question
When there is a permanent increase in market demand in a constant-cost industry, a firm's short-run average total cost curve will:
answer
a) become vertical
b) shift up
c) shift down
d) remain the same
b) shift up
c) shift down
d) remain the same
question
Perfect competition is defined as market structure in which:
answer
a) there are many small sellers.
b) the product is homogeneous.
c) it is very easy for firms to enter or exit the market.
d) All of the above answers are correct.
b) the product is homogeneous.
c) it is very easy for firms to enter or exit the market.
d) All of the above answers are correct.
question
Under perfect competition, which of the following are the same (equal) at all levels of output?
answer
a) Price and marginal cost
b) Price and marginal revenue
c) Marginal cost and marginal revenue
d) All of the above answers are correct
b) Price and marginal revenue
c) Marginal cost and marginal revenue
d) All of the above answers are correct
question
A portrait photographer produces output in packages of 100 photos each. If the output sold increases from 600 to 700 photos, total revenue increases from $1,200 to $1,400. What is the marginal revenue per photo?
answer
a) $200
b) $100
c) $20
d) $2
e) $1
b) $100
c) $20
d) $2
e) $1
question
In the short run, a perfectly competitive firm is producing at a price below average total cost. What is its economic profit?
answer
a) Positive
b) Zero
c) Negative
d) Normal
b) Zero
c) Negative
d) Normal
question
The point of maximum profit for a business firm is where:
answer
a) P = AC
b) TP = TC
c) MR = AR
d) MR =MC
b) TP = TC
c) MR = AR
d) MR =MC
question
When there is a permanent increase in market demand in a constant-cost industry, the industry's equilibrium price and quantity move along the industry's long-run supply curve, which is:
answer
a) upward sloping.
b) horizontal.
c) vertical.
d) downward sloping.
b) horizontal.
c) vertical.
d) downward sloping.
question
A perfectly competitive firm's short-run supply curve is the:
answer
a) average total cost curve.
b) demand curve above the marginal revenue curve.
c) same as the market supply curve.
d) marginal cost curve above the average variable cost curve.
b) demand curve above the marginal revenue curve.
c) same as the market supply curve.
d) marginal cost curve above the average variable cost curve.
question
Suppose there is a permanent decrease in market demand in a constant-cost industry. In the long-run, this change in demand will cause the industry to have:
answer
a) fewer firms and a lower market price.
b) fewer firms and no change in the market price.
c) fewer firms and a higher market price.
d) more firms and no change in the market price.
b) fewer firms and no change in the market price.
c) fewer firms and a higher market price.
d) more firms and no change in the market price.
question
In long-run equilibrium, the perfectly competitive firm sets its price equal to which of the following?
answer
a) Short-run average total cost
b) Short-run marginal cost
c) Long-run average cost
d) All of the above answers are correct
b) Short-run marginal cost
c) Long-run average cost
d) All of the above answers are correct
question
If there is a permanent increase in demand for the product of a perfectly competitive industry, the process of transition to a new long-run equilibrium will include:
answer
a) the entry of new firms.
b) temporarily higher profits.
c) both a and b.
d) neither a nor b.
b) temporarily higher profits.
c) both a and b.
d) neither a nor b.
question
The monopolist faces:
answer
a) a perfectly inelastic demand curve.
b) a perfectly elastic demand curve.
c) the entire market demand curve.
d) All of the answers above are correct.
b) a perfectly elastic demand curve.
c) the entire market demand curve.
d) All of the answers above are correct.
question
To maximize its profit, a monopoly should choose a price where demand is:
answer
a) elastic.
b) inelastic.
c) unitary elastic.
d) vertical.
b) inelastic.
c) unitary elastic.
d) vertical.
question
When marginal revenue is zero for a monopolist facing a downward-sloping straight-line demand curve, the price elasticity of demand is:
answer
a) greater than 1.
b) equal to 1.
c) less than 2.
d) equal to 0.
b) equal to 1.
c) less than 2.
d) equal to 0.
question
Both a perfectly competitive firm and a monopolist:
answer
a) always earn an economic profit.
b) maximize profit by setting marginal cost equal to marginal revenue.
c) maximize profit by setting marginal cost equal to average total cost.
d) are price takers.
b) maximize profit by setting marginal cost equal to marginal revenue.
c) maximize profit by setting marginal cost equal to average total cost.
d) are price takers.
question
Suppose a monopolist's demand curve lies below its average variable cost curve. The firm will:
answer
a) stay in operation in the short run.
b) earn an economic profit.
c) earn an economic profit in the long run.
d) shut down.
b) earn an economic profit.
c) earn an economic profit in the long run.
d) shut down.
question
Which of the following statements best describes the price, output, and profit conditions of monopoly?
answer
a) Price will equal marginal cost at the profit-maximizing level of output, and profits will be positive in the long run.
b) Price will always equal average variable cost in the short run, and either profits or losses may result in the long run.
c) In the long run, positive economic profit will be earned.
d) All of the answers above are correct.
b) Price will always equal average variable cost in the short run, and either profits or losses may result in the long run.
c) In the long run, positive economic profit will be earned.
d) All of the answers above are correct.
question
Which of the following is true for the monopolist?
answer
a) Marginal revenue is less than the price charged.
b) Economic profit is possible in the long run.
c) Profit maximizing or loss minimizing occurs when marginal revenue equals marginal cost.
d) All of the answers above are correct.
b) Economic profit is possible in the long run.
c) Profit maximizing or loss minimizing occurs when marginal revenue equals marginal cost.
d) All of the answers above are correct.
question
Although a monopoly can charge any price it wishes, it chooses
answer
a) the highest price.
b) the price equal to marginal cost.
c) the price that maximizes profit.
d) competitive prices.
e) a fair price.
b) the price equal to marginal cost.
c) the price that maximizes profit.
d) competitive prices.
e) a fair price.
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