Smartworks Questions:
According to the profit-maximizing rule, firms expand output until Choose one: A. MR = MC. B. MR > MC or MR < MC. C. MR > MC. D. MR < MC.
A
In a perfectly competitive market, "price takers" Choose one: A. have no control over the the price set by the market. B. are competing firms that independently set prices for a good. C. are a group of firms that meet and jointly set the price for a good. D. are market leaders that set the price for a good and are then copied by other firms.
A
Under monopolistic competition, a market has Choose one: A. many firms and no dominant firm. B. many firms with one large dominant firm. C. a small number of very large firms. D. a single producer.
A
Under monopolistic competition, there are Choose one: A. no long-run barriers to entry of new firms. B. long-run barriers to entry of new firms. C. no short-run barriers to entry of new firms. D. None of the above are true.
A
What can we say about a firm that is perfectly price discriminating? Choose one or more: A. The firm will charge each customer his or her maximum willingness to pay. B. All else equal, this firm will have greater profits than a firm that charges only one price. C. This firm will usually have two prices: one for customers that have a more elastic demand and one for customers that have a less elastic demand.
A, B
Which statements are true regarding economies of scale? Choose one or more: A. A firm that has economies of scale sees its average total costs decrease when production increases. B. When a firm has a natural monopoly, it has that type of monopoly because of economies of scale. C. To maximize profits, a monopoly that occurs because of economies of scale should produce an output so that marginal revenue equals marginal costs. D. Economies of scale typically cause an industry to be perfectly competitive.
A, B, C
Which of these statements regarding the differences between monopoly and a competitive market are true? Choose one or more: A. A monopolist can earn profits in the long run, but a firm in a perfectly competitive market cannot. B. There are more firms in a competitive market than in a monopoly. C. A monopolist will produce less than the output produced in a perfectly competitive market. D. A monopoly is a price maker, while a competitive firm is a price taker.
A, B, C, D
Product differentiation is the process that firms use to make a product more attractive to potential customers. On which of the following criteria can firms differentiate their products? Choose one or more: A. location (downtown, next door) B. style/type (language, size, speed) C. number of competitors D. quality (durable, reliable, easily broken) E. excess capacity (ability to produce more than current output) F. entry/exit (joining a market as a new firm, "retiring" as a firm)
A, B, D
What solutions can the government employ to reduce inefficiency when there is a monopolist? Choose one or more: A. Reduce trade barriers to foster competition. B. Break up the monopolist into several smaller firms. C. Subsidize the monopolist. D. Regulate the market by imposing a maximum price that can be charged.
A, B, D
If a firm runs a successful advertising campaign, what happens to the firm's demand curve? Choose one or more: A. The demand curve becomes more vertical. B. The demand curve shifts to the left. C. The demand curve becomes flatter or less vertical. D. The demand curve shifts to the right.
A, D
"If the marginal cost of producing one more unit is larger than the marginal revenue of producing that unit, the firm should produce more, because MR is not equal to MC." Choose one: A. true B. false
B
A firm increases all of its inputs by 30%. As a result, output increases by 15%. This firm experiences _______________. Choose one: A. economies of scale B. diseconomies of scale C. constant returns to scale
B
A natural monopoly exists when a single seller experiences __________________ costs than any potential competitor. Choose one: A. higher B. lower C. equal D. sometimes higher and sometimes lower
B
How does the monopolist's decision compare to the efficient price and output? Choose one: A. The monopolist charges less and produces less. B. The monopolist charges more and produces less. C. The monopolist charges more and produces more. D. The monopolist charges less and produces more.
B
Which of the following could be considered a monopoly? Choose one or more: A. George Clooney B. your local sewer company C. Boeing, a manufacturer of airplanes D. the only gas station along a 100-mile stretch of road E. Wegmans
B, D
The company charges a lower price to veterans because their demand for a small cup of coffee is more price _______ A. Unit Elastic B. Less Price Elastic C. More Price Elastic
C
A national coffee chain offers a small cup of coffee for $3.79 but charges $2.49 for the same item to veterans with a valid veteran ID. The company is able to practice price discrimination because it Choose one: A. is able to determine each customer's willingness to pay. B. is able to sell products of varying quality. C. is able to distinguish between buyers. D. encounters different underlying costs.
C
Total profits and losses are determined by ______________. Choose one: A. subtracting explicit costs from total revenue B. adding total cost to total revenue C. subtracting total cost from total revenue D. subtracting implicit costs from total revenue
C
Assume the market for cell phones is an oligopoly. Further assume that cell phone consumption and production generate no negative externalities. Imagine that all the companies in the oligopoly agree to collude and charge a single price for their cell phones. Which of the following is true? Choose one: A. This agreement is not in the best interest of society, because there will be less competition and the price of cell phones will be significantly below marginal cost. B. This agreement is in the best interest of society because the price of cell phones will be higher than if there had been no collusive agreement. C. This agreement is in the best interest of society because the quantity of cell phones sold will be significantly less than the quantity that would be sold if the cell phone market were perfectly competitive. D. This agreement is not in the best interest of society, because there will be less competition and the price of cell phones will be significantly above marginal cost.
D
For a perfectly competitive firm, marginal revenue is Choose one: A. at first greater than price, but eventually less than price. B. greater than price. C. less than price. D. equal to price.
D
In the long run, all costs are ______________. Choose one: A. dependent on the firm B. variable and fixed C. fixed only D. variable only
D
Assume there are currently five firms producing and selling beer in the Latin American market. Also assume that the product is differentiated and barriers to entry are high in the industry, making this market an oligopoly. If two firms were to exit the market, economists expect the equilibrium price will likely ______ and the equilibrium quantity will likely ________
Increase Decrease
The firm's short-run supply curve exists where: A. Price is above ATC B. MC is increasing C. ATC is decreasing
Price is above ATC
The firms's long-run supply curve exists where A. Price is above ATC B. MC is increasing C. ATC is decreasing
Price is above ATC