Econ unit 3 test

Refer to Exhibit 22-3. Based upon the information provided in this table, what is the maximum profit this firm can earn? a. $308 b. $16 c. $65 d. $6

$16

A monopolist can sell 26,000 units at a price of $30 per unit. Lowering price by $1 raises the quantity demanded by 1,000 units. What is the change in total revenue resulting from this price change? a.-$2,800 b.$5,500 c.$3,000 d.$1,500

$3,000

In the short-run, if P < ATC, a perfectly competitive firm should a. continue producing at a loss. b. continue producing at a profit. c. There is not enough information to answer the question. d. increase production to the output level at which P = ATC. e. shut down.

c. There is not enough information to answer this question

The perfectly competitive firm charges a price equal to __________ while the monopolist charges a price __________. a. marginal revenue; equal to marginal cost b. marginal revenue; less than marginal revenue c. average total cost; greater than average total cost d. marginal cost; greater than marginal cost

marginal cost; greater than marginal cost

Which of the following is the best example of a homogeneous good? a. ice cream b. wheat c. new cars d. soft drinks

wheat

In order for a firm to continue producing, price must exceed __________ and total revenue must exceed __________. a. AVC; total variable costs b. AFC; total fixed cost c. ATC; total cost d. marginal cost; total cost e. price; total cost

AVC, total variable cost

Resources are allocated efficiently when a. firms produce the quantity of output at which price is greater than marginal cost. b. the marginal benefit to demanders of the resources in the goods they purchase is less than the marginal cost to suppliers of the resources they use in producing the goods. c. the exchange value of the resources to demanders is greater than the opportunity cost of the resources. d. firms produce the quantity of output at which price is equal to marginal cost.

Firms produce the quantity of output at which price is equal to marginal cost

Is it possible for a perfectly competitive firm to be maximizing profits, but not achieving resource allocative efficiency? a. There is not enough information to answer this question. b. No, it is not possible, because the output at which MR = MC is also the output at which P = MC. c. Definitely yes, because it is impossible to achieve both at the same time. d. Yes, it is possible, but it is not possible to minimize losses without also achieving resource allocative efficiency.

No, it is not possible, because the output at which MR-MC is also the output at which P=MC

Refer to Exhibit 23-1. If the product is produced under single-price monopoly, what do profits equal at the profit maximizing level of output? a.area 0P1BQ1 b.area P2CAP1 c.area BCA d.area P1P2CB

P1P2CB

The perfectly competitive firm's short-run supply curve is the a. horizontal portion of its marginal revenue curve. b. portion of its average variable cost curve that lies above the average fixed cost curve. c. portion of its marginal cost curve that lies above its average variable cost curve. d. upward-sloping portion of its average total cost curve. e. upward-sloping portion of its marginal cost curve.

Portion of its marginal curve that lies above its average variable cost-curve

Refer to Exhibit 23-1. If the product is produced under single-price monopoly, what quantity will be produced and what price will be charged in order to maximize profit? a.Q2 units at P2 b.Q1 units at P1 c.Q1 units at P2 d.Q2 units at P1

Q1 units at P2

Which of the following is an assumption of the theory of monopoly? a.There are many sellers. b.The product is of extremely high quality. c.There are extremely high barriers to entry. d.The product has a number of close substitutes.

There are extremely high barriers to entry

A right granted to a firm by government that permits the firm to provide a particular good or service and excludes others from doing the same is called a.an economy of scale. b.a comparative advantage. c.a natural monopoly. d.a public franchise.

an economy of scale

In order for a monopolist to be earning a profit, price must be greater than a.total cost. b.marginal revenue. c.marginal cost. d.average total cost.

average total cost

Barriers to entry include all of the following except a.diseconomies of scale. b.exclusive ownership of a scarce resource. c.patents. d.government licenses. e.public franchises.

diseconomies of scale

A natural monopoly exists when a. a firm is the exclusive owner of a key resource necessary to produce the firm's product. b.there are no close substitutes for a firm's product. c.a monopolist produces a product, the main component of which is a natural resource. d.economies of scale are so large that only one firm can survive and achieve low unit costs.

economies of scale are so large that only one firm can survive and achieve low unit costs

If an industry is in long-run competitive equilibrium and experiences a decrease in demand, then as a result the equilibrium price will __________, which will cause the representative firm's __________ curve to shift downward and some firms will __________ the industry. a. fall; demand; exit b. fall; marginal cost; exit c. rise; marginal revenue; enter d. fall; marginal cost; enter e. rise; marginal cost; enter

fall, demand, exit

If a perfectly competitive firm and a single-price monopolist face the same demand and cost curves, then the competitive firm will produce a a. greater output but charge the same price as the monopolist. b.smaller output and charge a higher price than the monopolist. c.greater output and charge a higher price than the monopolist. d.smaller output and charge a lower price than the monopolist. e.greater output and charge a lower price than the monopolist.

greater output and charge a lower price than the monopolist

The perfectly competitive firm should produce in the a. long run if price is below average variable cost. b. short run if price is below average variable cost. c. long run if price is below average total cost but above average variable cost. d. short run if price is below average total cost but above average variable cost.

short run price is below average total cost but above average variable cost

Exhibit 22-4 ​ Refer to Exhibit 22-4. The firm sells its product at P1 and produces Q1. Given this situation, a. total variable cost is equal to area 2 + area 3. b. profit equals area 1. c. total cost is equal to area 1 + area 2 + area 3. d. total revenue is equal to area 1 + area 2.

total cost is equal to area1+area2+area3