Past Econ Test #2

If Big Time Utilities wins a patent for a nuclear mini-power plant, resulting industrial structure leads to:

A loss in consumer surplus

Marginal cost will equal average total cost at the point where:

ATC is lowest

If the public utility commission allows the water company to earn a normal profit, then it is enforcing:

An average cost pricing rule

Which of the following curves is NOT bowl-shaped?

Average fixed cost curve

A firm will stop all production when the market price falls below the:

Average variable cost curve

All of the following are explicit costs

Business taxes paid by an entrepreneur; Money paid for raw materials; Salaries paid to employees

How do you find the marginal revenue?

Change in total revenue that results from the sale of one added unit of a product. MR=Change of TR/Change Quantity

Which of the following is not an example of a natural monopoly?

Chemical industry

The market structure that maximizes consumer and producer surplus is:

Competition

If a competitive firm can sell a bushel of soybeans for $25 and it has an average variable cost of $26 per bushel and the marginal cost is $26 per bushel, the firm should:

Cut output to zero

Assume that the fixed input is solely rent and the variable input is solely labor. As the marginal product of labor increases, the marginal cost:

Decreases

Economic prices are the sum of ____ and ____.

Explicit costs; implicit costs

Among the policies directed at dealing with natural monopolies are:

External constraints regarding price and quantity on firm behavior; Competition among firms for a monopoly right; and Public ownership of firms

The _____ converts factors of production into outputs.

Firm

When a market is allocatively efficient, consumers pay:

Fixed cost in the long run

Which of the following is NOT a natural monopoly?

Grocery store in a large city?

Competitive markets are efficient because:

P 5 MR 5 MC 5 SRATCmin 5 LRATCmin 5

If a competitive firm can increase its profits by increasing its output, the the firm's:

P > MC

What should the competitive firm in the short run do under this situation: minimum AVC < P < minimum ATC?

Produce that output where P=MC

_____ is the process by which products are sold to consumers at their lowest possible opportunity cost.

Productive efficiency

Assume that at a given level of output a monopoly firm has marginal revenue of $9, its ATC is $9, and its marginal cost is $7. If this firm were to incrementally increase its output, then:

Profit will increase

Economists assume that the primary goal of the firm is to maximize:

Profits

X-inefficiency results from:

Protection from competitive pressures

All of the following ARE examples of a natural monopoly:

Railroad industry, Local newspaper, and Electric utilities

Constant returns to scale are defined as long-run average total costs that:

Remain the same as output increases

Suppose a water utility charges a residential customer $1.50 per 1,000 gallons for the first 30,000 gallons of water used, and $1 per 1,000 gallons for any amount used in excess of 30,000 gallons of water. The water utility is practicing:

Second-degree price discrimination

All of the following conditions are required for successful price discrimination, EXCEPT that:

Sellers must be in an industry with no barriers to entry

Which of the following activities is NOT a responsibility of the entrepreneur?

Selling shares in the firm

The reason price equals marginal revenue in a competitive market is that:

Since price is constant, the added revenue from selling once more unit is the price

How do you find diminishing returns

That section of the total production curve in which each worker adds to output by an increment smaller than what was added by the previous worker

In the short run, if output is declining:

The average fixed cost must be rising

If Clearwater Cotton Candy Company lays off its workers and shuts down, it incurs costs of $30,000. If it produces at full capacity it incurs costs of $90,00. One would conclude that:

The costs of variable inputs at full capacity is $60,000

Which of the following statements about trusts is NOT correct?

The first antitrust act was passed after WWII

Which of the following is NOT true when there are large economies of scale to the point that one firm can produce at a lower average cost than can be achieved by multiple firms?

The long-run average cost curve of the firm will shift upward at low levels of output.

The monopolist's demand curve is:

The market demand curve

All of the following statements about trusts are correct:

The problems associated with the trust form of business organization led to the development of the antitrust acts; Trusts acted like monopolies; Trusts developed after the Civil War

All of the following are explicit costs except:

The salary an entrepreneur could have earned in a corporate job

The owners of a corporation are:

The shareholders

When new firms enter a competitive market:

it will cause an increase in supply

The idea that monopolies do not have to act efficiently because they are protected from competition is known as:

x-inefficiency

A monopoly differs from a competitive market in that:

No close substitutes exist for the monopolist's product

If Annie has sold 40 apples in a competitive market and her total revenue is $30, when she sells her 41st apple, her marginal revenue will be:

$0.75

When a new worker hired adds more to total output than the previous worker hired, you have:

Increasing Marginal Returns

All of the following are natural monopolies:

Local electric utility; microprocessor; and local newspaper

The short-run supply curve begins where the:

MC equals the minimum AVC

If a monopolist must charge the same price to all customers, then:

MR will be less than price

Which of the following firms is most likely to operate in a competitive market?

Maple Syrup Company

Which equation is used by a manager when considering total costs?

Total costs (TC) = Total fixed costs (ATC) + Total variable costs (AVC)

Which industry best illustrates a competitive market?

Wheat industry

A normal profit is equal to:

Zero economic profit

In an increasing cost industry:

Zero economic profit occurs at a higher price in the long run

Normal profits are equal to:

Zero economic profits