PRINCIPLES OF MICROECONOMICS FINAL EXAM ECON 2223

question

The short run is the time period

answer

in which some cost are fixed

question

Competitive firms cannot individually affect market price because

answer

Their individual production is insignificant relative to the production of the industry.

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Marginal revenue is the change in

answer

Total revenue when output is changed.

question

The market price for T-shirts sold in a perfectly competitive market is determined by

answer

Supply and demand.

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Profit per unit is equal to

answer

P - ATC.

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Normal profit implies that

answer

The factors employed are earning as much as they could in the best alternative employment.

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Economic profit is the difference between

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Total revenues and total economic costs.

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Short-run profits are maximized at the rate of output where

answer

Marginal revenue is equal to marginal cost.

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Economic profit is

answer

Less than accounting profit by the amount of implicit cost.

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For the perfectly competitive firm, the marginal revenue is always

answer

Constant

question

Which of the following represents the change in total cost that results from a one-unit increase in production?

answer

Marginal cost.

question

In defining economic costs, economists emphasize

answer

Explicit and implicit costs while accountants recognize only explicit costs.

question

The difference between the total revenue and total cost curves at a given output is equal to

answer

Total profit.

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A firm that makes zero economic profits

answer

Covers all its costs, including a provision for normal profit.

question

All of the following are ways a business can earn economic profits except

answer

Maximize implicit costs but not explicit costs.

question

In order to sell additional units of their products, competitive firms must

answer

Increase output.

question

Accounting costs and economic costs differ because

answer

Economic costs include the opportunity costs of all resources used, while accounting costs include actual dollar outlays.

question

If price is less than marginal cost, a perfectly competitive firm should decrease output because

answer

The firm is producing units that cost more to produce than the firm receives in revenue, thus reducing profits (or increasing losses).

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The demand curve confronting a competitive firm

answer

Equals the marginal revenue curve.

question

A perfectly competitive firm will maximize profits by choosing an output level where

answer

Price equals marginal cost.

question

Normal profit

answer

Covers the full opportunity cost of the resources used by the firm.

question

Market structure is determined by the

answer

Number and relative size of the firms in an industry.

question

If a perfectly competitive firm is producing a rate of output at which MC exceeds price, then the firm

answer

Can increase its profit by decreasing output.

question

When price exceeds average variable cost but not average total cost, the firm should, in the short run,

answer

Produce at the rate of output where MR = MC.

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Explicit costs

answer

Are the sum of actual monetary payments made for resources used to produce a good.

question

If a perfectly competitive firm wanted to maximize its total revenues, it would produce

answer

As much as it is capable of producing.

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The marginal cost curve

answer

Is the short-run supply curve for a competitive firm at prices above the AVC curve.

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Which of the following characterizes a competitive market?

answer

A downward-sloping demand curve for the market.

question

If price is greater than marginal cost, a perfectly competitive firm should increase output because

answer

Additional units of output will add to the firm's profits (or reduce losses).

question

A competitive firm

answer

Is a price taker.

question

When a firm is earning positive economic profits, this is an indication that the firm

answer

Is using its resources in the best possible way.

question

Refer to Figure 23.1 for a perfectly competitive firm. In the long run, this firm would stay in this market only if the market price was equal to or higher than

answer

$15.

question

Which of the following is not a characteristic of a perfectly competitive market?

answer

High barriers.

question

In a competitive market, economic profits will

answer

Cause existing firms to expand production.

question

The market structure of the computer industry

answer

Has become more competitive over time.

question

If price is below the long-run competitive equilibrium level, there will be

answer

Exit of firms from the market.

question

A firm should shut down production when

answer

P < minimum AVC.

question

Investment decisions are made on the basis of the relationship of price to

answer

Long-run average total cost.

question

In a perfectly competitive market in the long run, which of the following is not correct?

answer

Firms are maximizing total revenue.

question

The entry of firms into a market, ceteris paribus,

answer

Reduces the economic profit of each firm already in the market.

question

Perfectly competitive firms cannot individually affect market price because

answer

There are many firms, none of which has a significant share of total output.

question

The entry of firms into a market

answer

Reduces the profits of existing firms in the market.

question

A profit-maximizing producer seeks to

answer

Maximize total profit.

question

If long-run economic losses are being experienced in a competitive market,

answer

Equilibrium price will rise as firms exit.

question

In a perfectly competitive market economy, business failures can benefit society by causing

answer

A reallocation of resources to better uses.

question

The market supply curve in a perfectly competitive market is usually

answer

Upward-sloping.

question

Refer to Figure 23.2 for a perfectly competitive firm. This firm will maximize profits by producing the level of output that corresponds to point

answer

question

Economic losses are a signal to producers

answer

That they are not using resources in the best way.

question

Examples of barriers to entry include

answer

Patents

question

If a new sushi restaurant opens, then

answer

The market supply curve for sushi will shift to the right.

question

Other things being equal, as more firms enter a market, the market supply curve

answer

Shifts to the right.

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Which of the following characterizes a firm that is in long-run perfectly competitive equilibrium where profits are maximized?

answer

Price equals minimum ATC.

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The exit of firms from a market, ceteris paribus,

answer

Increases the equilibrium price in the market.

question

Marginal cost pricing means that a firm

answer

Produces up to the output where P = MC for a given market price.

question

If the price of ricotta cheese, an ingredient in lasagna, increases, then

answer

The market supply curve for lasagna will shift to the left.

question

When economic profits exist in the market for a particular product, this is a signal to producers that

answer

Consumers would like more scarce resources devoted to the production of this product.

question

Which of the following is characteristic of a perfectly competitive market?

answer

Zero economic profit in the long run.

question

Which of the following is not a barrier to entry?

answer

Perfect information.

question

A perfectly competitive market results in efficiency because

answer

Price is driven down to minimum ATC.

question

To determine the market supply, the quantities

answer

Supplied at each price by each supplier are added together.

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All of the following are limitations on the market power of a monopoly except

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The ability of a company to control the quantity supplied.

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Which of the following was the first to prohibit "conspiracies in restraint of trade"?

answer

The Sherman Act.

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If a firm can raise market price by reducing its output, then

answer

It faces a downward-sloping demand curve.

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The ultimate market constraint on the exercise of market power

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Is the demand curve facing the monopolist.

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A monopoly

answer

Charges higher prices than competitive firms, ceteris paribus.

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Which of the following is a barrier to entry in a monopoly market?

answer

A patent on a new product.

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Which of the following is a barrier to entry in a monopoly market?

answer

Economies of scale.

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A monopoly

answer

Produces less output than a competitive industry, ceteris paribus.

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A monopolist has market power because it

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Faces a downward-sloping demand curve for its own output.

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Which of the following is the same for monopoly and competition under the same cost and demand conditions?

answer

The goal of maximizing profits.

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Which of the following is a barrier to entry into a monopoly market?

answer

Economies of scale.

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Both a competitive industry and a monopoly

answer

Face downward-sloping market demand curves.

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Price discrimination does not allow a producer to

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Designate a point above the market demand curve as the new equilibrium.

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Which of the following statements is not correct?

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A monopolist's ability to act as a price setter guarantees economic profits in the short run.

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The primary purpose of antitrust policy in the United States is to

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Encourage competition.

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If the entire output of a market is produced by a single seller, the firm

answer

Is a monopoly.

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Which of the following is likely to be a monopolist?

answer

A drug firm that has a patent granting it the exclusive right to produce a drug.

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Monopolists are price

answer

Makers, but competitive firms are price takers.

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A patent gives a firm the exclusive right to produce a product for

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20 years.

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If a monopolist is producing a level of output where MR exceeds MC, then it should

answer

Increase its output.

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A monopoly can have a high degree of market power because of all but

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The presence of many close substitutes for its product.

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At equilibrium in a monopoly, economic profits will most likely be

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Greater than zero.

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Which of the following does not contribute to a firm maintaining a monopoly?

answer

The presence of many close substitutes for its product.

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A barrier to entry is

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An obstacle that makes it difficult for new firms to enter a market.

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If a monopolist is producing a level of output where MR is less than MC, then it should

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Lower its output.

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Price discrimination is best defined as

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The selling of an identical good at different prices to different consumers by a single seller.

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Which of the following is not an example of price discrimination by the only movie theater in town?

answer

Charging one price at all times for all customers.

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Assume a monopoly confronts the same costs and demand as a competitive industry. In this case, the monopolist produces

answer

Less output and charges a higher price than the competitive industry.

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A firm can take advantage of economies of scale through

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Investment decisions to increase capacity.

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The price charged by a profit-maximizing monopolist occurs

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At a price on the demand curve above the intersection where MR = MC.

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An imperfection in the market mechanism that prevents optimal outcomes is called

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Market failure.

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When firms are interdependent,

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The profit of one firm depends on how its rivals respond to its strategic decisions.

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When oligopoly firms collude to raise prices,

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Each firm benefits, but society loses.

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Which of the following is not an argument to have less antitrust enforcement?

answer

Oligopolies can lead to less output and higher prices.

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The only market structure in which there is significant interdependence among firms with regard to their pricing and output decisions is

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Oligopoly

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The soft drink market is dominated by Coke, Pepsi, and very few other firms. The firms often start price wars. The market can best be classified as

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Oligopoly

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The Herfindahl-Hirshman Index is

answer

Used to identify cases worthy of antitrust concern.

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If all of your friends use the same instant messaging service provider, you are likely to use it too. This behavior may create

answer

A network economy.

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Suppose the larger firm of a duopoly has sales of $400 million and the smaller firm has sales of $100 million. The market share of the larger firm is

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80 percent.

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A contestable market is

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An imperfectly competitive situation that is subject to entry.

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There are many corn farmers, each of whom produces the same product. The corn market can best be classified as

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Perfect competition.

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Which of the following industries has the highest concentration ratio?

answer

Soft drinks.

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The concentration ratio for an oligopoly is

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Over 60 percent.

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Which of the following may characterize a monopoly?

answer

Substantial market power.

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Oligopolists will maximize total profits for all of the firms in the market at the rate of output where

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MR = MC for the market.

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Game theory is

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The study of how decisions are made when interdependence exists between firms.

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If a firm in an oligopoly expands its market share at prevailing prices, its competitors

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Lose market share.

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What is the most likely response by rivals when an oligopolist cuts its price to increase its sales?

answer

Cut their prices.

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Which of the following is the critical determinant of market power?

answer

The extent of barriers to entry.

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The correct ranking of degree of market power (from highest to lowest) is

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Monopoly, oligopoly, monopolistic competition, perfect competition.

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When U.S. government regulations that prevent goods from being imported are relaxed, this

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Reduces the barriers to entry into U.S. markets.

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Collusion is undesirable and illegal because

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Resources are misallocated and the level of output is restricted.

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Suppose there are only three firms in a market. The largest firm has sales of $500 million, the second-largest has sales of $300 million, and the smallest has sales of $200 million. The market share of the largest firm is

answer

50 percent.

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Which of the following market structures is characterized by the absence of market power?

answer

Perfect competition.

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It is easiest for new firms to enter a

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Perfectly competitive market.

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Market power leads to market failure when it results in

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Decreased market output.

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General Electric and Westinghouse were convicted of

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Price-fixing.

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If an oligopolist is going to change its price or output, its initial concern is

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The response of its competitors.

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Product differentiation

answer

Involves advertising unique product features.

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If a market changes from oligopoly to perfect competition, then as a result

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Output should increase in the long run.

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Which of the following market structures will have lower prices in the long run than monopoly, ceteris paribus?

answer

Perfect competition, oligopoly, and monopolistic competition.

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When new firms enter a monopolistically competitive industry, ceteris paribus, the

answer

Market price decreases.

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A concentration ratio measures the

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Proportion of industry output produced by the largest firms.

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Entry into a market characterized by monopolistic competition

answer

Is frequent because barriers to entry are low.

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Entry into a market characterized by monopolistic competition is generally

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Very easy because few barriers exist.

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A monopolistically competitive industry is characterized by ________ concentration ratios and ________ entry barriers.

answer

low; low

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In monopolistic competition, a firm's demand curve is tangent to the ATC curve in the long run because

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Entry eliminates economic profit, and exit eliminates losses.

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Which of the following is true about advertising?

answer

It is a form of nonprice competition.

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Product differentiation occurs when

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Buyers perceive differences in the products of several companies.

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Which of the following market structures will have only normal profit in the long run?

answer

Monopolistic competition.

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Monopolistically competitive firms have a "monopoly" element to them because

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Brand loyalty gives them a captive audience.

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A monopolistically competitive firm can raise its price somewhat without fear of great change in unit sales because of

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Brand loyalty.

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When a monopolistically competitive firm advertises, it is attempting to increase

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The demand and decrease the price elasticity of demand for its product.

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In the short run, a monopolistically competitive firm

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May make economic profits, but it fails to make economic profits in the long run because of the entry of new firms.

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Product differentiation refers to

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Features that make one product appear different from competing products in the same market.

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If new firms enter a monopolistically competitive market, the demand curves for the existing firms will

answer

Shift to the left.

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Each producer in monopolistic competition has

answer

Some market power.

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Which of the following is not true about advertising?

answer

It results in efficient allocation of resources.

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When new firms enter a monopolistically competitive industry, the market

answer

Supply curve shifts to the right.

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Both perfect competitors and monopolistic competitors

answer

Earn zero economic profit in the long run.

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Which of the following market structures will have lower output in the long run than perfect competition, ceteris paribus?

answer

Monopolistic competition, oligopoly, and monopoly.

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In monopolistic competition, a firm

answer

Uses nonprice competition.

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In a monopolistically competitive market with negative economic profits,

answer

Firms will exit until economic profits are zero.

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Firms in a monopolistically competitive market will

answer

Use the profit-maximizing rule MC = MR.

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The main difference between perfect competition and monopolistic competition is

answer

The degree of product differentiation.

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A major difference between monopoly and monopolistic competition is

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The number of firms in the market.

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Monopolistically competitive industries are characterized by all of the following except

answer

Homogenous products.

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Which of the following is not characteristic of monopolistic competition?

answer

Firms have zero control over price.

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A major difference between oligopoly and monopolistic competition is that monopolistically competitive firms and oligopolies do not

answer

Have many competitors.

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If a monopolistic competitor is maximizing profit, it is producing at a point where marginal cost

answer

Is less than price.

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Students who major in computer science are paid a lot more when they graduate than those who major in philosophy because

answer

Information technology is a growth industry.

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As labor productivity increases, which of the following shifts in the labor market should occur?

answer

Demand for labor should shift to the right.

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Workers typically require higher wages in order to work additional hours because of the

answer

Increasing opportunity cost of labor.

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The change in total revenue associated with one additional unit of input measures

answer

MRP

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A production process is defined as

answer

The manufacturing of goods and services.

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If a chair can be sold for $20 and it takes a worker two hours to make a chair, the marginal revenue product of this worker is

answer

$10 per hour.

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The marginal physical product of labor is equal to

answer

The change in total output divided by the change in quantity of labor.

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If the wage rate increases, there will be a

answer

Movement up the labor supply curve to the right.

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When people are standing in line for jobs and there are more applicants than jobs, then the labor market is characterized by a

answer

Surplus of labor.

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The willingness to work a certain amount of time at a given wage rate is known as

answer

Labor supply.

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Other things being equal, which of the following would increase the market demand for labor?

answer

An increase in the marginal productivity of labor.

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The demand for labor is downward-sloping because of

answer

Diminishing returns to labor.

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The value of an hour of leisure can best be estimated as

answer

The hourly wage that could have been earned.

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Campbell loves to work. He does not receive any enjoyment from leisure time. The last dollar that he earns each year means just as much to him as the first dollar. Which of the following best describes the shape of Campbell's labor supply curve?

answer

Horizontal

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If the demand for hair gel increases, the effect on the hair gel manufacturing job market will be to

answer

Increase the demand for labor and increase equilibrium wages.

question

The law of diminishing returns states that, ceteris paribus, the

answer

MPP of labor declines as more labor is employed.

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The determinants of labor demand include

answer

The leisure-labor trade-off.

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All of the following are true at the equilibrium wage in a competitive market except

answer

The market demand curve for labor intersects the market supply curve of labor.

question

Assume the apple market is competitive. If citizens want wages and the number of available jobs for apple pickers to increase, the best strategy would be to

answer

Buy more apples.

question

Marginal physical product diminishes as additional workers are hired because

answer

Each worker has an increasingly smaller amount of other factors with which to work.

question

As more hours are worked, the marginal utility of leisure time tends to

answer

Increase

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Which of the following is not consistent with a minimum wage that is set above the equilibrium wage?

answer

There will be no unemployment.

question

The marginal revenue product of labor is equal to

answer

The marginal physical product multiplied by the marginal revenue of the output.

question

If there is an increase in the number of workers who want to work as accountants, there will be a

answer

Rightward shift of the labor supply curve.

question

If the price of the output produced by a particular type of labor decreases, which of the following shifts should occur in the labor market for the particular type of labor?

answer

Demand for labor should shift to the left.

question

The demand for labor and other factors of production typically decline in a recession because those factors

answer

Are derived from the demand for final output, which also declines in a recession.

question

When there are more qualified applicants than job openings, this indicates that the

answer

Wages being offered are too high.

question

The wage rate is

answer

The payment for labor.

question

If the number of employers for a particular type of labor increases, which of the following shifts should occur in the labor market for the particular type of labor?

answer

Supply of labor should shift to the left.

question

If the MPP of an additional unit of labor is 3 units per hour, product price is constant at $8 per unit, and the wage rate is $26 per hour, then

answer

The additional unit of labor should not be employed because it costs more than it is worth.

question

Trade restrictions

answer

Reduce the gains from trade for the country as a whole.

question

Increased trade restrictions

answer

Reduce total consumption possibilities.

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If a country engages in trade with other countries, it is known as

answer

An open economy.

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A beggar-thy-neighbor policy is

answer

The imposition of trade barriers for the purpose of expanding exports.

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In terms of the world as a whole, imports must equal exports because

answer

Every good exported by one country becomes an import for another country.

question

Specialization in production

answer

Increases output.

question

Over a given period of time, if exports are greater than imports, the result is

answer

A trade surplus.

question

If a country is completely self-reliant in producing goods for its own consumption needs, then

answer

Its consumption possibilities equal its production possibilities.

question

According to the text, which of the following are both imports and exports for the United States?

answer

Cars, computers, and auto parts.

question

Which of the following groups has an interest in encouraging free trade?

answer

Workers in export industries.

question

A country with a comparative advantage in producing computer chips

answer

Has a lower opportunity cost of producing computer chips than its trading partners.

question

What should happen to the equilibrium price and quantity in a market as a result of a quota on imports?

answer

Equilibrium price should go up, and equilibrium quantity should go down.

question

When quotas are eliminated, losers include

answer

Domestic producers.

question

Goods and services purchased from international sources are

answer

Imports.

question

The benefits from international trade include

answer

Greater efficiency in the use of the world's limited resources.

1 of 195

question

The short run is the time period

answer

in which some cost are fixed

question

Competitive firms cannot individually affect market price because

answer

Their individual production is insignificant relative to the production of the industry.

question

Marginal revenue is the change in

answer

Total revenue when output is changed.

question

The market price for T-shirts sold in a perfectly competitive market is determined by

answer

Supply and demand.

question

Profit per unit is equal to

answer

P - ATC.

question

Normal profit implies that

answer

The factors employed are earning as much as they could in the best alternative employment.

question

Economic profit is the difference between

answer

Total revenues and total economic costs.

question

Short-run profits are maximized at the rate of output where

answer

Marginal revenue is equal to marginal cost.

question

Economic profit is

answer

Less than accounting profit by the amount of implicit cost.

question

For the perfectly competitive firm, the marginal revenue is always

answer

Constant

question

Which of the following represents the change in total cost that results from a one-unit increase in production?

answer

Marginal cost.

question

In defining economic costs, economists emphasize

answer

Explicit and implicit costs while accountants recognize only explicit costs.

question

The difference between the total revenue and total cost curves at a given output is equal to

answer

Total profit.

question

A firm that makes zero economic profits

answer

Covers all its costs, including a provision for normal profit.

question

All of the following are ways a business can earn economic profits except

answer

Maximize implicit costs but not explicit costs.

question

In order to sell additional units of their products, competitive firms must

answer

Increase output.

question

Accounting costs and economic costs differ because

answer

Economic costs include the opportunity costs of all resources used, while accounting costs include actual dollar outlays.

question

If price is less than marginal cost, a perfectly competitive firm should decrease output because

answer

The firm is producing units that cost more to produce than the firm receives in revenue, thus reducing profits (or increasing losses).

question

The demand curve confronting a competitive firm

answer

Equals the marginal revenue curve.

question

A perfectly competitive firm will maximize profits by choosing an output level where

answer

Price equals marginal cost.

question

Normal profit

answer

Covers the full opportunity cost of the resources used by the firm.

question

Market structure is determined by the

answer

Number and relative size of the firms in an industry.

question

If a perfectly competitive firm is producing a rate of output at which MC exceeds price, then the firm

answer

Can increase its profit by decreasing output.

question

When price exceeds average variable cost but not average total cost, the firm should, in the short run,

answer

Produce at the rate of output where MR = MC.

question

Explicit costs

answer

Are the sum of actual monetary payments made for resources used to produce a good.

question

If a perfectly competitive firm wanted to maximize its total revenues, it would produce

answer

As much as it is capable of producing.

question

The marginal cost curve

answer

Is the short-run supply curve for a competitive firm at prices above the AVC curve.

question

Which of the following characterizes a competitive market?

answer

A downward-sloping demand curve for the market.

question

If price is greater than marginal cost, a perfectly competitive firm should increase output because

answer

Additional units of output will add to the firm's profits (or reduce losses).

question

A competitive firm

answer

Is a price taker.

question

When a firm is earning positive economic profits, this is an indication that the firm

answer

Is using its resources in the best possible way.

question

Refer to Figure 23.1 for a perfectly competitive firm. In the long run, this firm would stay in this market only if the market price was equal to or higher than

answer

$15.

question

Which of the following is not a characteristic of a perfectly competitive market?

answer

High barriers.

question

In a competitive market, economic profits will

answer

Cause existing firms to expand production.

question

The market structure of the computer industry

answer

Has become more competitive over time.

question

If price is below the long-run competitive equilibrium level, there will be

answer

Exit of firms from the market.

question

A firm should shut down production when

answer

P < minimum AVC.

question

Investment decisions are made on the basis of the relationship of price to

answer

Long-run average total cost.

question

In a perfectly competitive market in the long run, which of the following is not correct?

answer

Firms are maximizing total revenue.

question

The entry of firms into a market, ceteris paribus,

answer

Reduces the economic profit of each firm already in the market.

question

Perfectly competitive firms cannot individually affect market price because

answer

There are many firms, none of which has a significant share of total output.

question

The entry of firms into a market

answer

Reduces the profits of existing firms in the market.

question

A profit-maximizing producer seeks to

answer

Maximize total profit.

question

If long-run economic losses are being experienced in a competitive market,

answer

Equilibrium price will rise as firms exit.

question

In a perfectly competitive market economy, business failures can benefit society by causing

answer

A reallocation of resources to better uses.

question

The market supply curve in a perfectly competitive market is usually

answer

Upward-sloping.

question

Refer to Figure 23.2 for a perfectly competitive firm. This firm will maximize profits by producing the level of output that corresponds to point

answer

question

Economic losses are a signal to producers

answer

That they are not using resources in the best way.

question

Examples of barriers to entry include

answer

Patents

question

If a new sushi restaurant opens, then

answer

The market supply curve for sushi will shift to the right.

question

Other things being equal, as more firms enter a market, the market supply curve

answer

Shifts to the right.

question

Which of the following characterizes a firm that is in long-run perfectly competitive equilibrium where profits are maximized?

answer

Price equals minimum ATC.

question

The exit of firms from a market, ceteris paribus,

answer

Increases the equilibrium price in the market.

question

Marginal cost pricing means that a firm

answer

Produces up to the output where P = MC for a given market price.

question

If the price of ricotta cheese, an ingredient in lasagna, increases, then

answer

The market supply curve for lasagna will shift to the left.

question

When economic profits exist in the market for a particular product, this is a signal to producers that

answer

Consumers would like more scarce resources devoted to the production of this product.

question

Which of the following is characteristic of a perfectly competitive market?

answer

Zero economic profit in the long run.

question

Which of the following is not a barrier to entry?

answer

Perfect information.

question

A perfectly competitive market results in efficiency because

answer

Price is driven down to minimum ATC.

question

To determine the market supply, the quantities

answer

Supplied at each price by each supplier are added together.

question

All of the following are limitations on the market power of a monopoly except

answer

The ability of a company to control the quantity supplied.

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Which of the following was the first to prohibit "conspiracies in restraint of trade"?

answer

The Sherman Act.

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If a firm can raise market price by reducing its output, then

answer

It faces a downward-sloping demand curve.

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The ultimate market constraint on the exercise of market power

answer

Is the demand curve facing the monopolist.

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A monopoly

answer

Charges higher prices than competitive firms, ceteris paribus.

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Which of the following is a barrier to entry in a monopoly market?

answer

A patent on a new product.

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Which of the following is a barrier to entry in a monopoly market?

answer

Economies of scale.

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A monopoly

answer

Produces less output than a competitive industry, ceteris paribus.

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A monopolist has market power because it

answer

Faces a downward-sloping demand curve for its own output.

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Which of the following is the same for monopoly and competition under the same cost and demand conditions?

answer

The goal of maximizing profits.

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Which of the following is a barrier to entry into a monopoly market?

answer

Economies of scale.

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Both a competitive industry and a monopoly

answer

Face downward-sloping market demand curves.

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Price discrimination does not allow a producer to

answer

Designate a point above the market demand curve as the new equilibrium.

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Which of the following statements is not correct?

answer

A monopolist's ability to act as a price setter guarantees economic profits in the short run.

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The primary purpose of antitrust policy in the United States is to

answer

Encourage competition.

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If the entire output of a market is produced by a single seller, the firm

answer

Is a monopoly.

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Which of the following is likely to be a monopolist?

answer

A drug firm that has a patent granting it the exclusive right to produce a drug.

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Monopolists are price

answer

Makers, but competitive firms are price takers.

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A patent gives a firm the exclusive right to produce a product for

answer

20 years.

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If a monopolist is producing a level of output where MR exceeds MC, then it should

answer

Increase its output.

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A monopoly can have a high degree of market power because of all but

answer

The presence of many close substitutes for its product.

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At equilibrium in a monopoly, economic profits will most likely be

answer

Greater than zero.

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Which of the following does not contribute to a firm maintaining a monopoly?

answer

The presence of many close substitutes for its product.

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A barrier to entry is

answer

An obstacle that makes it difficult for new firms to enter a market.

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If a monopolist is producing a level of output where MR is less than MC, then it should

answer

Lower its output.

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Price discrimination is best defined as

answer

The selling of an identical good at different prices to different consumers by a single seller.

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Which of the following is not an example of price discrimination by the only movie theater in town?

answer

Charging one price at all times for all customers.

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Assume a monopoly confronts the same costs and demand as a competitive industry. In this case, the monopolist produces

answer

Less output and charges a higher price than the competitive industry.

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A firm can take advantage of economies of scale through

answer

Investment decisions to increase capacity.

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The price charged by a profit-maximizing monopolist occurs

answer

At a price on the demand curve above the intersection where MR = MC.

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An imperfection in the market mechanism that prevents optimal outcomes is called

answer

Market failure.

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When firms are interdependent,

answer

The profit of one firm depends on how its rivals respond to its strategic decisions.

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When oligopoly firms collude to raise prices,

answer

Each firm benefits, but society loses.

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Which of the following is not an argument to have less antitrust enforcement?

answer

Oligopolies can lead to less output and higher prices.

question

The only market structure in which there is significant interdependence among firms with regard to their pricing and output decisions is

answer

Oligopoly

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The soft drink market is dominated by Coke, Pepsi, and very few other firms. The firms often start price wars. The market can best be classified as

answer

Oligopoly

question

The Herfindahl-Hirshman Index is

answer

Used to identify cases worthy of antitrust concern.

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If all of your friends use the same instant messaging service provider, you are likely to use it too. This behavior may create

answer

A network economy.

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Suppose the larger firm of a duopoly has sales of $400 million and the smaller firm has sales of $100 million. The market share of the larger firm is

answer

80 percent.

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A contestable market is

answer

An imperfectly competitive situation that is subject to entry.

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There are many corn farmers, each of whom produces the same product. The corn market can best be classified as

answer

Perfect competition.

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Which of the following industries has the highest concentration ratio?

answer

Soft drinks.

question

The concentration ratio for an oligopoly is

answer

Over 60 percent.

question

Which of the following may characterize a monopoly?

answer

Substantial market power.

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Oligopolists will maximize total profits for all of the firms in the market at the rate of output where

answer

MR = MC for the market.

question

Game theory is

answer

The study of how decisions are made when interdependence exists between firms.

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If a firm in an oligopoly expands its market share at prevailing prices, its competitors

answer

Lose market share.

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What is the most likely response by rivals when an oligopolist cuts its price to increase its sales?

answer

Cut their prices.

question

Which of the following is the critical determinant of market power?

answer

The extent of barriers to entry.

question

The correct ranking of degree of market power (from highest to lowest) is

answer

Monopoly, oligopoly, monopolistic competition, perfect competition.

question

When U.S. government regulations that prevent goods from being imported are relaxed, this

answer

Reduces the barriers to entry into U.S. markets.

question

Collusion is undesirable and illegal because

answer

Resources are misallocated and the level of output is restricted.

question

answer

50 percent.

question

Which of the following market structures is characterized by the absence of market power?

answer

Perfect competition.

question

It is easiest for new firms to enter a

answer

Perfectly competitive market.

question

Market power leads to market failure when it results in

answer

Decreased market output.

question

General Electric and Westinghouse were convicted of

answer

Price-fixing.

question

If an oligopolist is going to change its price or output, its initial concern is

answer

The response of its competitors.

question

Product differentiation

answer

Involves advertising unique product features.

question

If a market changes from oligopoly to perfect competition, then as a result

answer

Output should increase in the long run.

question

Which of the following market structures will have lower prices in the long run than monopoly, ceteris paribus?

answer

Perfect competition, oligopoly, and monopolistic competition.

question

When new firms enter a monopolistically competitive industry, ceteris paribus, the

answer

Market price decreases.

question

A concentration ratio measures the

answer

Proportion of industry output produced by the largest firms.

question

Entry into a market characterized by monopolistic competition

answer

Is frequent because barriers to entry are low.

question

Entry into a market characterized by monopolistic competition is generally

answer

Very easy because few barriers exist.

question

A monopolistically competitive industry is characterized by ________ concentration ratios and ________ entry barriers.

answer

low; low

question

In monopolistic competition, a firm's demand curve is tangent to the ATC curve in the long run because

answer

Entry eliminates economic profit, and exit eliminates losses.

question

Which of the following is true about advertising?

answer

It is a form of nonprice competition.

question

Product differentiation occurs when

answer

Buyers perceive differences in the products of several companies.

question

Which of the following market structures will have only normal profit in the long run?

answer

Monopolistic competition.

question

Monopolistically competitive firms have a "monopoly" element to them because

answer

Brand loyalty gives them a captive audience.

question

A monopolistically competitive firm can raise its price somewhat without fear of great change in unit sales because of

answer

Brand loyalty.

question

When a monopolistically competitive firm advertises, it is attempting to increase

answer

The demand and decrease the price elasticity of demand for its product.

question

In the short run, a monopolistically competitive firm

answer

May make economic profits, but it fails to make economic profits in the long run because of the entry of new firms.

question

Product differentiation refers to

answer

Features that make one product appear different from competing products in the same market.

question

If new firms enter a monopolistically competitive market, the demand curves for the existing firms will

answer

Shift to the left.

question

Each producer in monopolistic competition has

answer

Some market power.

question

Which of the following is not true about advertising?

answer

It results in efficient allocation of resources.

question

When new firms enter a monopolistically competitive industry, the market

answer

Supply curve shifts to the right.

question

Both perfect competitors and monopolistic competitors

answer

Earn zero economic profit in the long run.

question

Which of the following market structures will have lower output in the long run than perfect competition, ceteris paribus?

answer

Monopolistic competition, oligopoly, and monopoly.

question

In monopolistic competition, a firm

answer

Uses nonprice competition.

question

In a monopolistically competitive market with negative economic profits,

answer

Firms will exit until economic profits are zero.

question

Firms in a monopolistically competitive market will

answer

Use the profit-maximizing rule MC = MR.

question

The main difference between perfect competition and monopolistic competition is

answer

The degree of product differentiation.

question

A major difference between monopoly and monopolistic competition is

answer

The number of firms in the market.

question

Monopolistically competitive industries are characterized by all of the following except

answer

Homogenous products.

question

Which of the following is not characteristic of monopolistic competition?

answer

Firms have zero control over price.

question

A major difference between oligopoly and monopolistic competition is that monopolistically competitive firms and oligopolies do not

answer

Have many competitors.

question

If a monopolistic competitor is maximizing profit, it is producing at a point where marginal cost

answer

Is less than price.

question

Students who major in computer science are paid a lot more when they graduate than those who major in philosophy because

answer

Information technology is a growth industry.

question

As labor productivity increases, which of the following shifts in the labor market should occur?

answer

Demand for labor should shift to the right.

question

Workers typically require higher wages in order to work additional hours because of the

answer

Increasing opportunity cost of labor.

question

The change in total revenue associated with one additional unit of input measures

answer

MRP

question

A production process is defined as

answer

The manufacturing of goods and services.

question

If a chair can be sold for $20 and it takes a worker two hours to make a chair, the marginal revenue product of this worker is

answer

$10 per hour.

question

The marginal physical product of labor is equal to

answer

The change in total output divided by the change in quantity of labor.

question

If the wage rate increases, there will be a

answer

Movement up the labor supply curve to the right.

question

When people are standing in line for jobs and there are more applicants than jobs, then the labor market is characterized by a

answer

Surplus of labor.

question

The willingness to work a certain amount of time at a given wage rate is known as

answer

Labor supply.

question

Other things being equal, which of the following would increase the market demand for labor?

answer

An increase in the marginal productivity of labor.

question

The demand for labor is downward-sloping because of

answer

Diminishing returns to labor.

question

The value of an hour of leisure can best be estimated as

answer

The hourly wage that could have been earned.

question

answer

Horizontal

question

If the demand for hair gel increases, the effect on the hair gel manufacturing job market will be to

answer

Increase the demand for labor and increase equilibrium wages.

question

The law of diminishing returns states that, ceteris paribus, the

answer

MPP of labor declines as more labor is employed.

question

The determinants of labor demand include

answer

The leisure-labor trade-off.

question

All of the following are true at the equilibrium wage in a competitive market except

answer

The market demand curve for labor intersects the market supply curve of labor.

question

Assume the apple market is competitive. If citizens want wages and the number of available jobs for apple pickers to increase, the best strategy would be to

answer

Buy more apples.

question

Marginal physical product diminishes as additional workers are hired because

answer

Each worker has an increasingly smaller amount of other factors with which to work.

question

As more hours are worked, the marginal utility of leisure time tends to

answer

Increase

question

Which of the following is not consistent with a minimum wage that is set above the equilibrium wage?

answer

There will be no unemployment.

question

The marginal revenue product of labor is equal to

answer

The marginal physical product multiplied by the marginal revenue of the output.

question

If there is an increase in the number of workers who want to work as accountants, there will be a

answer

Rightward shift of the labor supply curve.

question

If the price of the output produced by a particular type of labor decreases, which of the following shifts should occur in the labor market for the particular type of labor?

answer

Demand for labor should shift to the left.

question

The demand for labor and other factors of production typically decline in a recession because those factors

answer

Are derived from the demand for final output, which also declines in a recession.

question

When there are more qualified applicants than job openings, this indicates that the

answer

Wages being offered are too high.

question

The wage rate is

answer

The payment for labor.

question

If the number of employers for a particular type of labor increases, which of the following shifts should occur in the labor market for the particular type of labor?

answer

Supply of labor should shift to the left.

question

If the MPP of an additional unit of labor is 3 units per hour, product price is constant at $8 per unit, and the wage rate is $26 per hour, then

answer

The additional unit of labor should not be employed because it costs more than it is worth.

question

Trade restrictions

answer

Reduce the gains from trade for the country as a whole.

question

Increased trade restrictions

answer

Reduce total consumption possibilities.

question

If a country engages in trade with other countries, it is known as

answer

An open economy.

question

A beggar-thy-neighbor policy is

answer

The imposition of trade barriers for the purpose of expanding exports.

question

In terms of the world as a whole, imports must equal exports because

answer

Every good exported by one country becomes an import for another country.

question

Specialization in production

answer

Increases output.

question

Over a given period of time, if exports are greater than imports, the result is

answer

A trade surplus.

question

If a country is completely self-reliant in producing goods for its own consumption needs, then

answer

Its consumption possibilities equal its production possibilities.

question

According to the text, which of the following are both imports and exports for the United States?

answer

Cars, computers, and auto parts.

question

Which of the following groups has an interest in encouraging free trade?

answer

Workers in export industries.

question

A country with a comparative advantage in producing computer chips

answer

Has a lower opportunity cost of producing computer chips than its trading partners.

question

What should happen to the equilibrium price and quantity in a market as a result of a quota on imports?

answer

Equilibrium price should go up, and equilibrium quantity should go down.

question

When quotas are eliminated, losers include

answer

Domestic producers.

question

Goods and services purchased from international sources are

answer

Imports.

question

The benefits from international trade include

answer

Greater efficiency in the use of the world's limited resources.

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