question
When Charlie opened a bar he had to quit his job as a lawyer, which had a salary of $100,000 a year. Additionally, he had to cash all $100,000 of his assets, which were earning $10,000 a year in order to pay for the lease, equipment and to stock the bar which cost $140,000 in total.
What was the explicit cost of operating the bar for the first year?
A. $160,000
B. $260,000
C. $40,000
D. $140,000
E. $60,000
What was the explicit cost of operating the bar for the first year?
A. $160,000
B. $260,000
C. $40,000
D. $140,000
E. $60,000
answer
D
question
When Charlie opened a bar he had to quit his job as a lawyer, which had a salary of $100,000 a year. Additionally, he had to cash all $100,000 of his assets, which were earning $10,000 a year in order to pay for the lease, equipment and to stock the bar which cost $140,000 in total.
If Charlie's bar had $200,000 in revenue the first year, what was the accounting profit?
A. $60,000
B. $140,000
C. $40,000
D. -$60,000
E. -$40,000
If Charlie's bar had $200,000 in revenue the first year, what was the accounting profit?
A. $60,000
B. $140,000
C. $40,000
D. -$60,000
E. -$40,000
answer
A
question
A profit maximizing perfectly competitive firm produces at a quantity such as that the marginal cost is greater than the average total cost in the short run. Which of the following is true?
A. economic profit is greater than zero
B. economic profit is equal to zero
C. economic profit is less than zero
D. they are producing at the efficient scale of production
E. none of the above
A. economic profit is greater than zero
B. economic profit is equal to zero
C. economic profit is less than zero
D. they are producing at the efficient scale of production
E. none of the above
answer
A
question
For perfectly competitive firms, which of the following is false?
A. economic profit is zero in the long run
B. quantity is chosen by setting marginal cost equal to marginal revenue in the long run
C. quantity is chosen by setting marginal cost equal to marginal revenue in the short run
D. firms always produce at the efficient scale of production in the short run
E. firms always produce at the efficient scale of production in the long run
A. economic profit is zero in the long run
B. quantity is chosen by setting marginal cost equal to marginal revenue in the long run
C. quantity is chosen by setting marginal cost equal to marginal revenue in the short run
D. firms always produce at the efficient scale of production in the short run
E. firms always produce at the efficient scale of production in the long run
answer
D
question
Which of the following is not the reason for a monopoly to exist?
A. one firm producing a quantity has a lower average total cost than two firms producing that quantity together for all quantities
B. a small number of buyers
C. patent laws
D. controlling all of the water in town
E. the government giving Comcast exclusive rights to provide cable to a city
A. one firm producing a quantity has a lower average total cost than two firms producing that quantity together for all quantities
B. a small number of buyers
C. patent laws
D. controlling all of the water in town
E. the government giving Comcast exclusive rights to provide cable to a city
answer
B
question
A monopoly's marginal revenue will always be...
A. lower than the price
B. above the price
C. equal to the price
D. all of the above
A. lower than the price
B. above the price
C. equal to the price
D. all of the above
answer
A
question
A firm is a natural monopoly. Consider two quantities such that quantity one is less than quantity two. Which of the following will always be true?
A. marginal cost is decreasing
B. marginal cost is increasing
C. average total cost is decreasing
D. average total cost is increasing
E. the total cost decreases as more units are produced
A. marginal cost is decreasing
B. marginal cost is increasing
C. average total cost is decreasing
D. average total cost is increasing
E. the total cost decreases as more units are produced
answer
C
question
For a monopoly, if the marginal cost is less than the price, then...
A. the firm will increase quantity
B. the firm will decrease quantity
C. the firm will not change quantity
D. the firm may increase, decrease, or keep quantity constant
A. the firm will increase quantity
B. the firm will decrease quantity
C. the firm will not change quantity
D. the firm may increase, decrease, or keep quantity constant
answer
D
question
Which of the following is true for monopolies, monopolistically competitive firms, and perfectly competitive firms?
A. quantity is set by [marginal cost (=) average total cost]
B. quantity is set by minimizing the average total cost
C. price is set by [marginal cost (=) average total cost]
D. quantity is set by [marginal revenue (=) marginal cost]
E. price is set by [marginal revenue (=) marginal cost]
A. quantity is set by [marginal cost (=) average total cost]
B. quantity is set by minimizing the average total cost
C. price is set by [marginal cost (=) average total cost]
D. quantity is set by [marginal revenue (=) marginal cost]
E. price is set by [marginal revenue (=) marginal cost]
answer
D
question
Which of the following is an example of monopolistic competition?
A. gasoline
B. the provision of utilities in communities with only one provider
C. laptop computers
D. controlling all the diamonds in the world
A. gasoline
B. the provision of utilities in communities with only one provider
C. laptop computers
D. controlling all the diamonds in the world
answer
C
question
Which of the following is false?
A. monopolistically competitive firms face downward sloping demand in the short run
B. monopolies face downward sloping demand in the long run
C. perfectly competitive firms face downward sloping demand in the short run
D. oligopolies face downward sloping demand in the long run
A. monopolistically competitive firms face downward sloping demand in the short run
B. monopolies face downward sloping demand in the long run
C. perfectly competitive firms face downward sloping demand in the short run
D. oligopolies face downward sloping demand in the long run
answer
C
question
In a monopolistically competitive market, if the economic profit is greater than zero, then...
A. firms with identical products will enter the market
B. firms with differentiated products will enter the market
C. no firms will enter the market
D. firms will exit the market
A. firms with identical products will enter the market
B. firms with differentiated products will enter the market
C. no firms will enter the market
D. firms will exit the market
answer
B
question
In the long run, monopolistically competitive firms have zero economic profit.
A. true
B. false
A. true
B. false
answer
A
question
Which of the following is true about oligopolistic firms not in a cartel?
A. oligopoly price is greater than monopoly price
B. oligopoly price is less than monopoly price
C. oligopoly price is equal to monopoly price
A. oligopoly price is greater than monopoly price
B. oligopoly price is less than monopoly price
C. oligopoly price is equal to monopoly price
answer
B
question
Price matching helps firms in duopolies by...
A. creating product differentiation
B. creating a monopoly
C. removing the other firm's incentive to cheat from the monopoly price in game theory
D. incentivizing the other firm to cheat from the monopoly price
A. creating product differentiation
B. creating a monopoly
C. removing the other firm's incentive to cheat from the monopoly price in game theory
D. incentivizing the other firm to cheat from the monopoly price
answer
C
question
The Nash equilibrium is the...
A. bottom right cell
B. top right cell
C. bottom left cell
D. top left cell
E. there is no Nash Equilibrium
A. bottom right cell
B. top right cell
C. bottom left cell
D. top left cell
E. there is no Nash Equilibrium
answer
A
question
Assume firms "A" and "B" have an average total cost of zero for all quantities. They can each charge either $2 or $3. If they charge the same price, they split all the customers 50/50. If they charge a lower price than their competitor, they get all the customers. No matter the price changed, the number of customers does not change.
What is the Nash Equilibrium?
A. they both charge $3
B. they both charge $2
C. one charges $2 and one charges $3
D. there is no Nash Equilibrium
What is the Nash Equilibrium?
A. they both charge $3
B. they both charge $2
C. one charges $2 and one charges $3
D. there is no Nash Equilibrium
answer
B
question
Assume firms "A" and "B" have an average total cost of zero for all quantities. They can each charge either $2 or $3. If they charge the same price, they split all the customers 50/50. If they charge a lower price than their competitor, they get all the customers. No matter the price changed, the number of customers does not change.
If they both have price matching, what is the new Nash Equilibrium, assuming they both start by charging $3?
A. they both charge $3
B. they both charge $2
C. one charges $2 and one charges $3
D. there is no Nash Equilibrium
If they both have price matching, what is the new Nash Equilibrium, assuming they both start by charging $3?
A. they both charge $3
B. they both charge $2
C. one charges $2 and one charges $3
D. there is no Nash Equilibrium
answer
A
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