question
A market
answer
a.
may be an organized exchange.
b.
refers to a set of sellers and buyers whose actions affect a commodity's price.
c.
is that area in which buyers and sellers compete to affect a product price.
d.
All of the above are correct.
Answer:D
may be an organized exchange.
b.
refers to a set of sellers and buyers whose actions affect a commodity's price.
c.
is that area in which buyers and sellers compete to affect a product price.
d.
All of the above are correct.
Answer:D
question
A perfectly competitive firm is a price
answer
a.
taker.
b.
giver.
c.
leader.
d.
maker.
Answer A
taker.
b.
giver.
c.
leader.
d.
maker.
Answer A
question
Firms in perfect competition are often described as price
answer
a.
makers.
b.
leaders.
c.
setters.
d.
takers.
Answer: D
makers.
b.
leaders.
c.
setters.
d.
takers.
Answer: D
question
Perfect competition is the term used to describe
answer
a.
the kind of industry any American would support.
b.
an industry untouched by government regulation.
c.
an industry in which numerous firms produce identical products.
d.
an industry in which all businessmen are honest and accommodating.
Answer:C
the kind of industry any American would support.
b.
an industry untouched by government regulation.
c.
an industry in which numerous firms produce identical products.
d.
an industry in which all businessmen are honest and accommodating.
Answer:C
question
The result that perfectly competitive firms produce at the lowest per-unit cost is derived from the assumptions of
answer
a.
homogeneous products.
b.
few sellers.
c.
free entry and exit.
d.
firms facing horizontal demand curves
Answer: C
homogeneous products.
b.
few sellers.
c.
free entry and exit.
d.
firms facing horizontal demand curves
Answer: C
question
In a market with perfectly competitive firms, the market demand curve is usually ____ and the demand curve facing each individual firm ____.
answer
a.
downward sloping; downward sloping
b.
upward sloping; horizontal
c.
horizontal; downward sloping
d.
downward sloping; horizontal
Answer: D
downward sloping; downward sloping
b.
upward sloping; horizontal
c.
horizontal; downward sloping
d.
downward sloping; horizontal
Answer: D
question
A firm facing a horizontal demand curve
answer
a.
always produces at an output at which P = MR.
b.
cannot affect the price it receives for its output.
c.
All of the above are correct.
d.
faces perfectly elastic demand for its product.
Answer:C
always produces at an output at which P = MR.
b.
cannot affect the price it receives for its output.
c.
All of the above are correct.
d.
faces perfectly elastic demand for its product.
Answer:C
question
What is the nature of the elasticity of the demand curve faced by perfectly competitive firm?
answer
a.
Perfectly inelastic
b.
Unit elastic
c.
Perfectly elastic
d.
Highly elastic
Answer:C
Perfectly inelastic
b.
Unit elastic
c.
Perfectly elastic
d.
Highly elastic
Answer:C
question
If the profit-maximizing firm depicted in Figure 10-1 is perfectly competitive, how much output should it produce?
answer
a.
B
b.
A
c.
D
d.
C
Answer:D
B
b.
A
c.
D
d.
C
Answer:D
question
A firm earns a profit of exactly zero at its optimal output level only if
answer
a.
P = MR.
b.
P = AC.
c.
P = SR AVC.
d.
P = MC
Answer:B
P = MR.
b.
P = AC.
c.
P = SR AVC.
d.
P = MC
Answer:B
question
Figure 10-2 shows demand and short-run cost curves for a perfectly competitive firm. At its profit-maximizing output, the firm's total ____ is represented by area ____.
answer
a.
loss; ADEC
b.
loss; GBHC
c.
profit; EGH
d.
profit; ADGHC
Answer:A
loss; ADEC
b.
loss; GBHC
c.
profit; EGH
d.
profit; ADGHC
Answer:A
question
Figure 10-2 shows demand and short-run cost curves for a perfectly competitive firm. In the short run, this firm would
answer
a.
Cannot be determined with the information given.
b.
earn positive economic profits.
c.
earn economic losses.
d.
go out of business.
Answer:C
Cannot be determined with the information given.
b.
earn positive economic profits.
c.
earn economic losses.
d.
go out of business.
Answer:C
question
In the short run, perfectly competitive firms can
answer
a.
All of the above are correct.
b.
break even.
c.
make an economic profit.
d.
take a loss.
Answer:A
All of the above are correct.
b.
break even.
c.
make an economic profit.
d.
take a loss.
Answer:A
question
In Figure 10-3, the profit maximizing firm will operate at a level of
answer
a.
OG.
b.
OJ.
c.
OH.
d.
OI.
Answer:D
OG.
b.
OJ.
c.
OH.
d.
OI.
Answer:D
question
In Figure 10-3, the perfectly competitive firm is realizing a
answer
a.
loss equal to ABDF.
b.
profit equal to ABDF.
c.
profit equal to ABCE.
d.
loss equal to ABCE.
Answer:B
loss equal to ABDF.
b.
profit equal to ABDF.
c.
profit equal to ABCE.
d.
loss equal to ABCE.
Answer:B
question
In perfect competition, marginal revenue always equals
answer
a.
marginal fixed cost.
b.
price.
c.
average cost.
d.
total revenue.
Answer:B
marginal fixed cost.
b.
price.
c.
average cost.
d.
total revenue.
Answer:B
question
Figure 10-4 shows the industry's supply and demand curves in panel (1) and the cost curves of a firm in the industry in panel (2). At S1, the firm is
answer
a.
earning economic profit greater than zero.
b.
incurring losses.
c.
earning zero economic profits.
d.
preparing to shut down.
Answer:A
earning economic profit greater than zero.
b.
incurring losses.
c.
earning zero economic profits.
d.
preparing to shut down.
Answer:A
question
If a competitive firm's short run average cost curve lies above the price of the product, we can conclude that the firm
answer
a.
is earning a huge profit.
b.
is incurring losses.
c.
is earning zero economic profits.
d.
is earning a normal profit
Answer:B
is earning a huge profit.
b.
is incurring losses.
c.
is earning zero economic profits.
d.
is earning a normal profit
Answer:B
question
A firm can stay in business while taking a loss in the short run as long as it covers its
answer
a.
fixed costs.
b.
fixed and variable costs.
c.
variable costs.
d.
A firm can never stay in business when it experiences losses.
Answer:C
fixed costs.
b.
fixed and variable costs.
c.
variable costs.
d.
A firm can never stay in business when it experiences losses.
Answer:C
question
A firm will shut down in the short run if
answer
a.
P < AVC.
b.
AVC > AFC.
c.
TR > TC.
d.
P > AVC.
Answer:A
P < AVC.
b.
AVC > AFC.
c.
TR > TC.
d.
P > AVC.
Answer:A
question
If a firm shuts down in the short run, its losses are equal to
answer
a.
TFC.
b.
TVC.
c.
TC − TR.
d.
MC.
Answer:A
TFC.
b.
TVC.
c.
TC − TR.
d.
MC.
Answer:A
question
Refer to Table 10-2. Which firm is better off staying in business in the short run?
answer
a.
Firm B
b.
Firm C
c.
Firm D
d.
Firm A
Answer:B
Firm B
b.
Firm C
c.
Firm D
d.
Firm A
Answer:B
question
The short-run supply curve of the perfectly competitive firm is the firm's
answer
a.
MC curve above the minimum point on the AVC curve.
b.
MC curve.
c.
MC curve above the minimum point on the ATC curve.
d.
AVC curve.
Answer:A
MC curve above the minimum point on the AVC curve.
b.
MC curve.
c.
MC curve above the minimum point on the ATC curve.
d.
AVC curve.
Answer:A
question
A firm in a perfectly competitive industry
answer
a.
may choose a different output in the long run than in the short run.
b.
always produces more output in the long run than in the short run.
c.
earns economic profit in the long run but not in the short run.
d.
is unaffected by the entrance of new firms into the industry, since entering firms affect only the prices they themselves receive.
Answer:A
may choose a different output in the long run than in the short run.
b.
always produces more output in the long run than in the short run.
c.
earns economic profit in the long run but not in the short run.
d.
is unaffected by the entrance of new firms into the industry, since entering firms affect only the prices they themselves receive.
Answer:A
question
In the short run, the firm in Figure 10-8 will shut down if the price falls below
answer
a.
$8.
b.
$5.
c.
$6.
d.
$1.
Answer:B
$8.
b.
$5.
c.
$6.
d.
$1.
Answer:B
question
Pure monopoly is defined as a
answer
a.
one-firm industry.
b.
market structure maintained by entry of many rival firms.
c.
market structure created by special government sanctions.
d.
market structure in which there are many substitute products.
Answer:A
one-firm industry.
b.
market structure maintained by entry of many rival firms.
c.
market structure created by special government sanctions.
d.
market structure in which there are many substitute products.
Answer:A
question
Pure monopoly
answer
a.
All of the above are correct.
b.
exists when entry and survival of potential competitors is extremely unlikely.
c.
has no close substitutes for its product.
d.
is defined as having only one supplier.
Answer:A
All of the above are correct.
b.
exists when entry and survival of potential competitors is extremely unlikely.
c.
has no close substitutes for its product.
d.
is defined as having only one supplier.
Answer:A
question
A market is not a pure monopoly if firms
answer
a.
sell unique products.
b.
require government permission to sell in the market.
c.
can exit the market freely.
d.
can enter it freely.
Answer:D
sell unique products.
b.
require government permission to sell in the market.
c.
can exit the market freely.
d.
can enter it freely.
Answer:D
question
Which of the following is not a barrier to entry?
answer
a.
Legal restrictions
b.
Large sunk costs
c.
Patents
d.
Survivor rights
Answer:D
Legal restrictions
b.
Large sunk costs
c.
Patents
d.
Survivor rights
Answer:D
question
What is a key criterion involved in deciding a natural monopoly?
answer
a.
Magnitude of profits generated by the company.
b.
Size of the firm relative to the total market demand for a product.
c.
A firm's ability to adapt to market changes.
d.
Size of the firm relative to its competitors.
Answer:B
Magnitude of profits generated by the company.
b.
Size of the firm relative to the total market demand for a product.
c.
A firm's ability to adapt to market changes.
d.
Size of the firm relative to its competitors.
Answer:B
question
A market structure in which only one firm has survived because of its economies of scale is called a
answer
a.
free monopoly.
b.
planned monopoly.
c.
natural monopoly.
d.
structural monopol
Answer:C
free monopoly.
b.
planned monopoly.
c.
natural monopoly.
d.
structural monopol
Answer:C
question
The marginal revenue curve for a monopolist is
answer
a.
always above the demand curve.
b.
always above the average revenue curve.
c.
always below the demand curve.
d.
generally below the average cost curve.
Answer:C
always above the demand curve.
b.
always above the average revenue curve.
c.
always below the demand curve.
d.
generally below the average cost curve.
Answer:C
question
The Red Cross is virtually the only operator of blood banks in the United States. In Figure 11-1 are the demand and supply curves facing the Red Cross blood bank. If it were to operate like a profit-maximizing business, how many units of blood would it sell?
answer
a.
OD
b.
OC
c.
OB
d.
OA
Answer:D
OD
b.
OC
c.
OB
d.
OA
Answer:D
question
The marginal revenue curve for a monopolist
answer
a.
is always below its demand curve if the demand curve is downward sloping.
b.
is always below its demand curve if the demand curve is horizontal.
c.
is identical to its demand curve.
d.
typically crosses the average revenue curve.
Answer:A
is always below its demand curve if the demand curve is downward sloping.
b.
is always below its demand curve if the demand curve is horizontal.
c.
is identical to its demand curve.
d.
typically crosses the average revenue curve.
Answer:A
question
In Figure 11-2, at what quantity would the monopolist maximize profit?
answer
a.
D
b.
A
c.
B
d.
C
Answer:B
D
b.
A
c.
B
d.
C
Answer:B
question
In Figure 11-2, at what quantity would the monopolist maximize profit?
answer
a.
H
b.
E
c.
G
d.
F
Answer:A
H
b.
E
c.
G
d.
F
Answer:A
question
A monopoly firm
answer
a.
is a price taker.
b.
does not have a supply curve.
c.
has a short-run supply curve that slopes upward.
d.
is at the mercy of the market-determined price.
Answer:B
is a price taker.
b.
does not have a supply curve.
c.
has a short-run supply curve that slopes upward.
d.
is at the mercy of the market-determined price.
Answer:B
question
A monopolist will operate where
answer
a.
MR = MC and charge a price equal to marginal cost.
b.
MC = MR and charge a price corresponding to average cost.
c.
MR = MC and charge a price equal to marginal revenue.
d.
MR = MC and charge a price corresponding to demand at that level.
Answer:D
MR = MC and charge a price equal to marginal cost.
b.
MC = MR and charge a price corresponding to average cost.
c.
MR = MC and charge a price equal to marginal revenue.
d.
MR = MC and charge a price corresponding to demand at that level.
Answer:D
question
Which of the following is true for a profit-maximizing competitive firm in the long run but not a monopolist?
answer
a.
Q > 0
b.
MC = P
c.
MC = MR
d.
AR = P
Answer:B
Q > 0
b.
MC = P
c.
MC = MR
d.
AR = P
Answer:B
question
A monopolist maximizes profits by producing where which of the following occur?
answer
a.
AC = P
b.
AC = AR
c.
MC = P
d.
MC = MR
Answer:D
AC = P
b.
AC = AR
c.
MC = P
d.
MC = MR
Answer:D
question
Using the graph in Figure 11-3, the profit-maximizing monopolist will charge a price
answer
a.
of more than $3.
b.
of $3.
c.
between $2 and $3.
d.
of $2.
Answer:A
of more than $3.
b.
of $3.
c.
between $2 and $3.
d.
of $2.
Answer:A
question
In Figure 11-3, one can tell from the graph that the monopolist will earn a positive profit only if
answer
a.
output is less than 60 units.
b.
the price exceeds $2.
c.
One cannot tell from the information given.
d.
the price exceeds $3.
Answer:C
output is less than 60 units.
b.
the price exceeds $2.
c.
One cannot tell from the information given.
d.
the price exceeds $3.
Answer:C
question
In Figure 11-3, which of the following is true, whether or not the monopolist is maximizing profits?
answer
a.
MR = P
b.
MC < AC
c.
MR < P
d.
MC = P
Answer:C
MR = P
b.
MC < AC
c.
MR < P
d.
MC = P
Answer:C
question
In Figure 11-9, how much more than the long-run competitive price will the profit-maximizing monopolist charge?
answer
a.
$1
b.
$11
c.
$2
d.
$3
Answer:D
$1
b.
$11
c.
$2
d.
$3
Answer:D
question
In Figure 11-9, how much more than the short-run competitive price will the profit-maximizing monopolist charge?
answer
a.
$2
b.
$10
c.
$1
d.
$3
Answer:C
$2
b.
$10
c.
$1
d.
$3
Answer:C
question
What is true for monopoly that is not true for perfect competition?
answer
a.
Positive economic profits may be earned in the short run.
b.
Profit is maximized where MR = MC.
c.
The industry demand curve is downward sloping.
d.
The firm and the industry are exactly the same entity.
Answer:D
Positive economic profits may be earned in the short run.
b.
Profit is maximized where MR = MC.
c.
The industry demand curve is downward sloping.
d.
The firm and the industry are exactly the same entity.
Answer:D
question
Identify the market structure characterized by many small firms selling somewhat different products.
answer
a.
Monopolistic competition
b.
Duopoly
c.
Perfect competition
d.
Monopoly
Answer:A
Monopolistic competition
b.
Duopoly
c.
Perfect competition
d.
Monopoly
Answer:A
question
Which of the following characteristics of perfect competition does not apply in monopolistic competition?
answer
a.
perfect information
b.
numerous participants
c.
homogeneous products
d.
free entry and exit
Answer:C
perfect information
b.
numerous participants
c.
homogeneous products
d.
free entry and exit
Answer:C
question
Monopolistic competitors and perfect competitors are alike in
answer
a.
relying on advertising to attract buyers to their products.
b.
zero economic profit in the long run.
c.
zero economic profit in the short run.
d.
having horizontal demand curves.
Answer:B
relying on advertising to attract buyers to their products.
b.
zero economic profit in the long run.
c.
zero economic profit in the short run.
d.
having horizontal demand curves.
Answer:B
question
In the long run the prices charged by a firm in monopolistic competition will be
answer
a.
equal to marginal cost.
b.
equal to average cost, including the opportunity cost of capital.
c.
so low that many firms will drop out of the industry.
d.
high enough to provide profits to the firm.
Answer:B
equal to marginal cost.
b.
equal to average cost, including the opportunity cost of capital.
c.
so low that many firms will drop out of the industry.
d.
high enough to provide profits to the firm.
Answer:B
question
Unlike a perfectly competitive firm, a monopolistically competitive firm
answer
a.
has a negatively sloped demand curve.
b.
faces a perfectly inelastic demand curve.
c.
can earn positive economic profit in the short run and in the long run.
d.
cannot earn positive economic profit even in the short run.
Answer:A
has a negatively sloped demand curve.
b.
faces a perfectly inelastic demand curve.
c.
can earn positive economic profit in the short run and in the long run.
d.
cannot earn positive economic profit even in the short run.
Answer:A
question
Everything else equal, the more rivals a firm has, the
answer
a.
more elastic is its demand curve.
b.
less kinked is its demand curve.
c.
more differentiated is its product from rivals' products.
d.
closer is its equilibrium price to its average variable costs.
Answer:A
more elastic is its demand curve.
b.
less kinked is its demand curve.
c.
more differentiated is its product from rivals' products.
d.
closer is its equilibrium price to its average variable costs.
Answer:A
question
In Figure 12-1, for a monopolistically competitive firm, long-run equilibrium can occur only at the quantity indicated by which point?
answer
a.
C
b.
A
c.
B
d.
D
Answer:A
C
b.
A
c.
B
d.
D
Answer:A
question
In Figure 12-2, which of the graphs represents a monopolistic competitor in long-run equilibrium?
answer
a.
1
b.
4
c.
3
d.
2
Answer:C
1
b.
4
c.
3
d.
2
Answer:C
question
In Figure 12-2, which of the graphs represents a firm that is a sales revenue maximizer?
answer
a.
1
b.
4
c.
2
d.
3
Answer:A
1
b.
4
c.
2
d.
3
Answer:A
question
A firm in a monopolistically competitive market makes no economic profit in the long run because
answer
a.
long-run marginal cost will be too high to make any economic profit.
b.
long-run price will be equal to long run average cost.
c.
long-run price will be equal to long run marginal cost.
d.
long-run marginal cost will be equal to long run marginal revenue.
Answer:B
long-run marginal cost will be too high to make any economic profit.
b.
long-run price will be equal to long run average cost.
c.
long-run price will be equal to long run marginal cost.
d.
long-run marginal cost will be equal to long run marginal revenue.
Answer:B
question
The monopolistically competitive firm in short-run equilibrium
answer
a.
faces a downward-sloping demand curve.
b.
maximizes profit where MR = MC.
c.
All of the above are correct.
d.
has a marginal revenue curve which lies below its demand curve.
Answer:C
faces a downward-sloping demand curve.
b.
maximizes profit where MR = MC.
c.
All of the above are correct.
d.
has a marginal revenue curve which lies below its demand curve.
Answer:C
question
Oligopoly
answer
Small # of firms control on Industry Strategic Dependence
question
vertical merger
answer
the combination of two or more firms involved in different stages of producing the same good or service
When one firm takes over another and they are in similar business, ex:When one is supplier to another
When one firm takes over another and they are in similar business, ex:When one is supplier to another
question
horizontal merger
answer
the combination of two or more firms competing in the same market with the same good or service
question
Gaming Theory
answer
be nice first time then do what they did to you. Zero sum game my win is your loss
question
zero-sum
answer
an exchange in a purely conflictual relationship in which what is gained by one competitor is lost by the other
question
Prisoner's Dilemma
answer
a game in which pursuing dominant strategies results in noncooperation that leaves everyone worse off
question
Total Revenue (TR)
answer
price x quantity; PxQ
question
Marginal Revenue (MR)
answer
the change in total revenue from selling one more unit of a product Change in TR/CHange in Quantity
question
Marginal Cost (MC)
answer
the change in total costs associated with a one-unit change in output
question
Perfect Competition
answer
Market Structure
1)Large #of Firms
2)Identical Products
3) No Barriers to Entry
*Demand Curve: Horizontal
^MR=D=Price
P=Given Q MR=MC
Short Run . Long Run
Negative Profit Is forced to Zero
*Positive
*Zero
Breakdown- Minimum ATC
Shutdown- Minimum AVC
1)Large #of Firms
2)Identical Products
3) No Barriers to Entry
*Demand Curve: Horizontal
^MR=D=Price
P=Given Q MR=MC
Short Run . Long Run
Negative Profit Is forced to Zero
*Positive
*Zero
Breakdown- Minimum ATC
Shutdown- Minimum AVC
question
Monopoly
answer
Market Structure
1)Single Firm
2)Unique Product
3)High Barriers to Entry
*Barriers to Entry
1)Natural Monopoly
2) Actions By Firm
3) Government
*Demand Curve: Negative
MR=Negative
Mr> Price
P= DC Q MR=MC
Short Run Long Run
1)Positive 1) Positive
2)Negative 2) Zero
3) Zero
*Price Discrimination
1)Price Setter
2)Separate Individual
3) Prevent Sales
1)Single Firm
2)Unique Product
3)High Barriers to Entry
*Barriers to Entry
1)Natural Monopoly
2) Actions By Firm
3) Government
*Demand Curve: Negative
MR=Negative
Mr> Price
P= DC Q MR=MC
Short Run Long Run
1)Positive 1) Positive
2)Negative 2) Zero
3) Zero
*Price Discrimination
1)Price Setter
2)Separate Individual
3) Prevent Sales
question
Monopolisitc
answer
Market Structure
1) Large # of firms
2) Differentiated Product
3) No Barriers to Entry
*Demand Curve: Negative
^MR=Negative
Price> MR
P=DC QMR=MC
Short Run Long Run
1) Positive 1) Zero
2) Negative
3) Zero
1) Large # of firms
2) Differentiated Product
3) No Barriers to Entry
*Demand Curve: Negative
^MR=Negative
Price> MR
P=DC QMR=MC
Short Run Long Run
1) Positive 1) Zero
2) Negative
3) Zero
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