Unit 5 Exam

Question 51 Refer to the above diagrams, which pertain to a purely competitive firm producing output q and the industry in which it operates. The predicted long-run adjustments in this industry might be offset by:

Answer to question 51 a technological improvement in production methods.

Question 52 Refer to the above cost and demand data for a pure monopolist. In equilibrium the firm will produce:

Answer to question 52 Q3 and charge price P3

Question 53 Refer to the above cost and demand data for a pure monopolist. In equilibrium the firm will realize a per unit:

Answer to question 53 Profit of P1-P3

Question 54 Refer to the above cost and demand data for a pure monopolist. Suppose this firm is deemed a natural monopoly and is subjected to a regulatory commission. If the commission seeks to achieve the most efficient allocation of resources for this firm, it should set its price at:

Answer to question 54 P2

Question 6 A competitive firm in the short run can determine the profit maximizing (or loss minimizing) output by equating

Answer to question 6 marginal revenue and marginal costs

Question 7 In the short run, a purely competitive firm will close down if

Answer to question 7 price is less than AVC at all outputs

Question 8 When a perfectly competitive firm sells additional units of output, its total revenue will

Answer to question 8 increase at a constant rate

Question 9 The owner of a competitive firm making zero economic profit

Answer to question 9 is making exactly what she would make in her next best alternative job

Question 2 The demand schedule for the purely competitive firm is

Answer to question 2 perfectly elastic

Question 20 The Monopolistically competitive seller maximizes profits by producing at the point where:

Answer to question 20 marginal revenue = marginal cost

Question 21 When a monopolistically competitive firm is in long run equilibrium

Answer to question 21 marginal revenue equals marginal cost and price equals average total cost

Question 22 The demand curve for a monopolistically competitive producer is:

Answer to question 22 more elastic than a pure monopolist, and less elastic than a purely competitive seller

Question 23 In equilibrium, a monopolistically competitor achieves:

Answer to question 23 neither productive efficiency nor allocative efficiency

Question 24 Non price competition refers to:

Answer to question 24 advertising, product promotion, and changes in the real or perceived characteristics of a product

Question 25 Concentration ratios measure

Answer to question 25 percentage of total sales accounted for by the four largest firms in the industry

Question 26 Mutual interdependence means that each oligopolistic firm

Answer to question 26 must consider the reactions of its rivals when it determines its price policy

Question 27 If the several oligopolistic firms, which compromise an industry, behave collusively, the resulting price and output will most likely resemble that of

Answer to question 27 unregulated monopoly

Question 28 Which of the following best characterizes the firms in the oligopoly industry?

Answer to question 28 they use strategic decision-making

Question 29 In a duopoly payoff matrix, if one firm increases its price, then the other firm can:

Answer to question 29 keep its price constant than thus increase its market share

Question 3 Which of the following is characteristic of a purely competitive seller's demand curve?

Answer to question 3 price and marginal revenue are equal at all levels of output

Question 30 Given the same unit cost data, a monopolistic producer will charge

Answer to question 30 a higher price and produce a smaller output than a competitive firm

Question 31 Price discrimination refers to

Answer to question 31 the selling of a given product at different prices that do not reflect cost differences

Question 32 Which of the following statements is true for a monopolist at the profit maximizing output level?

Answer to question 32 price exceeds marginal revenue

Question 33 A natural monopoly occurs when:

Answer to question 33 long-run average costs decline continuously through the range of demand

Question 34 Which of the following is true in the elastic range of the firm's demand curve?

Answer to question 34 a decrease in the price will likely lead to an increase in total revenue

Question 35 The practice of price discrimination is associated with pure monopoly because:

Answer to question 35 monopolists have considerable ability to control output and price

Question 36 The dilemma of regulation refers to the notion that

Answer to question 36 the regulated price that achieves allocatively efficiency is also likely to result in losses

Question 37 With a natural monopoly, the fair return price:

Answer to question 37 is allocatively inefficienct, the social optimal price is allocatively efficient

Question 38 A pure monopolist:

Answer to question 38 will realize an economic profit if price exceeds ATC at the equilibrium output

Question 39 Unregulated monopolies may earn economic profits in the long run because

Answer to question 39 of barriers to entry

Question 4 Price is constant to the individual firm selling in a purely competitive market because

Answer to question 4 each seller supplies a negligible fraction of total supply

Question 40 A non-discriminating monopolist:

Answer to question 40 will never produce in the output range where demand is inelastic

Question 41 Game theory, and price leadership are explanations for the profit - maximizing behavior of a firm under which of the following market structures?

Answer to question 41 Oligopoly

Question 42 If a regulatory commission wants to establish a "socially optimal" price for a natural monopoly, it should select that price:

Answer to question 42 at which the marginal cost curve intersects the demand curve (P=MC)

Question 43 If a regulatory commission wants to provide a natural monopoly with a "fair return", it should establish that price which is equal to

Answer to question 43 average total cost

Question 44 Which is NOT a precondition for price discrimination?

Answer to question 44 the commodity must be a durable good

Question 45 Other things being equal, in which of the following cases would we expect economic profits to be the greatest

Answer to question 45 an unregulated monopolist which is able to price discriminate

Question 46 A price discriminating monopolist would differ from a non-discriminating monopolist in which of the following measurements

Answer to question 46 higher with price discrimination : lower with price discrimination

Question 47 In a monopolistically competitive firm in the long run, the excess capacity means:

Answer to question 47 the output at minimum ATC is greater than the profit-maximizing level of output

Question 48 Price leadership in oligopolistic industries represents a situation in which firms:

Answer to question 48 tacitly collude

Question 49 Refer to the above diagrams, which pertain to a purely competitive firm producing output q and the industry in which it operates. Which of the following is correct?

Answer to question 49 The diagrams portray short-run equilibrium, but not long-run equilibrium

Question 5 Marginal revenue may be best defined as

Answer to question 5 change in total revenue associated with the sale of one more unit

Question 50 Refer to the above diagrams, which pertain to a purely competitive firm producing output q and the industry in which it operates. In the long run we should expect:

Answer to question 50 firms to leave the industry, market supply to fall, and product price to rise

Question 1 Which of the following is not a basic characteristic of pure competition?

Answer to question 1 considerable non price competition

Question 10 Which of the following statements is true for a firm in a perfectly competitive industry?

Answer to question 10 Average revenue equals marginal revenue

Question 11 A purely competitive firm

Answer to question 11 cannot earn economic profit in the long run

Question 12 The condition that P=MC is the direct requirement for which type of efficiency

Answer to question 12 allocation efficiency

Question 13 Productive Efficiency refers to:

Answer to question 13 the production of a good at the lowest average costs (P = min ATC)

Question 14 Under pure competition in the long run:

Answer to question 14 Both allocative efficiency and productive efficiency are being achieved

Question 15 Assume a purely competitive, increasing-cost industry is in long run equilibrium. If a decline in demand occurs, firms will

Answer to question 15 leave the industry and price and output will both decline

Question 16 Monopolistic competition means

Answer to question 16 relatively large number of firms and low entry barriers

Question 17 Monopolistically competitive firms:

Answer to question 17 may realize either profits or losses in the short run, but tend to realize only normal profits in the long run

Question 18 Economic analysis of a monopolistically competitive industry is more complicated than that of pure competition because:

Answer to question 18 of product differentiation and consequent product promotion activities

Question 19 A Monopolistically competitive firm has a

Answer to question 19 relatively elastic demand curve