue for a purely competitive firm:

answer

is equal to price.

question

Firms seek to maximize:

answer

total profit.

question

If a purely competitive firm shuts down in the short run:

answer

it will realize a loss equal to its total fixed costs.

question

In the short run a purely competitive seller will shut down if product price:

answer

is less than AVC

question

A purely competitive firm's short-run supply curve is:

answer

its marginal cost curve above average variable cost.

question

A constant-cost industry is one in which:

answer

resource prices remain unchanged as output is increased.

question

Under pure competition in the long run:

answer

both allocative efficiency and productive efficiency are achieved.

question

Pure monopoly means:

answer

a single firm producing a product for which there are no close substitutes.

question

Which of the following is correct?

answer

A purely competitive firm is a "price taker," while a monopolist is a "price maker."

question

A pure monopolist is:

answer

a one-firm industry

question

In the short run, a monopolist's economic profits:

answer

may be positive or negative depending on market demand and cost conditions.

question

There is some evidence to suggest that X-inefficiency is:

answer

more likely to occur in monopolistic firms than in competitive firms.

question

Monopolistic competition means:

answer

many firms producing differentiated products.

question

Under monopolistic competition entry to the industry is:

answer

more difficult than under pure competition but not nearly as difficult as under pure monopoly.

question

The restaurant, legal assistance, and clothing industries are each illustrations of:

answer

monopolistic competition.

question

In the short run a monopolistically competitive firm's economic profit:

answer

may be positive, zero, or negative.

question

The term oligopoly indicates:

answer

a few firms producing either a differentiated or a homogeneous product.

question

In an oligopolistic market:

answer

products may be standardized or differentiated.

question

The automobile, household appliance, and automobile tire industries are all illustrations of:

answer

differentiated oligopoly.

question

The copper, aluminum, cement, and industrial alcohol industries are examples of:

answer

homogeneous oligopoly.

question

Which of the following is the best example of oligopoly?

answer

automobile manufacturing

question

Homogeneous oligopoly exists where a small number of firms are:

answer

producing virtually identical products.

question

Which of the following is a unique feature of oligopoly?

answer

mutual interdependence

question

Concentration ratios measure the:

answer

percentage of total sales accounted for by the four largest firms in the industry.

question

If the four-firm concentration ratio for industry X is 80:

answer

the four largest firms account for 80 percent of total sales.

question

An industry having a four-firm concentration ratio of 85 percent:

answer

is an oligopoly.

question

OPEC provides an example of:

answer

an international cartel.

question

The Clayton Act of 1914:

answer

outlawed price discrimination, tying contracts, intercorporate stockholding, and interlocking directorates that lessen competition.

question

The Sherman Act was designed to:

answer

make monopoly and acts that restrain trade illegal.

question

The function of investigating instances of fraudulent advertising has been assigned to the:

answer

Federal Trade Commission.

question

Which of the following gave the Federal Trade Commission responsibility to protect the public against false and misleading advertising?

answer

Wheeler-Lea Act of 1938

question

The basic issue in the DuPont cellophane case was:

answer

defining the relevant market.

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