Practice Final - Assignment Essays

question

Profit maximizing firms want to maximize the difference between

answer

total revenue and total cost.

question

The difference between the firm's total revenues and total cost when all explicit and implicit costs are included is the firm's

answer

economic profit.

question

Which of the following is an example of something that economists would consider a cost but accountants would not?

answer

the wages that the owner of a firm could have earned in some alternative job

question

________ is a cost that is independent of the quantity produced by the firm and is incurred by the firm in the short run.

answer

Fixed cost

question

Total variable costs

answer

always increase with output.

question

When an increase in a firm's scale of production leads to lower average costs, the industry exhibits

answer

increasing returns to scale.

question

When a firm becomes so large that it becomes difficult to manage in an efficient manner, this is an example of

answer

diseconomies of scale.

question

Engineers for The All-Terrain Bike Company have determined that a 10 % increase in all inputs will cause a 10 % increase in output. Assuming that input prices remain constant, you correctly deduce that such a change will cause ____ as output increases.

answer

average costs to remain constant.

question

Which of the following situation describes a short-run adjustment of a firm to changing business conditions?

answer

A baker works all night to prepare for a holiday rush.

question

Which of the following describes a long-run adjustment of a firm to changing business conditions?

answer

A restaurant owner leases an empty store next door and expands.

question

Diminishing marginal returns implies that:

answer

marginal product is decreasing.

question

Marginal product is defined as the change in ________ resulting from a one-unit increase in ________.

answer

total product; output

question

Increased specialization in large firms might lead to:

answer

downward-sloping long-run average cost curves

question

To maximize profit, firms in all market structures except oligopoly will produce where

answer

marginal revenue equals marginal cost.

question

A firm in a perfectly competitive market is characterized by

answer

many small firms selling a homogeneous product.

question

The horizontal demand curve facing an individual firm in a perfectly competitive market is

answer

a reflection of the firm's small size relative to the total market.

question

You sell your good in a perfectly competitive market where the market price is $33.00. When you sell 100 units your total revenue is $3,300. When you sell 101 units:

answer

total revenue increases by exactly $33.

question

A firm suffering economic losses decides whether or not to produce in the short run on the basis of whether

answer

revenue covers variable costs.

question

In the short run, the firm should shut down when:

answer

price is less than the minimum of the average variable cost of production.

question

The monopolistically competitive firm is characterized by

answer

many firms and a differentiated product.

question

The demand curve faced by a monopolistic competitor is likely to be

answer

less elastic than the demand curve faced by a perfectly competitive firm and more elastic than the demand curve faced by a monopoly.

question

If a monopolistically competitive firm maximizes its profit by producing 600 units per hour, it must be true that at 600 units per hour,

answer

marginal revenue is equal to marginal cost.

question

The word "monopolistic" in the label "monopolistic competition" refers to the fact that:

answer

each firm produces a slightly different version of the product.

question

The word "competition" in the label "monopolistic competition" refers to the fact that:

answer

firms vie against each other to get customers to buy their version of the product.

question

In monopolistic competition, firms can have some market power

answer

...

question

Which of the following statements best describes firms under monopolistic competition?

answer

The firms compete, using quality, location, advertising, and price.

question

As new firms enter a monopolistic competitive industry, it can be expected that

answer

profits of existing firms will decrease.

question

A monopolistically competitive firm is inefficient because it

answer

produces an output where average total cost is not minimum.

question

In the long-run, both monopolistic competition and perfect competition result in

answer

zero economic profit for firms.

question

Marginal revenue is equal to price for a perfectly competitive firm because:

answer

total revenue increases by the price of the good when an additional unit is sold.

question

Suppose that there are 1,000 identical firms producing a product in an industry with low barriers to entry. In the short run, the total revenues of each firm exceed total costs. What will happen in the long run?

answer

Additional firms will enter the market, and price will be driven down to the point where each firm will be making just enough to stay in business.

question

As compared to a perfectly competitive firm, a monopolistically competitive firm will

answer

sell a more differentiated product.

question

In which of the following ways is a monopolistically competitive firm like a monopoly?

answer

Firms face a downward demand curve.

question

A monopoly is characterized by

answer

one large firm selling a unique product.

question

The demand curve that a monopolist faces is

answer

the market demand curve.

question

For a monopolist to sell more units of output,

answer

the price must be reduced.

question

For a monopoly to be a natural monopoly,

answer

economies of scale must be realized at a scale that is close to total demand in the market.

question

Relative to a competitive market equilibrium, the profit maximizing quantity chosen by a monopolist will result in a deadweight loss because:

answer

the monopolist will produce at a quantity lower than the competitive equilibrium.

question

Which of the following is true?

answer

When sellers use price-discrimination, they will generally produce a larger output
than if they charged only a single price to consumers.

question

An oligopolistic industry is characterized by

answer

few large firms selling a homogeneous or differentiated product.

question

If the price in an oligopoly market is the same as that of a monopoly with identical cost and demand conditions then:

answer

there may be collusion between firms.

question

For a monopolist to practice effective price discrimination, one necessary condition is

answer

differences in the price elasticity of demand among groups of buyers.

question

In general, firms in a cartel:

answer

agree to charge the price the monopolist would charge.

question

When firms in an oligopolistic compete with each other rather than cooperate:

answer

consumers will end up better off.

question

A firm that faces the duopolists' dilemma can avoid the dilemma by

answer

always choosing its dominant strategy regardless of the other firm's action.

question

Suppose Ford, GM, and Dodge make the majority of pick-up trucks sold in the United States. If they all sell for approximately the same price, and Ford offers a $2,500 rebate on new truck sales, what can Ford expect to see?

answer

an immediate response by GM and Dodge.

question

Under an average-cost pricing policy

answer

a regulatory agency picks a price at which a natural monopoly's demand curve intersects its average cost curve.

1 of 47

question

Profit maximizing firms want to maximize the difference between

answer

total revenue and total cost.

question

The difference between the firm's total revenues and total cost when all explicit and implicit costs are included is the firm's

answer

economic profit.

question

Which of the following is an example of something that economists would consider a cost but accountants would not?

answer

the wages that the owner of a firm could have earned in some alternative job

question

________ is a cost that is independent of the quantity produced by the firm and is incurred by the firm in the short run.

answer

Fixed cost

question

Total variable costs

answer

always increase with output.

question

When an increase in a firm's scale of production leads to lower average costs, the industry exhibits

answer

increasing returns to scale.

question

When a firm becomes so large that it becomes difficult to manage in an efficient manner, this is an example of

answer

diseconomies of scale.

question

answer

average costs to remain constant.

question

Which of the following situation describes a short-run adjustment of a firm to changing business conditions?

answer

A baker works all night to prepare for a holiday rush.

question

Which of the following describes a long-run adjustment of a firm to changing business conditions?

answer

A restaurant owner leases an empty store next door and expands.

question

Diminishing marginal returns implies that:

answer

marginal product is decreasing.

question

Marginal product is defined as the change in ________ resulting from a one-unit increase in ________.

answer

total product; output

question

Increased specialization in large firms might lead to:

answer

downward-sloping long-run average cost curves

question

To maximize profit, firms in all market structures except oligopoly will produce where

answer

marginal revenue equals marginal cost.

question

A firm in a perfectly competitive market is characterized by

answer

many small firms selling a homogeneous product.

question

The horizontal demand curve facing an individual firm in a perfectly competitive market is

answer

a reflection of the firm's small size relative to the total market.

question

You sell your good in a perfectly competitive market where the market price is $33.00. When you sell 100 units your total revenue is $3,300. When you sell 101 units:

answer

total revenue increases by exactly $33.

question

A firm suffering economic losses decides whether or not to produce in the short run on the basis of whether

answer

revenue covers variable costs.

question

In the short run, the firm should shut down when:

answer

price is less than the minimum of the average variable cost of production.

question

The monopolistically competitive firm is characterized by

answer

many firms and a differentiated product.

question

The demand curve faced by a monopolistic competitor is likely to be

answer

less elastic than the demand curve faced by a perfectly competitive firm and more elastic than the demand curve faced by a monopoly.

question

If a monopolistically competitive firm maximizes its profit by producing 600 units per hour, it must be true that at 600 units per hour,

answer

marginal revenue is equal to marginal cost.

question

The word "monopolistic" in the label "monopolistic competition" refers to the fact that:

answer

each firm produces a slightly different version of the product.

question

The word "competition" in the label "monopolistic competition" refers to the fact that:

answer

firms vie against each other to get customers to buy their version of the product.

question

In monopolistic competition, firms can have some market power

answer

...

question

Which of the following statements best describes firms under monopolistic competition?

answer

The firms compete, using quality, location, advertising, and price.

question

As new firms enter a monopolistic competitive industry, it can be expected that

answer

profits of existing firms will decrease.

question

A monopolistically competitive firm is inefficient because it

answer

produces an output where average total cost is not minimum.

question

In the long-run, both monopolistic competition and perfect competition result in

answer

zero economic profit for firms.

question

Marginal revenue is equal to price for a perfectly competitive firm because:

answer

total revenue increases by the price of the good when an additional unit is sold.

question

answer

Additional firms will enter the market, and price will be driven down to the point where each firm will be making just enough to stay in business.

question

As compared to a perfectly competitive firm, a monopolistically competitive firm will

answer

sell a more differentiated product.

question

In which of the following ways is a monopolistically competitive firm like a monopoly?

answer

Firms face a downward demand curve.

question

A monopoly is characterized by

answer

one large firm selling a unique product.

question

The demand curve that a monopolist faces is

answer

the market demand curve.

question

For a monopolist to sell more units of output,

answer

the price must be reduced.

question

For a monopoly to be a natural monopoly,

answer

economies of scale must be realized at a scale that is close to total demand in the market.

question

Relative to a competitive market equilibrium, the profit maximizing quantity chosen by a monopolist will result in a deadweight loss because:

answer

the monopolist will produce at a quantity lower than the competitive equilibrium.

question

Which of the following is true?

answer

When sellers use price-discrimination, they will generally produce a larger output
than if they charged only a single price to consumers.

question

An oligopolistic industry is characterized by

answer

few large firms selling a homogeneous or differentiated product.

question

If the price in an oligopoly market is the same as that of a monopoly with identical cost and demand conditions then:

answer

there may be collusion between firms.

question

For a monopolist to practice effective price discrimination, one necessary condition is

answer

differences in the price elasticity of demand among groups of buyers.

question

In general, firms in a cartel:

answer

agree to charge the price the monopolist would charge.

question

When firms in an oligopolistic compete with each other rather than cooperate:

answer

consumers will end up better off.

question

A firm that faces the duopolists' dilemma can avoid the dilemma by

answer

always choosing its dominant strategy regardless of the other firm's action.

question

answer

an immediate response by GM and Dodge.

question

Under an average-cost pricing policy

answer

a regulatory agency picks a price at which a natural monopoly's demand curve intersects its average cost curve.

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