ECON EXAM 3

The marginal revenue curve for a perfectly competitive firm is a) horizontal. b) vertical. c) upward sloping. d)downward sloping. e) a straight line coming out of the origin with a 45 degree slope.

a) horizontal.

If marginal cost increases when output increases, then a) marginal product must decrease when output increases. b) average fixed cost is constant. c) total cost is constant. d)average variable cost must increase when output increases. e) average total cost must decrease when output increases.

a) marginal product must decrease when output increases.

Technological change a) usually requires an investment in a new plant. b) is implemented in the short run. c) almost always increases the costs of production. d) almost always increases the variable costs of production. e) cannot help a firm to earn an economic profit in either the short run or the long run.

a) usually requires an investment in a new plant.

The prisoners' dilemma is similar to the problem faced by firms in an oligopoly in the United States because a)mutual interdependence exists, and collusion is illegal in the United States, so the firms cannot legally communicate. b)collusion is legal in the United States, and firms can communicate their pricing decisions to each other. c)failure to cooperate leads to better outcomes than cooperation. d)private prisons are run by oligopolies. e)the firms can communicate but mutual interdependence exists.

a)mutual interdependence exists, and collusion is illegal in the United States, so the firms cannot legally communicate

In an oligopoly, there are a)many firms and barriers to entry. b)many firms and no barriers to entry. c)few firms and barriers to entry. d)few firms and no barriers to entry. e)barriers to entry and only one firm.

c)few firms and barriers to entry.

The prisoners' dilemma is an example of a)product differentiation. b)collusion. c)game theory. d)monopolistic competition. e)decision making in a monopoly.

c)game theory.

When economies of scale limit the number of firms in an industry to 3, there is a a)natural monopoly. B)natural oligopoly. C)legal oligopoly. D)legal cartel. E)natural monopolistic competition.

B)natural oligopoly.

For a duopoly, the maximum total profit is reached when the duopoly produces A)the same amount of output as the competitive outcome. B)the same amount of output as the monopoly outcome. C)an amount of output that lies between the competitive outcome and the monopoly outcome. D)more output than the competitive outcome. E) less output than the monopoly outcome.

B)the same amount of output as the monopoly outcome

The makers of the movie Titanic have some monopoly power over this film because the a)movie is patented. b)name Titanic is trademarked. c) movie is protected by copyright law. d) government has issued the maker of this movie a public franchise. e) owner never price discriminated in marketing the movie.

c) movie is protected by copyright law.

Average total cost is equal to a) average fixed cost + average variable cost. b)total cost ÷ quantity. c) the change in total cost when output changes by one unit. d) average fixed cost + average variable cost and total cost ÷ quantity are correct. d) average fixed cost + average variable cost and the change in total cost when output changes by one unit

average fixed cost + average variable cost and total cost ÷ quantity are correct.

If the four-firm concentration ratio for the market for pizza is 28 percent, then this industry is best characterized as a)a monopoly. b) monopolistic competition. c)an oligopoly. d)perfect competition. e)oligopolistic competition

b) monopolistic competition.

If a struggling perfectly competitive furniture store in Detroit shuts down, it incurs an economic loss equal to its a)marginal cost. b) total fixed cost. c) total variable cost. d)average variable cost. e) average total cost.

b) total fixed cost.

How should a natural monopoly be regulated under the social interest theory of regulation?\ a) by setting price equal to the average cost of production b)by allowing a price that maximizes the profit of the natural monopoly c) by using a marginal cost pricing rule d)by subsidizing other producers to compete with the monopoly e) by using rate of return regulation

c) by using a marginal cost pricing rule

When a monopoly price discriminates, it a)increases the amount of consumer surplus. b)decreases its economic profit. c) converts consumer surplus into economic profit. d)converts economic profit into consumer surplus. e) has no effect on the deadweight loss in the market.

c) converts consumer surplus into economic profit.

Which of the following is true about monopolistic competition but false about perfect competition? a)There are a large number of independently acting sellers. b)There are no barriers to entry. c)Firms can make an economic profit in the short run. d) Firms compete on their product's price as well as its quality and marketing. e)Firms cannot make an economic profit in the long run.

d) Firms compete on their product's price as well as its quality and marketing