AG BUSINESS FINAL REVIEW

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In a perfectly competitive market, if the price of the product is greater than the break-even price, we would expect to see a. firms increasing the price of the product b. firms decreasing the price of the product c. firms leaving the industry d. firms entering the industry e. a demand shift

Firms entering the industry

There are few firms and entry is difficult in a monopolistic competition structure.

False

Higher price variability is expected in those industries with higher a. fixed cost b. marginal cost c. government regulations d. variable cost e. technologies

Fixed cost

Those firms with relatively high __________ have relatively high _______________ a. costs; profits b. fixed costs; losses c. variable costs; profits d. fixed costs; price variability e. none of the above

Fixed costs; price variability

Profit is maximized when a. marginal cost = average total cost b. marginal revenue = average total cost c. total cost = total revenue d. marginal revenue is maximized e. none of the above

None of the above

The supply curve of a firm is equal to a. the demand curve of the firm b. the average variable cost curve of the firm c. the production function d. average total cost curve of the firm e. none of the above

None of the above

To maximize profits, the firm in monopolistic competition will adjust output to the point at which a. Revenue is maximized b. Variable costs are minimized c. Fixed costs are minimized d. Marginal revenue equals average revenue e. None of the above

None of the above

If the price of the product is less than the minimum average variable cost, then the form produces __________ and earns ___________ a. at MR = MC; negative profits b. at MR = MC; positive profits c. nothing; negative profits d. at minimum AVC; negative profit e. at minimum AVC; positive profit

Nothing; negative profits

The market structure in which the typical firm is reactive is a. oligopoly b. monopoly c. perfect competition d. monopolistic competition e. monopsony

Oligopoly

If fixed cost increase, then for the profit-maximizing firm?

Output remains constant

The "average" in average variable cost and average revenue means

Per unit of output

At the break-even point a. marginal cost is equal to average variable cost b. the economic profits of the firm are zero c. the rational range of production begins d. marginal revenue exceeds marginal cost e. none of the above

The economic profits of the firm are zero

A firm produces 20 units of stuff using 5 units of labor. The value of the total product is $60 and the total variable input cost is $20. What is the marginal revenue of the firm? a. $20 b. $60 c. $4 d. $3 e. cannot be determined from the information provided

$3

Which of the following is a constant with respect to output for the perfectly competitive firm? 1. Marginal revenue 2. Total fixed costs 3. Average fixed costs 4. Total revenue 5. Average revenue a. All five b. 1 and 5 only c. 1, 2, and 5 only d. 2, 4, and 5 only e. 1 only

1, 2, and 5 only

The distinguishing difference between a perfectly competitive firm and monopoly firm is a. marginal cost b. profit-maximizing behavior c. average revenue d. cost structure e. fixed cost

Average revenue

The defining characteristic of a monopoly is a. a perfectly horizontal demand curve b. entry is blocked c. they are always profitable d. profit maximization does not require MR=MC e. none of the above

Entry is blocked

A market size saturated by existing firms in the market is one of the necessary conditions for the presence of monopoly.

False

A typical supply curve is discontinuous at the break-even price.

False

Average cost can be defined as additional cost associated with producing one additional unit of output

False

Average variable cost and average fixed cost curves have a U-shape

False

Firms in low fixed-cost industries are slow to enter or leave the industry.

False

In the short-run, the production function is endogenous

False

Monopolistic competition is characterized by many firms selling homogeneous products.

False

The entry of other firms is completely blocked in the monopolistic competition structure.

False

The firm supply curve is the marginal cost curve above the break-even price.

False

An industry that experience wide price swings that are not accompanied by firm entering or leaving the industry is an industry in which the typical firm a. has high profits b. has high fixed costs c. is operating below the shut-down point d. has pure economic profits of zero e. none of the above

Has high fixed costs

The monopolistic competition market structure differs from the perfectly competitive market structure most strongly with regards to which assumption? a. many firm b. homogeneous product c. no limits to entry/exit d. perfect knowledge e. mobile resources

Homogenous product

Oligopolistic firms are characterized by a. a unique cost structure b. product differentiation c. price discimination d. elastic demand e. interdependence

Interdependence

In an oligopolistic market, the firms are _________ and pricing tends to be __________ a. many; competitive b. large; controlled by the largest firm c. small; competitive d. Interdependent; reactive e. none of the above

Interdependent; Reactive

The marginal revenue curve for the perfectly competitive firm

Is a straight, horizontal line

For a monopoly firm, the profit-maximizing output is at that level where __________ and the price of the product is determined from ___________ a. AR = MR; MR b. MC = MR; MR c. AR = MR; AR d. MC = MR; AR e. none of the above

MC = MR; AR

In the short-run, the supply curve of the firm is equal to a portion of the firm's a. MR curve b. MC curve c. AFC curve d. TVC curve e. Production function

MC curve

To maximize profit, the perfectly competitive firm should adjust output to that point at which a. AVC = ATC b. MC = AVC c. MR = MC d. TVC = AVC

MR = MC

In a perfectly competitive, long-run equilibrium, the price of the product is equal to the a. shut-down price b. minimum average total cost c. minimum marginal cost d. minimum average variable cost e. none of the above

Minimum average total cost

A change in the ____________ would NOT cause a shift in the supply of yellow squash a. price of bell peppers b. price of fertilizer c. price of yellow squash d. price of labor e. number of squash producers

Price of yellow squash

A firm in a monopolistically competitive industry finds that the additional cost of producing one additional unit of output is $4 and the additional revenue that could be earned from that additional output is $5. This firm should a. increase costs b. reduce price c. produce more d. produce less e. advertise more

Produce more

In monopolistic competition, the firm attempts to acquire a quasi-monopoly position by a. pricing the product below cost b. product differentiation c. maintaining market share d. cutting price to a level below the prices of competitors e. none of the above

Product differentiation

What drives and distinguishes monopolistic competition is a. product differentiation b. price retaliation c. uniform prices d. market expansion e. none of the above

Product differentiation

For a perfectly competitive, profit-maximizing firm, an increase in the fixed costs would cause the

Profits of the firm to fall

The typical, perfectly competitive, corn farmer has no control over each of the following in the short run EXCEPT

Quantity of fertilizer used

If the marginal revenue is less than the marginal cost, then profit-maximizing firm should a. reduce output b. increase output c. leave output where it is d. increase cost

Reduce output

The rational range of production begins at the a. minimum average total cost b. maximum average variable cost c. minimum marginal cost d. shut-down point e. break-even point

Shut- down point

Which of the following is NOT a supply shifter for tomatoes grown in south Florida? a. the price of labor b. productivity of labor c. the price of fertilizer d. the price of tomatoes e. none of the above

The price of tomatoes

In order for a monopoly to continue to be a monopoly a. marginal revenue must equal to marginal cost b. marginal revenue curve must be downward sloping c. there must be no close substitutes d. average total costs must be decreasing e. none of the above

There must be no close substitutes

Fixed costs are exogenous

True

For monopoly firm, a marginal revenue curve lies always below an average revenue curve.

True

If price is below the minimum average variable cost, then it is better to produce nothing

True

In a perfectly competitive structure, the firm's supply curve is the firm's marginal cost curve.

True

In the real world, both perfect competition and pure monopoly are rare.

True

Profit maximization will always occur in the rational range of production.

True

The firm will stop producing if average revenue is less than minimum average variable cost.

True

A profit-maximizing firm is producing 40 units of stuff using 10 units of labor. The price of stuff is $3/unit and the price of labor is $10. What is the average variable cost? a. $2.5 b. $3 c. $5 d. $10 e. cannot be determined from the information provided

a. $2.5

In a perfectly competitive market, if the price of the product is greater than the break-even price, we would expect to see a. firms increasing the price of the product b. firms decreasing the price of the product c. firms leaving the industry d. firms entering the industry e. a demand shift

c. additional firms will enter the industry, driving the price of the product down

In the widget industry, a high proportion of total costs is fixed costs. In the gadget industry, fixed costs are a small proportion of total costs. Therefore, a. the price of widget is greater than the price if gadgets b. the average total costs of widgets is greater than for gadgets c. a higher degree of price variability is expected in the market for gadgets than for widgets d. a higher degree of price variability is expected in the market for widgets than for gadgets e. none of the above

d. a higher degree of price variability is expected in the market for widgets than for gadgets


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