Micro Final
) A monopolistically competitive industry that earns economic profits in the short run will A) continue to earn economic profits in the long run. B) experience the entry of new rival firms into the industry in the long run. C) experience the exit of existing firms out of the industry in the long run. D) experience a rise in demand in the long run.
B
10) If a typical monopolistically competitive firm is making short-run losses, then A) other more competitive firms will enter the market. B) as some firms leave, the remaining firms will experience an increase in the demand for their products. C) as some firms leave, the demand for the products of the remaining firms will become more elastic. D) the industry will eventually cease to exist.
B
11) Refer to Figure 16-9. In order to maximize its profit, the firm will choose to produce a. less than 100 units of output. b. 100 units of output. c. between 100 and 133.33 units of output. d. more than 133.33 units of output.
B
12.)Refer to Figure 16-9. The firm's maximum profit is a. $-5,000.00. b. $0. c. $5,000.00. d. $8,887.78.
B
14) Refer to Figure 16-9. For this firm, the long-run equilibrium quantity of output is a. 100 and the long-run equilibrium price is $90. b. 100 and the long-run equilibrium price is $140. c. 133.33 and the long-run equilibrium price is $56.67. d. 133.33 and the long-run equilibrium price is $123.33.
B
20) Which of the following is important in determining the extent of competition in an industry? A) the minimum level of short run average total costs of production B) the minimum efficient scale of production relative to market demand C) whether or not the industry product is differentiated or standardized D) the level of market demand for the industry's product
B
21) Which of the following is most likely to exert the bargaining power of a buyer? A) Barnes and Noble purchases books from publishers for sale in its online stores. B) Wal-Mart, The world's largest discount store, seeks vendors to supply products made exclusively for its stores. C) Ground beef producers seek to purchase cattle from ranchers. D) Cowgirl Creamery, a small cheese producer, seeks a dairy farm for its organic milk supplies.
B
22) Refer to Table 14-4. If Alistair assumes that Baine would increase its advertising budget, what should it do? A) Alistair should keep its own budget the same and allow Baine to incur the higher cost. B) Alistair should also increase its advertising spending. C) Alistair should reduce its advertising spending. D) Being a duopolist, Alistair is not affected by Baine's choices because it has a secure 50 percent market share.
B
31) Compared to perfect competition, the consumer surplus in a monopoly A) is unchanged because price and output are the same. B) is lower because price is higher and output is lower. C) is higher because price is higher and output is the same. D) is eliminated.
B
41) Refer to Figure 12-5. If the market price is $20, what is the amount of the firm's profit? A) $5,400 B) $6,750 C) $8,100 D) $16,200
B
42) If a firm shuts down in the short run A) its loss equals zero. B) its loss equals its fixed cost. C) is makes zero economic profit. D) its total revenue is not large enough to cover its fixed cost.
B
48) Refer to Figure 12-11. Suppose the prevailing price is $20 and the firm is currently producing 1,350 units. In the long-run equilibrium, the firm represented in the diagram A) will continue to produce the same quantity. B) will reduce its output to 1,100 units. C) will reduce its output to 750 units. D) will cease to exist.
B
49) Refer to Figure 12-11. Suppose the prevailing price is $20 and the firm is currently producing 1,350 units. In the long-run equilibrium A) there will be fewer firms in the industry and total industry output decreases. B) there will be more firms in the industry and total industry output increases. C) there will be fewer firms in the industry but total industry output increases. D) there will be more firms in the industry and total industry output remains constant.
B
7) Refer to Figure 16-4. The firm in this figure is monopolistically competitive. This firm a. is operating in the long run. b. is earning a short-run economic profit. c. is incurring a short-run loss. d. The answer cannot be determined from the information given.
B
8) Refer to Figure 16-4. The maximum total short-run economic profit for the monopolistically competitive firm in this figure is a. -$3,000. b. $3,000. c. $9,000. d. $24,000.
B
Eco Energy is a monopolistically competitive producer of a sports beverage called Power On. Table 13-2 shows the firm's demand and cost schedules. 16) Refer to Table 13-2. What is the output (Q) that maximizes profit and what is the price (P) charged? A) P=$55; Q=5 cases B) P=$50; Q=6 cases C) P=$45; Q=7 cases D) P=$40; Q=8 cases
B
17) Refer to Table 13-2. What is Eco Energy's profit? A) $125 B) $140 C) $145 D) $150
C
19) If an industry is made up of five identical firms, the four-firm concentration ratio is A) 5%. B) 20%. C) 80%. D) 100%.
C
2) Although advertising raises the price of a monopolistic competitor's product, it does confer a benefit to consumers. Which of the following is a benefit to consumers? A) Advertising acts as a barrier to entry. B) Advertising engenders brand loyalty. C) Advertising could provide consumers with useful information about new products and enable them to comparison shop. D) Advertised products tend to be of higher quality so consumers feel special when they consume advertised products.
C
27) In a natural monopoly, throughout the range of market demand A) marginal cost is above average total cost and pulls average total cost upward. B) average total cost is above marginal cost and pulls marginal cost upward. C) marginal cost is below average total cost and pulls average total cost downward. D) there are diseconomies of scale.
C
29) Refer to Figure 15-3. Suppose the monopolist represented in the diagram above produces positive output. What is the price charged at the profit-maximizing/loss-minimizing output level? A) $38 B) $54 C) $68 D) $75
C
33) For a natural monopoly to exist A) a firm must continually buy up its rivals. B) a firm's long-run average cost curve must exhibit diseconomies of scale beyond the economically efficient output level. C) a firm's long-run average cost curve must exhibit economies of scale throughout the relevant range of market demand. D) a firm must have a government-imposed barrier.
C
38) Refer to Table 12-2. How many pounds of apples should Margie sell to maximize her profit? A) 300 pounds B) 400 pounds C) This cannot be determined without knowing Margie's total or marginal production costs. D) This can be determined only when all of the values for market price, total revenue, average revenue and marginal revenue are given.
C
39) Refer to Table 12-2. What is Margie's total revenue if she sells 250 pounds of apples? A) $250 B) $500 C) $750 D) There is not enough information in the table to determine Margie's total revenue.
C
4) Refer to Figure 13-3. The marginal revenue from one additional unit sold is the sum of the gain in revenue from selling the additional unit and the loss in revenue from having to charge a lower price to sell the additional unit. Based on the diagram in the figure, A) X represents the gain (price effect) and Y the loss (output effect). B) X + Z represents the loss (output effect) and Y the gain (price effect). C) Y represents the gain (output effect) and X the loss (price effect). D) X represents the loss (price effect) and Y + Z the gain (output effect).
C
43) If a typical firm in a perfectly competitive industry is earning profits, then A) all firms will continue to earn profits. B) new firms will enter in the long run causing market supply to decrease, market price to rise and profits to increase. C) new firms will enter in the long run causing market supply to increase, market price to fall and profits to decrease. D) the number of firms in the industry will remain constant in the long run.
C
45) The minimum efficient scale is A) the level of output where diminishing returns have not set in yet. B) the plant size that yields the most profit. C) level of operation where long-run average costs are lowest. D) the smallest output level where the firm finally reaches productive efficiency.
C
46) Assume that after the record year for U.S. farm income in 2013, farmers are expected to break even in 2014. This means that at the quantity being produced in 2014 A) MC =AVC. B) MR =MC. C) MR =ATC. D) AVC =ATC.
C
51) The law of one price states A) federal and state statutes that prohibit price discrimination. B) that all customers should pay the same price. C) that identical products should sell for the same price everywhere. D) government regulation of prices for all firms.
C
Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. 40) Refer to Figure 12-5. If the market price is $20, what is the firm's profit-maximizing output? A) 750 units B) 1,100 units C) 1,350 units D) 1,800 units
C
13) Refer to Figure 16-9. Efficient scale is reached a. at 100 units. b. between 100 and 133.33 units. c. at 133.33 units. d. beyond 133.33 units.
D
25) Refer to Table 14-4. What is the Nash equilibrium in this game? A) There is no Nash equilibrium. B) Baine increases its advertising budget, but Alistair does not. C) Alistair increases its advertising budget, but Baine does not. D) Both Alistair and Baine increase their advertising budgets.
D
26) Collusion makes firms better off because if they act as a single entity (a cartel) they can reduce output and increase their prices and profits. But some cartels have failed and others are unstable. Which of the following is a reason why cartels often break down? A) Most cartels do not have a dominant strategy. B) When a cartel is profitable the amount of competition it faces increases. C) Members of a cartel may resent having to share their profits equally. D) Each member of a cartel has an incentive to "cheat" on the collusive agreement by producing more than its share when everyone else sticks with the collusive agreement.
D
3) Monopolistically competitive firms can differentiate their products A) by producing at minimum efficient scale. B) by producing where marginal revenue equals marginal cost. C) by equating price and average total cost. D) through marketing.
D
36) Both buyers and sellers are price takers in a perfectly competitive market because A) the price is determined by government intervention and dictated to buyers and sellers. B) each buyer and seller knows it is illegal to conspire to affect price. C) both buyers and sellers in a perfectly competitive market are concerned for the welfare of others. D) each buyer and seller is too small relative to others to independently affect the market price.
D
44) If a perfectly competitive firm achieves productive efficiency then A) it will raise its price in order to earn an economic profit. B) the price of the good it sells is equal to the benefit consumers receive from consuming the last unit of the good sold. C) it is producing at minimum efficient scale. D) it is producing the good it sells at the lowest possible cost.
D
5) The demand curve of a monopolistically competitive firm A) is horizontal because the firm must cut its price to sell more. B) is perfectly elastic. C) is downward-sloping because it sells an identical product. D) is downward-sloping because it must cut its price to sell more.
D
1) A firm cannot control all of the factors that allow it to make economic profits in monopolistically competitive markets. However, they can control some of the factors to maximize their profit. Which of the following is an example of a controllable factor? A) product differentiation B) input prices C) producing at a lower average total cost than competing firms D) hiring competent managers
A
15) Is a monopolistically competitive firm productively efficient? A) No, because it does not produce at minimum average total cost. B) Yes, because it produces where marginal cost equals marginal revenue. C) No, because price is greater than marginal cost. D) Yes, because price equals average total cost.
A
18) What is the dominant strategy in the prisoner's dilemma? A) Each prisoner confesses because this is the rational action to pursue. B) Do nothing in the hope that the other prisoner will also do nothing. C) Do not confess because the other prisoner will most likely confess. D) There is no dominant strategy.
A
23) Refer to Table 14-4. Does Alistair have a dominant strategy and if so, what is it? A) Yes, Alistair should increase its advertising budget. B) Yes, Alistair should keep its advertising budget as is. C) There are two dominant strategies: if Baine increases its advertising budget, then Alistair's best bet is to keep its budget the same but if Baine does not increase its spending, then Alistair should raise its advertising budget D) No, there is no dominant strategy.
A
24) Refer to Table 14-4. Does Baine have a dominant strategy and if so, what is it? A) Yes, Baine should increase its advertising budget. B) Yes, Baine should keep its advertising budget as is. C) There are two dominant strategies: if Alistair increases its advertising budget, then Baine's best bet is to keep its budget the same but if Alistair does not increase its spending, then Baine should raise its advertising budget D) No, there is no dominant strategy.
A
28) Refer to Figure 15-3. Suppose the monopolist represented in the diagram above produces positive output. What is the profit-maximizing/loss-minimizing output level? A) 630 units B) 800 units C) 850 units D) 880 units
A
30) Refer to Figure 15-3. Suppose the monopolist represented in the diagram above produces positive output. What is the profit/loss per unit? A) loss of $7 per unit B) profit of $30 per unit C) loss of $21 per unit D) profit of $14 per unit
A
32) Refer to Figure 15-10. The deadweight loss due to a monopoly is represented by the area A) FHE. B) FGE. C) GEH. D) FQ1Q2E.
A
34) To maximize profit a monopolist will produce where A) marginal revenue is equal to marginal cost. B) demand for its product is unit-elastic. C) revenue per unit is maximized. D) average total cost is equal to average revenue.
A
35) Governments grant patents to encourage A) research and development on new products. B) competition. C) low prices. D) firms to form public enterprises.
A
37) The demand curve for each seller's product in perfect competition is horizontal at the market price because A) each seller is too small to affect market price. B) the price is set by the government. C) all the sellers get together and set the price. D) all the demanders get together and set the price.
A
47) A firm will break even when A) P = ATC. B) P > ATC. C) P < AVC. D) P = AVC.
A
50) A firm's efforts to increase profit by price discrimination can be undermined by A) arbitrage by buyers. B) consumer ignorance. C) differences in elasticity of demand. D) seller market power.
A
52) Which of the following is a necessary condition for successful price discrimination? A) The seller must possess market power. B) The buyer must possess market power. C) Transaction costs must be zero. D) Buyers must have identical inelastic demands.
A
53) With perfect price discrimination there is A) no deadweight loss. B) no producer surplus. C) one single price. D) an increase in consumer surplus.
A
