Econ Final

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

If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50, it will increase its profits by A) reducing output and raising price. B) reducing both output and price. C) increasing both price and output. D) raising price while keeping output unchanged.

A

If the four-firm concentration ratio for industry X is 80, A) the four largest firms account for 80 percent of total sales. B) each of the four largest firms accounts for 20 percent of total sales. C) the four largest firms account for 20 percent of total sales. D) the industry is monopolistically competitive.

A

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

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 following is cost information for the Creamy Crisp Donut Company. Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000Annual revenue from operations = $380,000 Payments to workers = $120,000Utilities (electricity, water, disposal) costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Creamy Crisp's total economic costs are A) $286,000. B) $150,000. C) $94,000. D) $156,000.

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

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

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 D) Normal profits will cause an industry to expand.

A

Augi's Art Shack sells art supplies in a perfectly competitive market. The firm is currently realizing economic profits of $25,000 in the short run. In the long run we would expect Augi's to A) realize economic profits greater than $0 but less than $25,000. B) realize economic profits of $0. C) realize economic losses greater than $0 but smaller than $25,000 D) shut down.

B

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then A) the selling price for this firm is above the market equilibrium price. B) new firms will enter this market. C) some existing firms in this market will leave. D) there must be price fixing by the industry's firms.

B

Long-run adjustments in purely competitive markets primarily take the form of A) variations in the cost curves of different firms in the market. B) entry or exit of firms in the market. C) evolution of the market from a constant-cost to an increasing-cost industry. D) product differentiation.

B

Refer to the data in the accompanying table. 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

Refer to the 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

Refer to the 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

Suppose the table above represents the long-run cost structure for a firm in a perfectly competitive industry. Based on this information we can conclude that this firm operates in A) an industry incapable of reaching long-run equilibrium. B) a constant-cost industry. C) an increasing-cost industry. D) a decreasing- cost industry.

B

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If product price is $75, the firm will produce A) 3 units of output. B) 4 units of output. C) 5 units of output. D) 6 units of output.

B

The average product when there are two workers A) is 10. B) is 9. C) is 28. D) cannot be determined from the information given.

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 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

We would expect an industry to expand if firms in that industry are A) earning normal profits. B) earning economic profits. C) breaking even. D) earning accounting profits.

B

When five units of labor are hired, the marginal product (MP) of the last worker is A) 11.6. B) 10. C) 290. D) 20.

B

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 monopolistically competitive industry combines elements of both monopoly. The monopoly element results from competition and A) the likelihood of collusion. B) high entry barriers. C) product differentiation. D) mutual interdependence in decision making.

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

According to the law of diminishing marginal returns, A) output will fall and then rise as additional units of input are employed. B) employing additional inputs will diminish total output. C) the additional output generated by additional units of an input will diminish. D) the additional inputs necessary to produce an additional unit of output will diminish.

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 industry sales accounted for by the largest firms in the industry. D) number of firms in an industry.

C

Economic cost can best be defined as A) any contractual obligation that results in a flow of money expenditures from an enterprise to resource suppliers. B) any contractual obligation to labor or material suppliers. C) a payment that must be made to obtain and retain the services of a resource. D) all costs exclusive of payments to fixed factors of production.

C

If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue A) may be either greater or less than $35. B) will also be $35. C) will be less than $35. D) will be greater than $35.

C

Refer to the diagram for a monopolistically competitive firm. Long-run equilibrium price will be A) above A. B) EF. C) A. D) B.

C

The law of diminishing returns implies that A) the more hours you spend studying, the less you will know. B) your understanding will be increased by decreasing your marginal study time. C) eventually, the more hours you spend studying per day, the less you will learn with each added hour. D) the more hours you spend studying per day, the more you will learn with each added hour.

C

The marginal revenue obtained from selling the third unit of output is A) $6. B) $1. C) $3. D) $5.

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

An industry having a four-firm concentration ratio of 30 percent A) approximates pure competition. B) is an oligopoly. C) is a pure monopoly. D) is monopolistically competitive.

D

Implicit and explicit costs are different in that A) explicit costs are opportunity costs; implicit costs are not. B) implicit costs are opportunity costs; explicit costs are not. C) the latter refer to nonexpenditure costs and the former to monetary payments. D) the former refer to nonexpenditure costs and the latter to monetary payments.

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

Refer to the diagram for a pure monopolist. Monopoly output will be A) between f and g. B) h. C) g. D) f.

D

The process by which new firms and new products replace existing dominant firms and products is called A) monopolistic competition. B) mergers and acquisitions. C) process innovation. D) creative destruction.

D