Ch8-11
31. Refer to the above diagram. At the profit-maximizing level of output, the firm will realize: A. an economic profit of ABHJ. B. an economic profit of ACGJ. C. a loss of GH per unit. D. a loss of JH per unit.
A
33. Refer to the above diagrams. Firm A is a: A. pure competitor and Firm B is a pure monopoly. B. pure competitor, as is Firm B. C. pure monopoly and Firm B is a pure competitor. D. pure monopoly, as is Firm B.
A
39. Refer to the above diagrams. Diagram (A) represents: A. equilibrium price and quantity in a purely competitive industry. B. the pure monopoly model. C. an industry in which there is productive efficiency but not allocative efficiency. D. a single firm operating in a purely competitive industry.
A
45. Refer to the above diagram. At the profit-maximizing output, total revenue will be: A. 0AHE. B. 0BGE. C. 0CFE. D. ABGE.
A
Which of the following is not a characteristic of pure competition? A. price strategies by firms B. a standardized product C. no barriers to entry D. a larger number of sellers
A
Which of the following is incorrect? Imperfectly competitive producers: A. face downsloping demand curves. B. do not compete with one another. C. can alter their output by changing price. D. find that, when they reduce price, their total revenue increases by less than the new price.
B
Which of the following is most likely to be a fixed cost? A. shipping charges B. property insurance premiums C. wages for unskilled labor D. expenditures for raw materials
B
Which of the following is not a basic characteristic of monopolistic competition? A. the use of trademarks and brand names B. recognized mutual interdependence C. product differentiation D. a relatively large number of sellers
B
A one-firm industry is known as: A. monopolistic competition. B. oligopoly. C. pure monopoly. D. pure competition.
C
Monopolistic competition means: A. a market situation where competition is based entirely on product differentiation and advertising. B. a large number of firms producing a standardized or homogeneous product. C. many firms producing differentiated products. D. a few firms producing a standardized or homogeneous product.
C
(Last Word) Increased concentration in the beer industry has been caused by: A. changes in consumer tastes from the strong beers of small breweries to the light beers of the large brewers. B. a shift of beer consumption from bars to homes. C. technological progress which has speeded up canning and bottling lines and lowered costs. D. all of these factors.
D
11. Refer to the above two diagrams for individual firms. In Figure 1, line A represents the firm's: A. demand and marginal revenue curves. B. demand curve only. C. marginal revenue curve only. D. total revenue curve only.
D
12. Refer to the above two diagrams for individual firms. Figure 2 pertains to: A. a market characterized by government regulation of price and output. B. either an imperfectly competitive or a purely competitive seller. C. a purely competitive seller. D. an imperfectly competitive seller.
D
26. Refer to the above data. At its profit-maximizing output, this firm's total revenue will be: A. $300. B. $198. C. $180. D. $280.
D
30. Refer to the above diagram. At the profit-maximizing level of output, total cost will be: A. NM times 0M. B. 0AJE. C. 0CGC. D. 0BHE
D
19. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. The profit-maximizing output for this firm will be: A. 100. B. 160. C. 180. D. 210.
B
9. Refer to the above two diagrams for individual firms. Figure 1 pertains to: A. an imperfectly competitive firm. B. a purely competitive firm. C. an oligopolist. D. a pure monopolist.
B
A break-down in price leadership leading to successive rounds of price cuts is known as: A. limit pricing B. a price war C. informal pricing D. price discrimination
B
An industry comprised of four firms, each with about 25 percent of the total market for a product is an example of: A. monopolistic competition. B. oligopoly. C. pure monopoly. D. pure competition.
B
CH 8 #43 In the above diagram it is assumed that: A. some costs are fixed and other costs are variable. B. all costs are variable. C. the law of diminishing returns determines the shape of the cost curve. D. marginal product first falls, but ultimately rises as output is increased.
B
CH 8 #44 Refer to the above diagram. Economies of scale: A. are evident over the entire range of output. B. occur over the 0Q1 range of output. C. begin at output Q3. D. occur only over the Q1Q3 range of output.
B
Which of the following statements concerning a monopolistically competitive industry is correct? A. If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms will shift to the right. B. If there are short-run economic profits, firms will enter the industry and the demand curves of existing firms will shift to the right. C. If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms will shift to the left. D. If there are short-run economic profits, firms will leave the industry and the demand curves of the remaining firms will shift to the right.
A
Which of the following best expresses the law of diminishing returns? A. Because large-scale production allows the realization of economies of scale, the real costs of production vary directly with the level of output. B. Population growth automatically adjusts to that level at which the average product per worker will be at a maximum. C. As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra output will decline. D. Proportionate increases in the inputs of all resources will result in a less-than-proportionate increase in total output.
C
Which of the following conditions is true for a purely competitive firm in long-run equilibrium? A. P > MC = minimum ATC. B. P > MC > minimum ATC. C. P = MC = minimum ATC. D. P < MC < minimum ATC.
C
Which of the following is correct? A. Both purely competitive and monopolistic firms are "price takers." B. Both purely competitive and monopolistic firms are "price makers." C. A purely competitive firm is a "price taker," while a monopolist is a "price maker." D. A purely competitive firm is a "price maker," while a monopolist is a "price taker."
C
In the long-run, a profit-maximizing monopolistically competitive firm sets it price: A. above marginal cost. B. below marginal cost. C. equal to marginal revenue. D. equal to marginal cost.
A
In which of the following industry structures is the entry of new firms the most difficult? A. pure monopoly B. oligopoly C. monopolistic competition D. pure competition
A
In which of the following market models do demand and marginal revenue diverge? A. pure monopoly, oligopoly, and monopolistic competition B. pure monopoly, oligopoly, and pure competition C. pure monopoly only D. oligopoly only
A
Marginal product is: A. the increase in total output attributable to the employment of one more worker. B. the increase in total revenue attributable to the employment of one more worker. C. the increase in total cost attributable to the employment of one more worker. D. total product divided by the number of workers employed.
A
OUTPUT MARGINAL REVENUE MARGINAL COST 0 --- --- 1 16 10 2 16 9 3 16 13 4 16 17 5 16 21 Refer to the above data. At the profit-maximizing output the firm's total revenue is: A. $48. B. $32. C. $80. D. $64.
A
Oligopolistic industries are characterized by: A. a few dominant firms and substantial entry barriers. B. a few dominant firms and no barriers to entry. C. a large number of firms and low entry barriers. D. a few dominant firms and low entry barriers.
A
The MR = MC rule applies: A. to firms in all types of industries. B. only when the firm is a "price taker." C. only to monopolies. D. only to purely competitive firms.
A
The MR = MC rule can be restated for a purely competitive seller as P = MC because: A. each additional unit of output adds exactly its price to total revenue. B. the firm's average revenue curve is downsloping. C. the market demand curve is downsloping. D. the firm's marginal revenue and total revenue curves will coincide.
A
The first, second, and third workers employed by a firm add 24, 18, and 9 units to total product respectively. Therefore, the: A. marginal product of the third worker is 9. B. total product of the three workers is 54. C. average product of the three workers is 18. D. marginal product of the first worker is 18.
A
The kinked-demand curve describes a situation in which an oligopolist will be: A. interested in maintaining the going price unless there is a rather large change in costs. B. anxious to either increase or lower price. C. anxious to increase price but not to lower price. D. anxious to lower price but not to increase price.
A
The kinked-demand curve model helps to explain price rigidity because: A. there is a gap in the marginal revenue curve within which changes in marginal cost will not affect output or price. B. demand is inelastic above and elastic below the going price. C. the model assumes firms are engaging in some form of collusion. D. the associated marginal revenue curve is perfectly elastic at the going price.
A
The law of diminishing returns indicates that: A. as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point. B. because of economies and diseconomies of scale a competitive firm's long-run average total cost curve will be U-shaped. C. the demand for goods produced by purely competitive industries is downsloping. D. beyond some point the extra utility derived from additional units of a product will yield the
A
The nondiscriminating monopolist's demand curve: A. is less elastic than a purely competitive firm's demand curve. B. is perfectly elastic. C. coincides with its marginal revenue curve. D. is perfectly inelastic.
A
Which of the following is characteristic of a purely competitive seller's demand curve? A. Price and marginal revenue are equal at all levels of output. B. Average revenue is less than price. C. Its elasticity coefficient is 1 at all levels of output. D. It is the same as the market demand curve.
A
Which of the following statements is correct? A. Economic profits induce firms to enter an industry; losses encourage firms to leave. B. Economic profits induce firms to leave an industry; profits encourage firms to leave. C. Economic profits and losses have no significant impact on the growth or decline of an industry.
A
(Last Word) The U.S. beer industry: A. has become monopolistically competitive as the result of new production technologies. B. has evolved from monopolistic competition to oligopoly in the past 50 years. C. is populated by hundreds of relatively large, independent brewers. D. approximates the purely competitive market model.
B
. Economic profit in the long run is: A. possible for both a pure monopoly and a pure competitor. B. possible for a pure monopoly, but not for a pure competitor. C. impossible for both a pure monopolist and a pure competitor. D. only possible when barriers to entry are nonexistent.
B
. In an oligopolistic market: A. one firm is always dominant. B. products may be standardized or differentiated. C. the four largest firms account for 20 percent or less of total sales. D. the industry is monopolistically competitive.
B
. The Herfindahl index for a pure monopolist is: A. 100. B. 10,000. C. 100,000. D. 10.
B
. The kinked-demand curve model of oligopoly: A. assumes a firm's rivals will ignore a price cut but match a price increase. B. embodies the possibility that changes in unit costs will have no effect on equilibrium price and output. C. assumes a firm's rivals will match any price change it may initiate. D. assumes a firm's rivals will ignore any price change it may initiate.
B
. The lowest point on a purely competitive firm's short-run supply curve corresponds to: A. the minimum point on its ATC curve. B. the minimum point on its AVC curve. C. the minimum point on its AFC curve. D. the minimum point on its MC curve.
B
20. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm will realize an economic: A. loss of $320. B. profit of $480. C. profit of $280. D. profit of $600.
B
24. Refer to the above data for a nondiscriminating monopolist. This firm will maximize its profit by producing: A. 3 units. B. 4 units. C. 5 units. D. 6 units.
B
27. Refer to the above diagram for a monopolistically competitive firm. If more firms were to enter the industry and product differentiation were to weaken, then: A. resource misallocation would become more severe. B. the demand curve would become more elastic. C. equilibrium output would decline and equilibrium price would rise. D. equilibrium output would decline and equilibrium price would fall.
B
28. Refer to the above diagram. To maximize profits or minimize losses this firm should produce: A. E units and charge price C. B. E units and charge price A. C. M units and charge price N. D. L units and charge price LK.
B
29. Refer to the above diagram. At the profit-maximizing level of output, total revenue will be: A. NM times 0M. B. 0AJE. C. 0EGC. D. 0EHB.
B
40. Refer to the above diagram for a purely competitive producer. The lowest price at which the firm should produce (as opposed to shutting down) is: A. P1. B. P2. C. P3. D. P4.
B
43. Refer to the above diagram for a purely competitive producer. The firm's short-run supply curve is: A. the abcd segment and above on the MC curve. B. the bcd segment and above on the MC curve. C. the cd segment and above on the MC curve. D. not shown.
B
47. Refer to the above diagram. At the profit-maximizing output, total variable cost is equal to: A. 0AHE. B. 0CFE. C. 0BGE. D. ABGH.
B
56. The above diagram portrays: A. a competitive firm that should shut down in the short run. B. the equilibrium position of a competitive firm in the long run. C. a competitive firm that is realizing an economic profit. D. the loss-minimizing position of a competitive firm in the short run.
B
57. Refer to the above diagram. If this competitive firm produces output Q, it will: A. suffer an economic loss. B. earn a normal profit. C. earn an economic profit. D. achieve productive efficiency, but not allocative efficiency.
B
A perfectly elastic demand curve implies that the firm: A. must lower price to sell more output. B. can sell as much output as it chooses at the existing price. C. realizes an increase in total revenue which is less than product price when it sells an extra unit. D. is selling a differentiated (heterogeneous) product.
B
A purely competitive firm's short-run supply curve is: A. perfectly elastic at the minimum average total cost. B. upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve. C. upsloping and equal to the portion of the marginal cost curve that lies above the average total cost curve. D. upsloping only when the industry has constant costs.
B
Cartels are difficult to maintain in the long run because: A. they are illegal in all industrialized countries. B. individual members may find it profitable to cheat on agreements. C. it is more profitable for the industry to charge a lower price and produce more output. D. entry barriers are insignificant in oligopolistic industries.
B
Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's: A. price, output, and average total cost would all be higher. B. price and average total cost would be higher, but output would be lower. C. price, output, and average total cost would all be lower. D. price and output would be lower, but average total cost would be higher.
B
Costs to an economist: A. consist only of explicit costs. B. may or may not involve monetary outlays. C. never reflect monetary outlays. D. always reflect monetary outlays.
B
Diseconomies of scale arise primarily because: A. the short-run average total cost curve rises when marginal product is increasing. B. of the difficulties involved in managing and coordinating a large business enterprise. C. firms must be large both absolutely and relative to the market to employ the most efficient productive techniques available. D. beyond some point marginal product declines as additional units of a variable resource (labor) are added to a fixed resource (capital).
B
Economies of scale are indicated by: A. the rising segment of the average variable cost curve. B. the declining segment of the long-run average total cost curve. C. the difference between total revenue and total cost. D. a rising marginal cost curve.
B
Fixed cost is: A. the cost of producing one more unit of capital, say, machinery. B. any cost which does not change when the firm changes its output. C. average cost multiplied by the firm's output. D. usually zero in the short run.
B
If a firm doubles its output in the long run and its unit costs of production decline, we can conclude that: A. technological progress has occurred. B. economies of scale are being realized. C. the firm is encountering diminishing returns. D. diseconomies of scale are being encountered.
B
If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing: A. marginal revenue and marginal cost. B. price and minimum average variable cost. C. total revenue and total cost. D. total revenue and total fixed cost.
B
If a nondiscriminating pure monopolist decides to sell one more unit of output, the marginal revenue associated with that unit will be: A. equal to its price. B. the price at which that unit is sold less the price reductions which apply to all other units of output. C. the price at which that unit is sold plus the price increases which apply to all other units of output. D. indeterminate unless marginal cost data are known.
B
If a technological advance increases a firm's labor productivity, we would expect its: A. average total cost curve to rise. B. average total cost curve to fall. C. total cost curve to rise. D. average total cost curve to be unaffected.
B
If all monopolistically competitive firms in the industry have profit circumstances similar to the firm shown above: A. new firms will enter the industry. B. some firms will exit the industry. C. all firms will exit the industry. D. no firms will exit the industry.
B
If an oligopolist is faced with a marginal revenue curve that has a gap in it, we may assume that: A. it is colluding with its rivals to maximize joint profits. B. its demand curve is kinked. C. it is selling a standardized product. D. it is selling a differentiated product.
B
If the firms in an oligopolistic industry can establish an effective cartel, the resulting output and price will approximate those of: A. a purely competitive producer. B. a pure monopoly. C. a monopolistically competitive producer. D. an industry with a low four-firm concentration ratio.
B
In pure competition in the long run when firms are in an increasing cost industry, the entry of additional firms causes: a. cost per unit to fall, prices to rise and profits to increase. b. cost per unit to rise, prices to fall and profits to decrease. c. cost per unit to rise, prices to fall and profits to increase. d. cost per unit to fall, prices to rise and profits to decrease.
B
In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to: A. average total cost. B. marginal revenue. C. average variable cost. D. average cost.
B
In the short run the individual competitive firm's supply curve is that segment of the: A. average variable cost curve lying below the marginal cost curve. B. marginal cost curve lying above the average variable cost curve. C. marginal revenue curve lying below the demand curve. D. marginal cost curve lying between the average total cost and average variable cost curves.
B
In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies? A. pure monopoly B. oligopoly C. monopolistic competition D. pure competition
B
Marginal cost is the: A. rate of change in total fixed cost that results from producing one more unit of output. B. change in total cost that results from producing one more unit of output. C. change in average variable cost that results from producing one more unit of output. D. change in average total cost that results from producing one more unit of output.
B
Mutual interdependence means that each oligopolistic firm: A. faces a perfectly elastic demand for its product. B. must consider the reactions of its rivals when it determines its price policy. C. produces a product identical to those of its rivals. D. produces a product similar but not identical to the products of its rivals.
B
OUTPUT MARGINAL REVENUE MARGINAL COST 0 --- --- 1 16 10 2 16 9 3 16 13 4 16 17 5 16 21 Refer to the above data. At the profit-maximizing output the firm's total cost is: A. $48. B. $32. C. $80. D. $64.
B
OUTPUT MARGINAL REVENUE MARGINAL COST 0 --- --- 1 16 10 2 16 9 3 16 13 4 16 17 5 16 21 Refer to the above data. If the firm's minimum average variable cost is $10, the firm's profit-maximizing level of output would be: A. 2. B. 3. C. 4. D. 5.
B
OUTPUT MARGINAL REVENUE MARGINAL COST 0 --- --- 1 16 10 2 16 9 3 16 13 4 16 17 5 16 21 Refer to the above data. The firm's: A. economic profit is $12. B. economic profit is $16. C. loss is $14. D. economic profit is $3.
B
Other things equal, if more firms enter a monopolistically competitive industry: A. the demand curves facing existing firms would shift to the right. B. the demand curves facing existing firms would shift to the left. C. the demand curves facing existing firms would become less elastic. D. losses would necessarily occur.
B
Price exceeds marginal revenue for the pure monopolist because the: A. law of diminishing returns is inapplicable. B. demand curve is downsloping. C. monopolist produces a smaller output than would a purely competitive firm. D. demand curve lies below the marginal revenue curve.
B
The basic characteristic of the short run is that: A. barriers to entry prevent new firms from entering the industry. B. the firm does not have sufficient time to change the size of its plant. C. the firm does not have sufficient time to cut its rate of output to zero. D. a firm does not have sufficient time to change the amounts of any of the resources it employs.
B
The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______. A. perfectly inelastic, perfectly elastic B. downsloping, perfectly elastic C. downsloping, perfectly inelastic D. perfectly elastic, downsloping
B
The demand schedule or curve confronted by the individual purely competitive firm is: A. relatively elastic, that is, the elasticity coefficient is greater than unity. B. perfectly elastic. C. relatively inelastic, that is, the elasticity coefficient is less than unity. D. perfectly inelastic.
B
The likelihood of a cartel being successful is greater when: A. firms are producing a differentiated, rather than a homogeneous, product. B. cost and demand curves of various participants are very similar. C. the number of firms involved is relatively large. D. the economy is in the recession phase of the business cycle.
B
The long-run average total cost curve: A. will rise if diminishing returns are encountered. B. will fall if diminishing returns are encountered. C. will rise if economies of scale are incurred. D. is based on the assumption that all resources are variable.
B
The practice of price discrimination is associated with pure monopoly because: A. it can be practiced whenever a firm's demand curve is downsloping. B. monopolists have considerable ability to control output and price. C. monopolists usually realize economies of scale. D. most monopolists sell differentiated products.
B
The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the: A. output-maximizing rule. B. profit-maximizing rule. C. shut-down rule. D. break-even rule.
B
The short-run average total cost curve is U-shaped because: A. average fixed costs decline continuously as output increases. B. of increasing and diminishing returns. C. of economies and diseconomies of scale. D. minimum efficient scale is encountered.
B
To economists, the main difference between the short run and the long run is that: A. the law of diminishing returns applies in the long run, but not in the short run. B. in the long run all resources are variable, while in the short run at least one resource is fixed. C. fixed costs are more important to decision making in the long run than they are in the short run. D. in the short run all resources are fixed, while in the long run all resources are variable.
B
Under pure competition in the long run: A. neither allocative efficiency nor productive efficiency are achieved. B. both allocative efficiency and productive efficiency are achieved. C. productive efficiency is achieved, but allocative efficiency is not. D. allocative efficiency is achieved, but productive efficiency is not.
B
Use the following data to answer the next question(s): Input of Labor Total Products 0 0 1 8 2 18 3 25 4 30 5 33 6 34 7 32 13. Refer to the above data. The average product (AP) when two units of labor are hired is: A. 8. B. 9. C. 10. D. 18.
B
Which of the following correctly arrays the various market structures in terms of their similarities to one another? A. pure competition, oligopoly, monopolistic competition, pure monopoly B. pure monopoly, oligopoly, monopolistic competition, pure competition C. pure competition, pure monopoly, monopolistic competition, oligopoly D. pure competition, oligopoly, pure monopoly, monopolistic competition
B
Which of the following is correct as it relates to cost curves? A. Average variable cost intersects marginal cost at the latter's minimum point. B. Marginal cost intersects average total cost at the latter's minimum point. C. Average fixed cost intersects marginal cost at the latter's minimum point. D. Marginal cost intersects average fixed cost at the latter's minimum point.
B
With respect to the pure monopolist's demand curve it can be said that: A. the stronger the barriers to entry, the more elastic is the monopolist's demand curve. B. price exceeds marginal revenue at all outputs greater than 1. C. demand is perfectly inelastic. D. marginal revenue equals price at all outputs.
B
Accounting profits are typically: A. greater than economic profits because the former do not take explicit costs into account. B. equal to economic profits because accounting costs include all opportunity costs. C. smaller than economic profits because the former do not take implicit costs into account. D. greater than economic profits because the former do not take implicit costs into account.
D
An industry comprised of a very large number of sellers producing a standardized product is known as: A. monopolistic competition. B. oligopoly. C. pure monopoly. D. pure competition.
D
Answer the next question(s) on the basis of the following information: TFC=Total Fixed Cost MC=Marginal Cost TVC=Total Varial Cost Q=Quantity of Output P=Product Price Refer to the above information. Average total cost is: A. TVC-MC B. TVC-TFC/Q C. TVC/Q D. TFC+TVC/Q
D
Assume a pure monopolist is currently operating at a price-quantity combination on the inelastic segment of its demand curve. If the monopolist is seeking maximum profits, it should: A. retain its current price-quantity combination. B. increase both price and quantity sold. C. charge a lower price. D. charge a higher price.
D
Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation: A. should close down in the short run. B. is maximizing its profits. C. is realizing a loss of $60. D. is realizing an economic profit of $40.
D
Average fixed cost: A. equals marginal cost when average total cost is at its minimum. B. may be found for any output by adding average variable cost and average total cost. C. graphs as a U-shaped curve. D. declines continually as output increases.
D
Economic profits are calculated by subtracting: A. explicit costs from total revenue. B. implicit costs from total revenue. C. implicit costs from normal profits. D. explicit and implicit costs from total revenue.
D
For a purely competitive firm total revenue: A. is price times quantity sold. B. increases by a constant absolute amount as output expands. C. graphs as a straight upsloping line from the origin. D. has all of these characteristics.
D
If profits are made in purely competitive market in the long run: a. additional firms will enter. b. the market supply curve will shift to the right. c. economic profits will be eliminated. d. all of the above.
D
In answering the next question(s), assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis. Refer to the above information. For a purely competitive firm: A. marginal revenue will graph as an upsloping line. B. the demand curve will lie above the marginal revenue curve. C. the marginal revenue curve will lie above the demand curve. D. the demand and marginal revenue curves will coincide.
D
Marginal product becomes negative with the hiring of the __________ unit of labor. A. third B. fourth C. sixth D. seventh
D
Marginal revenue is the: A. change in product price associated with the sale of one more unit of output. B. change in average revenue associated with the sale of one more unit of output. C. difference between product price and average total cost. D. change in total revenue associated with the sale of one more unit of output.
D
Monopolistic competition resembles pure competition because: A. both industries emphasize nonprice competition. B. in both instances firms will operate at the minimum point on their long-run average total cost curves. C. both industries entail the production of differentiated products. D. barriers to entry are either weak or nonexistent.
D
Product differentiation is present in: A. purely competitive markets only. B. monopolistically competitive markets only. C. oligopolistic markets only. D. both monopolistically competitive and oligopolistic markets.
D
Refer to the above diagram, which pertains to a purely competitive firm. Curve A represents: A. total revenue and marginal revenue. B. marginal revenue only. C. total revenue and average revenue. D. total revenue only.
D
Refer to the above diagram, which pertains to a purely competitive firm. Curve C represents: A. total revenue and marginal revenue. B. marginal revenue only. C. total revenue and average revenue. D. average revenue and marginal revenue.
D
The MR = MC rule: A. applies only to pure competition. B. applies only to pure monopoly. C. does not apply to pure monopoly because price exceeds marginal revenue. D. applies both to pure monopoly and pure competition.
D
The relationship between the marginal cost and the average total cost schedule is such that: A. the behavior of one schedule does not affect the other. B. if ATC exceeds MC, MC must be rising. C. if MC is declining, ATC may be either declining or rising. D. if MC is declining, ATC must also be declining.
D
Under which of the following market structures will the long-run equilibrium price be equal to marginal cost? A. oligopoly B. monopolistic competition C. pure monopoly D. pure competition
D
When a monopolistically competitive firm is in long-run equilibrium: A. P = MC = ATC. B. MR = MC and minimum ATC > P. C. MR > MC and P = minimum ATC. D. MR = MC and P > minimum ATC.
D
Which of the following is correct? A. There is no relationship between MP and MC. B. When AP is rising MC is falling, and when AP is falling MC is rising. C. When MP is rising MC is rising, and when MP is falling MC is falling. D. When MP is rising MC is falling, and when MP is falling MC is rising.
D
. Diminishing returns begin to occur with the hiring of the _________ unit of labor. A. first B. second C. third D. seventh
C
Answer the next question(s) on the basis of the following information: TFC=Total Fixed Cost MC=Marginal Cost TVC=Total Varial Cost Q=Quantity of Output P=Product Price 25. Refer to the above information. Average fixed cost is: A. TVC-MC B. MC/Q C. TFC/Q D. TVC/Q
C
Answer the next question(s) on the basis of the following information: TFC=Total Fixed Cost MC=Marginal Cost TVC=Total Varial Cost Q=Quantity of Output P=Product Price Refer to the above information. Total cost is: A. The change in marginal cost B. TVC-TFC C. TFC+TVC D. TFC+TVC/Q
C
Barriers to entry in oligopolistic industries may consist of: A. diseconomies of scale. B. diminishing returns. C. ownership of essential resources. D. patent expirations.
C
CH 8 #45 Refer to the above diagram. Diseconomies of scale: A. begin at output Q1. B. occur over the Q1Q3 range of output. C. begin at output Q3. D. are in evidence at all output levels.
C
CH8 #29 In the above figure, curves 1, 2, 3, and 4 represent the: A. ATC, MC, AFC, and AVC curves respectively. B. MC, AFC, AVC, and ATC curves respectively. C. MC, ATC, AVC, and AFC curves respectively. D. ATC, AVC, AFC, and MC curves respectively
C
Concentration ratios measure the: A. geographic location of the largest corporations in each industry. B. degree to which product price exceeds marginal cost in various industries. C. percentage of total sales accounted for by the four largest firms in the industry. D. number of firms in an industry.
C
Confronted with the same unit cost data, a monopolistic producer will charge: A. the same price and produce the same output as a competitive firm. B. a higher price and produce a larger output than a competitive firm. C. a higher price and produce a smaller output than a competitive firm. D. a lower price and produce a smaller output than a competitive firm.
C
Firms seek to maximize: A. per unit profit. B. total revenue. C. total profit. D. market share.
C
If a firm decides to produce no output in the short run, its costs will be: A. its marginal costs. B. its fixed plus its variable costs. C. its fixed costs. D. zero.
C
If a purely competitive firm shuts down in the short run: A. its loss will be zero. B. it will realize a loss equal to its total variable costs. C. it will realize a loss equal to its total fixed costs. D. it will realize a loss equal to its total costs.
C
If marginal cost is: A. falling, then average total cost must also be falling. B. rising, then average total cost must also be rising. C. rising, then average total cost could be either falling or rising. D. falling, then average total cost could be either falling or rising.
C
In a purely competitive industry: A. there will be no economic profits in either the short run or the long run. B. economic profits may persist in the long run if consumer demand is strong and stable. C. there may be economic profits in the short run, but not in the long run. D. there may be economic profits in the long run, but not in the short run.
C
In answering the next question(s), assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis. Refer to the above information. For a purely competitive firm, marginal revenue: A. graphs as a straight, upsloping line. B. is a straight line, parallel to the vertical axis. C. is a straight line, parallel to the horizontal axis. D. graphs as a straight, downsloping line.
C
Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from: A. rising marginal costs. B. a perfectly elastic product demand curve. C. relatively easy entry. D. product differentiation and development.
C
Marginal product: A. diminishes at all levels of production. B. may initially increase, then diminish, but never become negative. C. may initially increase, then diminish, and ultimately become negative. D. is always less than average product.
C
Marginal revenue for a purely competitive firm: A. is greater than price. B. is less than price. C. is equal to price. D. may be either greater or less than price.
C
Monopolistic competition is characterized by a: A. few dominant firms and low entry barriers. B. large number of firms and substantial entry barriers. C. large number of firms and low entry barriers. D. few dominant firms and substantial entry barriers.
C
Monopolistically competitive firms: A. realize normal profits in the short run but losses in the long run. B. incur persistent losses in both the short run and long run. C. may realize either profits or losses in the short run, but realize normal profits in the long run. D. persistently realize economic profits in both the short run and long run.
C
Nonprice competition refers to: A. competition between products of different industries, for example, competition between aluminum and steel in the manufacture of automobile parts. B. price increases by a firm that are ignored by its rivals. C. advertising, product promotion, and changes in the real or perceived characteristics of a product. D. reductions in production costs that are not reflected in price reductions.
C
Oligopolistic firms engage in collusion to: A. minimize unit costs of production. B. realize allocative efficiency, that is, the P = MC level of output. C. earn greater profits. D. increase production.
C
Other things equal, if the prices of a firm's variable inputs were to fall: A. one could not predict how unit costs of production would be affected. B. marginal cost, average variable cost, and average fixed cost would all fall. C. marginal cost, average variable cost, and average total cost would all fall. D. average variable cost would fall, but marginal cost would be unchanged.
C
Price discrimination refers to: A. selling a given product for different prices at two different points in time. B. any price above that which is equal to a minimum average total cost. C. the selling of a given product at different prices that do not reflect cost differences. D. the difference between the prices a purely competitive seller and a purely monopolistic seller would charge.
C
Price is constant or given to the individual firm selling in a purely competitive market because: A. the firm's demand curve is downsloping. B. of product differentiation reinforced by extensive advertising. C. each seller supplies a negligible fraction of total supply. D. there are no good substitutes for its product.
C
Pure monopolists may obtain economic profits in the long run because: A. of advertising. B. marginal revenue is constant as sales increase. C. of barriers to entry.
C
Pure monopoly means: A. any market in which the demand curve to the firm is downsloping. B. a standardized product being produced by many firms. C. a single firm producing a product for which there are no close substitutes. D. a large number of firms producing a differentiated product.
C
Suppose you find that the price of your product is less than minimum AVC. You should: A. minimize your losses by producing where P = MC. B. maximize your profits by producing where P = MC. C. close down because, by producing, your losses will exceed your total fixed costs. D. close down because total revenue exceeds total variable cost.
C
The MR = MC rule applies: A. in the short run, but not in the long run. B. in the long run, but not in the short run. C. in both the short run and the long run. D. only to a purely competitive firm.
C
The monopolistically competitive firm shown in the above figure: A. is in long-run equilibrium. B. might realize an economic profit or a loss, depending on its choice of output level. C. cannot operate profitably in the short run. D. can realize an economic profit.
C
The monopolistically competitive seller maximizes profit by producing at the point where: A. total revenue is at a maximum. B. average costs are at a minimum. C. marginal revenue equals marginal cost. D. price equals marginal revenue.
C
41. Refer to the above diagram for a purely competitive producer. The firm will produce at a loss at all prices: A. above P1. B. above P3. C. above P4. D. between P2 and P3.
D
41. Refer to the above diagrams. In diagram (B) the profit-maximizing quantity is: A. g and the profit-maximizing price is e. B. h and the profit-maximizing price is e. C. g and the profit-maximizing price is f. D. g and the profit-maximizing price is d.
D
46. Refer to the above diagram. At the profit-maximizing output, total fixed cost is equal to: A. 0AHE. B. 0BGE. C. 0CFE. D. BCFG.
D
48. Refer to the above diagram. At the profit-maximizing output, the firm will realize: A. a loss equal to BCFG. B. a loss equal to ACFH. C. an economic profit of ACFH. D. an economic profit of ABGH.
D
A firm's total variable cost will depend on: A. the prices of variable resources. B. the production techniques that are used. C. the level of output. D. all of these.
D
In the short run a pure monopolist: A. always earns an economic profit. B. always earns a normal profit. C. always realizes a loss. D. may realize an economic profit, a normal profit, or a loss.
D
The nondiscriminating pure monopolist's demand curve: A. is the industry demand curve. B. shows a direct or positive relationship between price and quantity demanded. C. tends to be inelastic at high prices and elastic at low prices. D. is identical to its marginal revenue curve.
A
The pure monopolist's demand curve is: A. identical with the industry demand curve. B. of unit elasticity throughout. C. perfectly inelastic. D. perfectly elastic.
A
. A natural monopoly occurs when: A. long-run average costs decline continuously through the range of demand. B. a firm owns or controls some resource essential to production. C. long-run average costs rise continuously as output is increased. D. economies of scale are obtained at relatively low levels of output.
A
10. Refer to the above two diagrams for individual firms. In Figure 1 line B represents the firm's: A. demand and marginal revenue curves. B. demand curve only. C. marginal revenue curve only. D. average revenue curve only.
A
13. Refer to the above two diagrams for individual firms. In Figure 2 the firm's demand and marginal revenue curves are represented by: A. lines B and C respectively. B. lines A and C respectively. C. lines A and B respectively. D. line B.
A
17. If the firm in the above diagram lowers price from P1 to P2, it will: A. lose P1P2ba in revenue from the price cut but increase revenue by Q1bcQ2 from the increase in sales. B. lose P1P2ca in revenue from the price cut but increase revenue by Q1acQ2 from the increase in sales. C. incur a decline in total revenue because it is operating on the elastic segment of the demand curve. D. incur an increase in total revenue because it is operating on the inelastic segment of the demand curve.
A
22. In short-run equilibrium, the monopolistically competitive firm shown above will set its price: A. below ATC. B. above ATC. C. below MC. D. below MR.
A
Prices are likely to be least flexible: A. in oligopoly. B. in monopolistic competition. C. where product demand is inelastic. D. in pure competition.
A
Three major means of collusion by oligopolists are: A. cartels, informal understandings, and price leadership. B. market sharing, mutual interdependence, and product differentiation. C. cartels, kinked-demand pricing, and product differentiation. D. informal understandings, P = MC pricing, and mutual interdependence.
A
To the economist, total cost includes: A. explicit and implicit costs, including a normal profit. B. neither implicit nor explicit costs. C. implicit, but not explicit, costs. D. explicit, but not implicit, costs.
A
Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a monopolistic competitor? A. Subway Sandwiches B. Pittsburgh Plate Glass C. Ford Motor Company D. Microsoft
A
Which of the following industries most closely approximates pure competition? A. agriculture B. farm implements C. clothing D. steel
A
Which of the following is most likely to be a variable cost? A. fuel and power payments B. interest on business loans C. rental payments on IBM equipment D. real estate taxes
A
44. Refer to the above diagrams. The price will be _______ and the quantity will be _______ with the industry structure represented by diagram (B) compared to the one represented in (A). A. higher; higher B. higher; lower C. lower; lower D. lower; higher
B
. If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue: A. may be either greater or less than $5. B. will also be $5. C. will be less than $5. D. will be greater than $5.
B
Nonprice competition refers to: A. low barriers to entry. B. product development, advertising, and product packaging. C. the differences in information which consumers have regarding various products. D. an industry or firm in long-run equilibrium.
B
A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from: A. the likelihood of collusion. B. high entry barriers. C. product differentiation. D. mutual interdependence in decision making.
C
The monopolistically competitive seller's demand curve will become more elastic the: A. more significant the barriers to entering the industry. B. greater the degree of product differentiation. C. larger the number of competitors. D. smaller the number of competitors.
C
The mutual interdependence that characterizes oligopoly arises because: A. the products of various firms are homogeneous. B. the products of various firms are differentiated. C. a small number of firms produce a large proportion of industry output. D. the demand curves of firms are kinked at the prevailing price.
C
The term allocative efficiency refers to: A. the level of output that coincides with the intersection of the MC and AVC curves. B. minimization of the AFC in the production of any good. C. the production of the product-mix most desired by consumers. D. the production of a good at the lowest average total cost.
C
When a firm is on the inelastic segment of its demand curve, it can: A. increase total revenue by reducing price. B. decrease total costs by decreasing price. C. increase profits by increasing price. D. increase total revenue by more than the increase in total cost by increasing price.
C
CH 8 #35 Refer to the above diagram. The profit-maximizing level of output for this firm: A. is at point a. B. is at point b. C. is at point c. D. cannot be determined from the information given.
D
. The above diagram indicates that the marginal revenue of the sixth unit of output is: A. -$1. B. $1. C. $4. D. $24.
A
27. Refer to the above data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's total profit will be: A. $82. B. zero. C. $54. D. $27.
A
42. Refer to the above diagrams. With the industry structure represented by diagram: A. (A) there will be only a normal profit in the long run, while in (B) an economic profit can persist. B. (A) price exceeds marginal cost, resulting in allocative inefficiency. C. (B) price equals marginal cost, resulting in allocative efficiency. D. (B) equilibrium price and quantity will be e and h, respectively.
A
A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from: A. a relatively large number of firms and the monopolistic element from product differentiation. B. product differentiation and the monopolistic element from high entry barriers. C. a perfectly elastic demand curve and the monopolistic element from low entry barriers. D. a highly inelastic demand curve and the monopolistic element from advertising and product promotion.
A
A natural monopoly exists when: A. unit costs are minimized by having one firm produce an industry's entire output. B. several formerly competing producers merge to become the only firm in an industry. C. short-run average total cost curves are tangent to long-run average total cost curves. D. minimum efficient scale is attained at a small level of output.
A
A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its: A. total variable costs. B. total costs. C. total fixed costs. D. marginal costs.
A
At its profit-maximizing output, a pure nondiscriminating monopolist achieves: A. neither productive efficiency nor allocative efficiency. B. both productive efficiency and allocative efficiency. C. productive efficiency but not allocative efficiency. D. allocative efficiency but not productive efficiency.
A
Diseconomies of scale: A. pertain to the long run. B. pertain to the short run. C. are synonymous with diminishing returns. D. are synonymous with increasing returns.
A
Excess capacity refers to the: A. amount by which actual production falls short of the minimum ATC output. B. fact that entry barriers artificially reduce the number of firms in an industry. C. differential between price and marginal costs which characterizes monopolistically competitive firms. D. fact that most monopolistically competitive firms encounter diseconomies of scale.
A
In answering the next question(s), assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis. 11. Refer to the above information. For a purely competitive firm, total revenue: A. graphs as a straight, upsloping line. B. is a straight line, parallel to the vertical axis. C. is a straight line, parallel to the horizontal axis. D. graphs as a straight, downsloping line.
A
. For an imperfectly competitive firm: A. total revenue is a straight, upsloping line because a firm's sales are independent of product price. B. the marginal revenue curve lies above the demand curve because any reduction in price applies to all units sold. C. the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold. D. the marginal revenue curve lies below the demand curve because any reduction in price applies only to the extra unit sold.
C
. In the short-run, a profit-maximizing monopolistically competitive firm sets it price: A. equal to marginal revenue. B. equal to marginal cost. C. above marginal cost. D. below marginal cost.
C
. OPEC provides an example of: A. an unwritten, informal understanding. B. noncollusive oligopoly. C. an international cartel. D. a monopolistically competitive industry.
C
. The kinked-demand curve model of oligopoly is useful in explaining: A. the way that collusion works. B. why oligopolistic prices and outputs are extremely sensitive to changes in marginal cost. C. why oligopolistic prices might change only infrequently. D. the process by which oligopolists merge with one another.
C
. The term oligopoly indicates: A. a one-firm industry. B. many producers of a differentiated product. C. a few firms producing either a differentiated or a homogeneous product. D. an industry whose four-firm concentration ratio is low.
C
. Which of the following is true concerning purely competitive industries? A. There will be economic losses in the long run because of cut-throat competition. B. Economic profits will persist in the long run if consumer demand is strong and stable. C. In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits. D. There are economic profits in the long run, but not in the short run.
C
18. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm's profit-maximizing price will be: A. $10. B. $13. C. $16. D. $19.
C
21. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. Assume the firm is part of an increasing-cost industry. In the long run firms will: A. leave this industry, causing both demand and the ATC curve to shift upward. B. enter this industry, causing demand to rise and the ATC curve to shift downward. C. enter this industry, causing demand to fall and the ATC curve to shift upward. D. enter this industry, causing both demand and the ATC curve to shift upward.
C
25. Refer to the above data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's total costs will be: A. $300. B. $248. C. $198. D. $126.
C
25. Refer to the above diagram for a monopolistically competitive firm. Long-run equilibrium price will be: A. above A. B. EF. C. A. D. B.
C
26. Refer to the above diagram for a monopolistically competitive firm. Long-run equilibrium output will be: A. greater than E. B. E. C. D. D. C.
C
40. Refer to the above diagrams. Diagram (B) represents: A. the pure competition model. B. an industry in which there is allocative efficiency but not productive efficiency. C. the pure monopoly model. D. a long-run constant-cost industry.
C
42. Refer to the above diagram for a purely competitive producer. If product price is P3: A. the firm will maximize profit at point d. B. the firm will earn an economic profit. C. economic profits will be zero. D. new firms will enter this industry.
C
43. Refer to the above diagrams. With the industry structure represented by diagram: A. (B) there will be allocative efficiency. B. (A) economic profit can persist in the long run. C. (B) output will be less than in diagram (A). D. (B) output will be the same as in diagram (A).
C
44. Refer to the above diagram. To maximize profit or minimize losses this firm will produce: A. K units at price C. B. D units at price J. C. E units at price A. D. E units at price B.
C
A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating: A. price and average total cost. B. price and average fixed cost. C. marginal revenue and marginal cost. D. price and marginal revenue.
C
A monopolistically competitive firm's marginal revenue curve: A. is downsloping and coincides with the demand curve. B. coincides with the demand curve and is parallel to the horizontal axis. C. is downsloping and lies below the demand curve. D. does not exist because the firm is a "price maker."
C
A nondiscriminating pure monopolist's demand curve: A. is perfectly inelastic. B. coincides with its marginal revenue curve. C. lies above its marginal revenue curve. D. lies below its marginal revenue curve.
C
A purely competitive seller is: A. both a "price maker" and a "price taker." B. neither a "price maker" nor a "price taker." C. a "price taker." D. a "price maker."
C
A significant difference between a monopolistically competitive firm and a purely competitive firm is that the: A. former does not seek to maximize profits. B. latter recognizes that price must be reduced to sell more output. C. former sells similar, although not identical, products. D. former's demand curve is perfectly inelastic.
C
An important economic problem associated with pure monopoly is that, at the profit maximizing outputs, resources are: A. overallocated because price exceeds marginal cost. B. overallocated because marginal cost exceeds price. C. underallocated because price exceeds marginal cost. D. underallocated because marginal cost exceeds price.
C
Answer the next question(s) on the basis of the following data confronting a firm: OUTPUT MARGINAL REVENUE MARGINAL COST 0 --- --- 1 16 10 2 16 9 3 16 13 4 16 17 5 16 21 33. Refer to the above data. This firm is selling its output in a(n): A. imperfectly competitive market. B. monopolistic market. C. purely competitive market. D. oligopolistic market.
C
