681316 MICRO Exam 3
If the quality differences of similar products are mostly imperceptible to the average consumer's eyes, which of the following will most likely play a major role in influencing the decisions of purchasers? A. price of competing products B. size of competing products C. purchaser's opportunity cost D. geographic origin of products
A
An _________________ is calculated by subtracting the firm's costs from its total revenues, _______________________________ . A. accounting profit; excluding opportunity cost B. accounting profit; including opportunity cost C. economic profit; excluding opportunity cost D. opportunity cost; including economic profit
A
__________________ law implies ownership over an idea or concept or image A. Intellectual property B. Copyright C. Patent D. Trademark
A. Intellectual property
_____________ has occurred if a government-owned firm becomes privately owned. A. Privatization B. Nationalization C. Deregulation D. Regulatory capture
A. Privatization
Government passed the ______________________ to limit the power of large, consolidated firms that were run by trustees as if they were a single firm. A. Sherman Act in 1890 B. Thatcher Act in 1980 C. Antitrust Act in 1890 D. Competition Act in 1980
A. Sherman Act in 1890
Occasionally, _________________ may lead to pure monopoly; in other market conditions, they may limit competition _________________ . A. barriers to entry; to a few oligopoly firms B. barriers to entry; to a natural monopoly C. deregulation; requiring new patent law D. deregulation; requiring new copyright law
A. barriers to entry; to a few oligopoly firms
Antitrust laws were created to give government the power to A. block certain mergers and break up large firms into smaller ones. B. block cartels, and break up regulatory capture. C. force the firm to sell off the profitable parts of its operation. D. block certain mergers that are determined to be uncompetitive.
A. block certain mergers and break up large firms into smaller ones.
A local regulator has calculated the average cost of production for the public water utility. The regulator has allowed an adjustment for the normal rate of profit the firm should expect to earn, and then set the price that consumers can be charged accordingly. In this instance, the regulator has used which of the following? A. cost-plus regulation B. cost-plus analysis C. price-cap regulation D. market-price analysis
A. cost-plus regulation
Regulations that permit a regulated firm to cover its costs and to make a normal level of profit are commonly referred to as A. cost-plus regulation. B. price cap regulations. C. regulatory capture. D. profit regulation.
A. cost-plus regulation.
Copyright protection legislation provides protection for original works A. during the author's life plus 70 years B. during the author's life plus 20 years C. until the author is 70 years of age D. until the author is 75 years of age
A. during the author's life plus 70 years
For a pure monopoly to exist, A. there is a single seller in a particular industry B. there is only one seller, therefore no industry C. there are a few sellers in a given industry D. there are limited sellers in a particular industry
A. there is a single seller in a particular industry
Which of the following completes the argument against deregulation of U.S. banks that began with the phrase: "if banks competed to pay higher rates of interest", A. they might also compete to make riskier loans, potentially imperiling the safety of the banking system. B. they might also compete to make less riskier loans, potentially imperiling the U.S. consumers' reliance on credit. C. they will end up playing a large role in setting the regulations that they will follow. D. they will send lobbyists to offer well-paid jobs to some of the retiring members of the regulatory board
A. they might also compete to make riskier loans, potentially imperiling the safety of the banking system.
Economic profit can be derived from calculating total revenues minus all of the firm's costs, A. excluding its opportunity costs. B. including its opportunity costs. C. including its marginal revenue. D. excluding its marginal revenue.
B
42. Refer to the diagram above. In this instance, point e shown on the graph indicates A. the point where profits will increase by increasing output B. the point where profits will increase by reducing output C. the profit-maximizing point where MR = MC D. the profit-maximizing point where MR is less an MC
B
In the United States, a pharmaceutical company's exclusive patent rights last for A. 20 years. B. 25 years. C. 10 years. D. 70 years.
A. 20 years.
The information below sets out the estimated market shares for the cellular phone manufacturing market. Firm Market Share Nokia 36% Fujitsu 3% Kyocera 3% LG 6% Motorola 16% Samsung 6% Sanyo 4% Siemens 7% Sony Ericsson 11% Plus 8 more firms with 1% each Based on this information, the four-firm concentration ratio is A. 70 B. 68 C. 65 D. 73
A. 70
In economic terms, a practical approach to maximizing profits requires an examination of how changes in production affect ________________ and ________________ . A. total revenue; total cost B. marginal revenue; marginal cost C. total revenue; marginal cost D. marginal revenue; total cost
B
Under perfect competition, any profit-maximizing producer faces a market price equal to its A. average costs B. marginal costs C. total costs D. variable costs
B
Even when competitive firms are unable to calculate marginal revenue product directly, _________________________________________ will push wage rates toward the marginal revenue product of labor. A. planned future investment in physical capital B. the pressures of competition in the labor market C. the marginal workers ongoing skills training D. wages that exceed workers' net revenue product
B
If a firm's revenues do not cover its average variable costs, then that firm has reached its _________________ . A. price taking point B. shutdown point C. marginal point D. opportunity margin
B
The information below sets out the estimated market revenue for the television manufacturing market. Firm Revenue (in millions of $) Hitachi 525 Philips/Magnavox 1,270 JVC 630 Matsushita/Panasonic 840 Mitsubishi 520 Samsung 650 Sharp 615 Sony 1,930 Toshiba 950 10 more firms 1,120 Based on this information, the Herfindahl-Hirschman Index is A. 896.73 B. 1,074.04 C. 1,505.13 D. 1,742.10
B. 1,074.04
The information below sets out the estimated market shares for the cellular phone manufacturing market are given in the table below. Firm Market Share Nokia 36% Fujitsu 3% Kyocera 3% LG 6% Motorola 16% Samsung 6% Sanyo 4% Siemens 7% Sony Ericsson 11% Plus 8 more firms with 1% each If Samsung were to acquire Sanyo, the Herfindahl-Hirschman Index would be A. 1,272 B. 1,884 C. 1,836 D. 2,216
B. 1,884
When the regulator sets a price that a firm cannot exceed over the next few years, the regulator is enforcing A. deregulation. B. price cap regulation. C. cost-plus regulation D. regulatory capture rules.
B. price cap regulation.
Since the Margaret Thatcher era of the 1970s, many countries have sold off vast numbers of government-owned firms to _________________ . A. private monopolies B. private ownership C. decrease regulation capture D. increase output
B. private ownership
In the _________, the perfectly competitive firm will seek out ________________________ . A. long run; the quantity of output where profits are highest B. short run; profits by ignoring the concept of total cost analysis C. short run; the quantity of output where profits are highest D. long run; methods to reduce production and shut down
C
If a firm holds a pure monopoly in the market and is able to sell 4 units of output at $2.00 per unit and 5 units of output at $1.75 per unit, it will produce and sell the fifth unit if its marginal cost is A. $1.75 or less B. $2.00 or less C. $0.75 or less D. $1.00 or less
C. $0.75 or less
The information below sets out the estimated market shares for the cellular phone manufacturing market. Firm Market Share Nokia 36% Fujitsu 3% Kyocera 3% LG 6% Motorola 16% Samsung 6% Sanyo 4% Siemens 7% Sony Ericsson 11% Plus 8 more firms with 1% each Based on this information, the Herfindahl-Hirschman Index is A. 1,272 B. 2,216 C. 1,836 D. 1,800
C. 1,836
What is the maximum value that can be reached using the HHI? A. 100 B. 1,000 C. 10,000 D. 100,000
C. 10,000
The form of legal protection intended to prevent reproduction of original works is referred to as ______________ law. A. patent B. trademark C. copyright D. trade secret
C. copyright
In the U.S., about __________ of all reported merger and acquisition transactions in 2008 exceeded $500 million, while about _________ exceeded $1 billion. A. 80%; 20% B. 99%; 1% C. 60%; 40% D. 25%; 10%
D. 25%; 10%
The information below sets out the estimated market shares for the cellular phone manufacturing market. Firm Market Share Nokia 36% Fujitsu 3% Kyocera 3% LG 6% Motorola 16% Samsung 6% Sanyo 4% Siemens 7% Sony Ericsson 11% Plus 8 more firms with 1% each If Samsung were to acquire Sanyo, the four-firm concentration ratio would be A. 70 B. 68 C. 65 D. 73
D. 73
The application of current US antitrust law A. extends its long reach to block mergers that reduce competition. B. reaches beyond the subjective judgments of antitrust regulators. C. includes a wide arrange of anticompetitive practices. D. includes a narrow range of anticompetitive practices.
C. includes a wide arrange of anticompetitive practices.
The demand curve perceived by a perfectly competitive firm A. shows that such a firm is a price-maker B. shows economies of scale over a large range of output C. is horizontal D. all of the above
C. is horizontal
A merger will likely lessen competition if A. they are very beneficial to consumers. B. less concentration in the market results. C. it enables the new single firm to raise price. D. both b and c above are correct answers.
C. it enables the new single firm to raise price.
Antitrust law includes specific rules against restrictive practices in particular because A. they're effective in creating natural monopolies. B. they're very disruptive and controversial practices. C. their effects can reduce competition. D. their specific contracts are complicated.
C. their effects can reduce competition.
67. The table below sets out the amount of capital needed for certain investment projects and the rate of return for each project. What is this firm's demand for physical capital if their hurdle rate is 8%? A. $1.5 million B. $2 million C. $250,000 D. $500,000
D
Intellectual property law is a body of law that includes A. the right of inventors to produce their inventions B. the right of inventors to sell their inventions C. trademark, patent and trade secret legislation D. copyright legislation, as well as all of the above
D. copyright legislation, as well as all of the above
Which of the following is most unlikely to present a barrier to entry into a market? A. market forces B. patent laws C. technological advantages D. deregulation
D. deregulation
Currently, the approach to antitrust regulation involves A. defining a market and counting up total sales. B. market concentration ratio. C. HHI and concentration ratio. D. detailed analysis of specific markets and companies.
D. detailed analysis of specific markets and companies.
Perfect competition displays ___________ because the social benefits of additional production, as measured by the price that people are willing to pay, are in balance with the ___________ to society of that production.
allocative efficiency; marginal costs
In the framework of an oligopoly, what strategy can work like a silent form of cooperation?
always match other cartel firms' price cuts, but don't match price increases
The long-term result of entry and exit in a perfectly competitive market is that all firms end up selling at the price level determined by the lowest point on the ___________.
average cost curve
If a perfectly competitive market involves many firms selling identical products, then, in the face of such competition, __________.
each of these firms must act as a price-taker
Monopolistic competitors in the food industry will often include a recyclable symbol on packaging used for their product as a means to _________.
differentiate their product
If oligopolistic firms banded together with the intention of acting like a monopoly, it would likely result in their being able to _____________.
divide up the monopoly level of profit amongst themselves
In the framework of monopolistic competition, the way advertising works can be perceived as ___________.
causing a firm's perceived demand curve to become more inelastic AND causing demand for the firm's product to increase.
How can parties who find themselves in a prisoner's dilemma situation avoid the undesired outcome and cooperate with each other?
find effective ways to penalize firms who do not cooperate
The single most common form of competition in the U.S. is __________.
monopolistic competition among firms with differentiated products
As the name monopolistic competition implies, a firm's decisions in this setting will in certain ways resemble ___________and in other ways resemble__________.
monopoly; perfect competition
In monopolistic competition, the end result of entry and exist is that firms end up with a price that lies _______.
on the downward-sloping portion of the average cost curve
Perfect competition and monopoly stand at ___________ of the spectrum of competition.
opposite ends
When exit occurs in a monopolistically competitive industry the ____________.
perceived demand and marginal revenue curves will shift to the right
When exit occurs in a monopolistically competitive industry the
perceived demand and marginal revenue curves will shift to the right.
The first step to be undertaken by a profit-maximizing monopolistic competitor wanting to decide what price to charge is to
select the profit maximizing quantity to produce
The first step to be undertaken by a profit-maximizing monopolistic competitor wanting to decide what price to charge is to _____________.
select the profit maximizing quantity to produce
The shape of the perceived demand curve for a perfectly competitive firm reflects that firm's ability to _________.
sell any quantity it wishes at the prevailing market price
A monopolistically competitive firm may earn abnormally high profits in the ____________.
short term, but the process of entry will drive those profits to zero in the long run
The perceived demand for a monopolistic competitor
takes competitors into account.
When entry occurs in a monopolistically competitive industry, _____________.
the perceived demand and marginal revenue curves for each firm will shift to the left
If one firm operating in an oligopoly raises its price and other firms do not do so,
the sales of the firm that increased its price will decline sharply
If one firm operating in an oligopoly raises its price and other firms do not do so,
the sales of the firm that increased its price will decline sharply.
If oligopolists compete hard against each other, ________.
zero profits result for all
If oligopolists compete hard against each other,
zero profits result for all.
A business ________________ occurs when, for practical purposes, one firm purchases another. A. merger B. loss C. acquisition D. antitrust violation
C. acquisition
For a monopolistic firm, the demand for its product is A. unitary elastic B. completely elastic C. completely inelastic D. neither b or c
C. completely inelastic
The demand curve as perceived by a perfectly competitive firm is ____________.
flat
36. Given the data provided in the table below, the total revenue (TR) for production at quantity (Q) level 4 equals A. zero B. $1.00 C. $15.00 D. $20.00
D
Which of the following is a true statement? A. The government approves most proposed mergers. B. Government regulators agree that few mergers are beneficial to consumers. C. Government regulators agree that all mergers are beneficial to consumers. D. The government disapproves most proposed mergers.
A. The government approves most proposed mergers.
A firm that holds a monopoly position in the market place is A. a price maker B. a price taker C. monopolistically competitive D. subject to infinite market forces
A. a price maker
The FTC and the Department of Justice guidelines state that, in the US market-driven economy, firms will be forbidden to A. agree to rig bids or allocate lines of commerce. B. agree to let the market set prevailing prices or output. C. refuse to share customers, suppliers or territories. D. refuse to share or divide markets.
A. agree to rig bids or allocate lines of commerce.
Antitrust regulations would most likely require one of the following in order to determine whether or not a merger may enhance competition. Which one is it? A. analysis using numerical tools. B. obvious objective judgments. C. readily qualified judgments. D. highly complex analytical tools.
A. analysis using numerical tools.
For the past two years, a cellphone manufacturer has been selling to a group of distributors, who then sell the products to retailers to sell to the general public. The firm has now informed its distributors that each of them must sell the cellphones for a minimum price the manufacturer has set. In these circumstances, A. any resulting minimum resale price maintenance agreements will be illegal. B. the purpose of this contract is to encourage competition between the distributors. C. any resulting agreement to give dealers exclusive distribution rights is illegal. D. these tie-in sales encourage competition between the manufacturer's distributors.
A. any resulting minimum resale price maintenance agreements will be illegal.
Norway's government nationalized the country's oil resources, and it has been accumulating a massive sovereign wealth fund worth billions of dollars ever since. This sovereign fund is used as a monetary source for government funded national education and healthcare. This is because the wealth generated by nationalized industries A. is used to serve the citizens of the country. B. is used to serve the interests of oil industry. C. always charge high prices and reduce output. D. never return value to citizens of the country.
A. is used to serve the citizens of the country.
If a monopolist increases quantity by one unit, but sells the increased output at a slightly lower price, A. marginal revenue is affected by adding one additional unit sold at the new price. B. all the previous units, which used to sell at a higher price, now sell for more. C. the marginal revenue of selling a unit is more than the price of the unit. D. because of higher output the marginal revenue curve is above the demand curve.
A. marginal revenue is affected by adding one additional unit sold at the new price.
The term ____________ refers to the percentage share of a firm's total sales in the market. A. market share B. concentration ratio C. total market ratio D. market cap
A. market share
A __________________ exists when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curve. A. natural monopoly B. monopoly C. oligopoly D. monopolistic competition
A. natural monopoly
Roughly speaking, patent law covers __________ and __________ law protects an author's original books. A. original inventive creations; copyright B. trade secrets; trademark C. all inventions; trademark D. original audiovisual creations; copyright
A. original inventive creations; copyright
Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency? A. output will be too small and its price too high. B. output will be too large and its price too high. C. output will be too small and its price too low. D. output will be too large and its price too low.
A. output will be too small and its price too high.
Government ______________ regulations specify that inventors will maintain exclusive legal rights to their respective inventions for ______________ . A. patent; a limited time B. trademark; an unlimited time C. copyright; a limited time D. trade secret; an unlimited time
A. patent; a limited time
There have been two especially important shifts in how markets are defined in recent decades: one involves _________________ and the other involves _____________. A. technology; globalization B. the Internet; technology C. communication technologies; the Internet D. globalization; communication technologies
A. technology; globalization
The following figure shows the average cost curve, demand curve, and marginal revenue curve for a monopolist. After maximizing profits, what do the firm's costs equal? A. the area of rectangle ABGH B. the area of rectangle BDEG C. the area of rectangle ACFH D. the area of rectangle ADEH
A. the area of rectangle ABGH
When the demand for a good or service limits the quantity that can be sold to an output at which the firm experiences economies of scale, A. the firm is a natural monopoly. B. there are close substitutes for the good the firm produces. C. firm is a single-price monopoly. D. firm is well protected from competition by a legal barrier.
A. the firm is a natural monopoly.
If a firm holds a pure monopoly in the market and is able to sell 5 units of output at $4.00 per unit and 6 units of output at $3,90 per unit, it will produce and sell the sixth unit if its marginal cost is A. $3.90 or less B. $3.40 or less C. $3.50 or less D. $4.00 or less
B. $3.40 or less
The US government has registered ___________________ on behalf of business firms to protect a particularly distinct element each has selected for its ability to aid consumers to easily __________________ . A. 200,00 patents; license for use B. 800,000 trademarks; identify the source of goods C. 1 million copyright licenses; identify the authors of creative works D. 200,000 trade secrets; create a natural monopoly
B. 800,000 trademarks; identify the source of goods
______________ give government the power to block certain mergers, and in some cases, to break up large firms into smaller ones. A. Market regulations B. Antitrust laws C. Nationalization policies D. Restrictive practices
B. Antitrust laws
Which of the following government institutions bears the responsibility of enforcing US antitrust laws? A. Federal Trade Commission B. Department of Justice C. Supreme Court D. Congress and Senate
B. Department of Justice
Which of the following has the power to allow a merger, prohibit it, or allow it if certain conditions are met? A. antitrust regulators at the FTC B. Department of Justice C. Congress and/or Senate D. Supreme Court
B. Department of Justice
_____________ and __________________ refer to the quantity and price at a point in time. A. Monopoly; productive efficiency B. Productive; allocative efficiency C. Monopoly; allocative efficiency D. Profit; maximization
B. Productive; allocative efficiency
Which of the following would a market competition regulator be most likely to assign the maximum HHI valuation to? A. a perfect competitor B. a monopoly C. an oligopoly D. a monopolistic competitor
B. a monopoly
The marginal revenue curve for a monopolist ____________________ the market demand curve. A. always rises above B. always lies beneath C. always runs parallel D. always is the same
B. always lies beneath
Which of the following may be legal and even common practice in a market economy? A. making the ability to buy one product conditional on also buying another B. bundling several products together and selling them as a package C. deterring new market entrants with short term predatory pricing D. selling product for less than the average variable cost of producing same.
B. bundling several products together and selling them as a package
If the U.S. electricity and the telecommunications industry are deregulated, the challenge that will need to be met will involve A. injecting competition into industries where the arguments for deregulation are not obvious. B. combining competition where possible with regulation where necessary. C. focusing on the grid of wires that bring electricity to all categories of consumers. D. plans for aiding the concealment of Enron-style antitrust activities.
B. combining competition where possible with regulation where necessary.
The concept of restrictive practices in the U.S. market economy is ____________________. A. set out in law that remains relatively constant B. continually evolving C. useful and fair D. closed to interpretation
B. continually evolving
Government policy-makers often must decide how to balance the potential benefits of ______________ against the potential benefits of _____________ . A. competition; nationalization B. corporate size; competition C. corporate size; predatory pricing D. nationalization; privatization
B. corporate size; competition
The two primary factors determining monopoly market power are the firm's A. revenues and size of its customer base B. demand curve and its cost structure C. variable cost curve and its fixed cost structure D. demand curve and level of wealth within its market
B. demand curve and its cost structure
Once I'MaPharmaCo. has received confirmation of the registration for its latest drug patent application, it will have created a monopoly for that product by restricting A. demand for the product. B. entry into the market. C. amount of product advertising. D. the number of product compliments.
B. entry into the market.
Today, a common starting point is for US antitrust regulators to use statistical tools and real-world evidence to_______________________ faced by firms proposing a merger of their respective businesses. A. define the market and count up total sales B. estimate the demand and supply curves C. preserve competition in certain local markets D. analyze companies and narrowly defined markets
B. estimate the demand and supply curves
A narrowly defined market will tend to make concentration appear _________, while a broadly defined market will tend to make it appear _________. A. concerning; less concerning B. higher; smaller C. less concerning; concerning D. smaller; higher
B. higher; smaller
A natural monopoly occurs when the quantity demanded is ________ the minimum quantity it takes to be at the bottom of the long-run average cost curve.
B. less than
Which of the following is most likely to be a monopoly? A. local fast-food restaurant B. local electricity distributor C. local bathroom fixtures shop D. local television broadcaster
B. local electricity distributor
Deregulation occurs when a government eliminates or scales back rules relating to all but one of the following. Which one is it? A. prices that can be charged B. natural monopoly C. conditions of entry in a certain industry D. quantities that can be produced
B. natural monopoly
In the closing decades of the nineteenth century, many industries in the U.S. economy were dominated by a single firm that had most of the sales for the entire country. In many cases these large firms were ___________________ . A. as efficient and innovative as they could be B. organized in the legal form of a trust C. able to provide consumers with the lowest price products D. using illegal practices to dominate the US economy
B. organized in the legal form of a trust
A monopolist is able to maximize its profits by A. setting the price at the level that will maximize its per-unit profit. B. producing output where MR = MC and charging a price along the demand curve. C. setting output at MR = MC and setting price at the demand curve's highest point. D. producing maximum output where price is equal to its marginal cost.
B. producing output where MR = MC and charging a price along the demand curve.
In the event that Only1Corp. obtains control of all the natural gas producers in the US, it would most likely A. have a patent giving it exclusive legal rights to make, use, and sell for a limited time. B. raise prices, cut production, and realize positive economic profits. C. have legal protection to prevent copying its methods of production for commercial use. D. acquire rights for its investors to produce and sell their product.
B. raise prices, cut production, and realize positive economic profits.
Splitting up a the natural monopoly held by a public utility that produces and provides electricity would A. raise the total cost of production for all and force their profits to zero. B. raise the average cost of production and force consumers to pay more. C. evolve the structure of costs and demand to make competition less costly. D. evolve the structure of costs and demand to make competition more likely.
B. raise the average cost of production and force consumers to pay more.
The statistical models currently used by competition regulators do require some degree of ___________________, and can become the subject of ___________ between the antitrust authorities and the companies that wish to merge. A. objective judgment; legal disputes B. subjective judgment; legal disputes C. subjective judgment; expertise D. objective judgment; expertise
B. subjective judgment; legal disputes
What qualities would ideally suit a monopolistic firm with regard to barriers to entry? A. a few impediments to limit new firms from operating and expanding within the market B. sufficient strength to prevent or discourage potential competitors from entering the market C. government rules on prices, quantities, or conditions of entry in an industry D. government regulations that provide no barriers to entry, exit, or competition
B. sufficient strength to prevent or discourage potential competitors from entering the market
If it was possible for one company to gain ownership control all of the uranium processing plants in the US, then A. they will strive to reach efficiencies only they know how to make. B. that firm could set up barriers to entry to discourage competition. C. government will deregulate to ensure the company's monopoly. D. the factors of market demand and supply will set the price.
B. that firm could set up barriers to entry to discourage competition.
The following figure shows the average cost curve, demand curve, and marginal revenue curve for a monopolist. After maximizing profits, what do the firm's profit's equal? A. the area of rectangle ABGH B. the area of rectangle BDEG C. the area of rectangle BCFG D. the area of rectangle ADEH
B. the area of rectangle BDEG
The following graph shows the demand curve for a good and the long run average cost curve for a typical firm in this market. If the government does not intervene in the market, then A. there will be many firms in this market, all of whom will take the market price as given and produce where price equals marginal cost B. there will only be 1 firm in this market, and they will produce where marginal revenue equals marginal cost C. there will only be 1 firm in this market, and they will take the price as given and produce where price equals marginal cost D. no firms will enter this market
B. there will only be 1 firm in this market, and they will produce where marginal revenue equals marginal cost
A manufacturer that only allows a consumer to purchase one product if they also buy another product is using ____________ to increase its profits. A. exclusive dealing B. tie-in sales C. predatory pricing D. bundle dealing
B. tie-in sales
Which of the following denotes the typical shape of the monopolist's total cost curve? A. total costs decrease and become flatter as output rises B. total costs rise and grow steeper as output rises C. higher output levels create the typical downward sloping cost curve D. total costs are typically constant and are shown by a straight horizontal line
B. total costs rise and grow steeper as output rises
If the largest four firms in an industry control less than half the market, their competitive concentration ratio A. would be considered to be especially high. B. would not be considered particularly high C. would not be considered particularly low. D. would be considered to be especially low.
B. would not be considered particularly high
In the _________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where _____________________ . A. long run; increasing production B. short run; fixed costs can be reduced C. short run; losses are smallest D. long run; fixed costs can be eliminated
C
The information below sets out the estimated market revenue for the television manufacturing market is given in the table below. Firm Revenue (in millions of $) Hitachi 525 Philips/Magnavox 1,270 JVC 630 Matsushita/Panasonic 840 Mitsubishi 520 Samsung 650 Sharp 615 Sony 1,930 Toshiba 950 10 more firms 1,120 Based on this information, the four-firm concentration ratio is A. 45.3 B. 50 C. 55.1 D. 62.5
C. 55.1
What was created by the U.S. government in 1914 to specifically define what types of competition were legally unfair? A. Department of Justice B. Antitrust Act C. Federal Trade Commission D. Supreme Court
C. Federal Trade Commission
Which one of the following is the most accurate description of a monopolist? A. a sole producer of a narrowly defined product class, such as brown, Grade A eggs produced in Eagle County, Colorado B. a firm that is very large relative to all its competitors within a narrow product class C. a sole producer of a product for which good substitutes are lacking in a market with high barriers to entry D. a large, multinational firm that produces a single product in a narrow product class
C. a sole producer of a product for which good substitutes are lacking in a market with high barriers to entry
Which of the following denotes a weakness that is common to both the four firm concentration ratio and the HHI? A. assuming the subject market is poorly defined relative to measuring its concentration of competition B. case-by-case analysis of the extent of competition is highly subjective. C. assuming the subject market is well-defined relative to measuring how sales are divided within it. D. case-by-case analysis of the extent of competition is highly objective.
C. assuming the subject market is well-defined relative to measuring how sales are divided within it.
By 2007, US market deregulation has proven to be most toxic to the overall health of the US economy in the ________________________ . A. telecommunications sector B. postal services sector C. banking sector D. nuclear power sector
C. banking sector
The term "tie-in sales" is synonymous with A. price maintenance B. exclusive dealing C. bundling D. predatory pricing
C. bundling
Which of the following has become a common condition for allowing a merger of large firms? A. commitment to operate in a market-oriented economy B. commitment to open a new factory C. commitment to sell off certain parts of the firms D. commitment to hire more workers
C. commitment to sell off certain parts of the firms
The US Federal Trade Commission justifies their record of approval of most mergers by asserting that, even though competition is diminished by consolidating two firms into one, mergers actually benefit A. competition and consumers by forcing firms to lower consumer pricing. B. competition and consumers in the short-run. C. competition and consumers by allowing firms to operate more efficiently. D. competition and consumers at the outset.
C. competition and consumers by allowing firms to operate more efficiently.
Because attempting to define a particular market can be difficult and controversial the Federal Trade Commission has begun to look less at market share and more at the data on actual ______________________________. A. competition in the overall economy B. selective anti-competitive industry practices C. competition between businesses D. market definition
C. competition between businesses
When J.K. Rowling exerts copyright ownership of her literary works, she creates a monopoly by restricting A. the number of inventors. B. unit production costs. C. entry into the market. D. demand for the product.
C. entry into the market.
The Herfindahl-hirschman index is calculated by taking ___________________, squaring it, and adding them up to get a total. A. concentration ratio of each firm in the industry B. total revenues of each firm in the industry C. market share of each firm in the industry D. market capitalization of each firm in the industry
C. market share of each firm in the industry
Which of the following is a valid criticism of the reduction of competition that results from corporate mergers? A. merged firms generally are as efficient and innovative as they can be B. consumers will have greater access to lower priced goods and services C. merged firms can increase price and maintain permanently higher profits D. merged firms are better positioned to take advantage of economies of scale
C. merged firms can increase price and maintain permanently higher profits
The largest cattle rancher in a given region will be unable to have a __________ when sufficient numbers of smaller cattle ranchers provide sources of competition. A. oligopoly B. patent C. monopoly D. monopolistic competition
C. monopoly
The term _______________ is used to describe circumstances where government takes over ownership of a business. A. privatization B. regulatory capture C. nationalization D. deregulation
C. nationalization
A government sanctioned merger between two companies can sometimes lead to a clash _______________________ that makes both firms worse off. A. with government regulators B. other market participants C. of corporate personalities D. with market-oriented economy fundamentals
C. of corporate personalities
The use of sharp, temporary price cuts as a form of _________________ would enable traditional US automakers to discourage new competition from smaller electric car manufacturers. A. natural monopoly B. monopolistic competition C. predatory pricing D. oligopolistic competition
C. predatory pricing
Following the commencement of deregulation of US airline industry in the 1970s, reduced airfares saved consumers billions of dollar a year however, the more recent string of airline mergers has A. government safety regulators increasing employment opportunities for safety inspectors every year. B. doubled the number of high-paying jobs in the airline industry year after year. C. raised new concerns over how competition in the industry can once again be strengthened. D. encouraged deregulators to push further and consider industries where deregulation needs are not obvious.
C. raised new concerns over how competition in the industry can once again be strengthened.
The most famous restrictive practices case of the last several decades involved a series of lawsuits by the U.S. government against Microsoft. These particular lawsuits were encouraged by A. all of Microsoft's competitors. B. U.S. consumers. C. some of Microsoft's competitors. D. U.S. antitrust regulators.
C. some of Microsoft's competitors.
In the 1980s, the FTC followed guidelines stipulating that, should a proposed merger result in an HHI of less than 1,000, A. the FTC would probably challenge it. B. the FTC would scrutinize the proposal. C. the FTC would probably approve it. D. the FTC make a case-by-case decision.
C. the FTC would probably approve it.
Which of the following will present the least amount of concern to a firm that has a monopoly over a particular industry? A. whether consumers will purchase its product B. whether consumers will spend on different products C. the competitive actions of other business firms D. barriers to entry and competitors' patent protection
C. the competitive actions of other business firms
When a firm pursues a predatory pricing strategy, it does so A. to hire more staff to lower unemployment. B. to increase supply to benefit consumers. C. to maximize profits in the long run. D. to discourage short run competition.
C. to maximize profits in the long run
Prior to the onset of deregulation in the US during the 1970s, it was common for measurements of concentration ratios and HHIs A. to exceed 1,000 B. to exceed 10,000 C. to stop at national borders. D. to extend past national borders.
C. to stop at national borders.
In the business world, a _________________ is recognized as a legally acceptable way for any business to keep knowledge of its particular methods of production from being known by competing firms. A. patent B. monopoly C. trade secret D. trademark
C. trade secret
The implicit assumption that competitive conditions across industries are similar enough to make a decision about the effects of a merger is A. fundamental to case-by-case analysis of how sales are divided in a particular market. B. fundamental to antitrust regulators for conducting case-by-case competitive analysis. C. a fundamentally sound principle found in all antitrust law. D. a weakness of the concentration ratio analysis method.
D. a weakness of the concentration ratio analysis method.
If monopolists are able to produce fewer goods and sell them at a higher price than they could under perfect competition, the result will be A. elimination of barriers to entry B. irregularly high unsustainable profits. C. government deregulation. D. abnormally high sustained profits.
D. abnormally high sustained profits.
The typical pattern of costs for a monopoly can be analyzed by using: I) total cost II) fixed cost III) variable cost IV) marginal cost V) average cost VI) average variable cost A. I, II, and III B. I, III and IV C. I, II, III, IV, and VI D. all of the above
D. all of the above
The typical pattern of costs for a perfectly competitive firm can be analyzed by using: I) total cost II) fixed cost III) variable cost IV) marginal cost V) average cost VI) average variable cost A. I, II, and III B. I, III and IV C. I, II, III, IV, and VI D. all of the above
D. all of the above
In order to analyze the effects of a particular business merger, economists typically measure whether the competitive change has A. helped consumers. B. hurt consumers. C. made much difference. D. all of the above.
D. all of the above.
The result of regulatory capture is that government price regulation can often become a way for existing competitors to work together to A. reduce output. B. limit competition. C. keep prices high. D. all of the above.
D. all of the above.
The US laws dealing with original works of authorship allow the US Copyright Office to enforce protection for all but one of the following. Which one is it? A. contemporary sculptures B. contemporary paintings C. pantomimic works D. ancient Bible texts
D. ancient Bible texts
Firms operating under cost-plus regulation have an incentive to generate high costs by building huge factories or employing lots of staff, A. because doing so creates efficiencies and innovation. B. because the market changes dramatically and they have incentive to meet new demand. C. because this will reduce the firm's costs more quickly and it can make a high level of profit. D. because what they can charge is linked to the costs they incur.
D. because what they can charge is linked to the costs they incur.
The slope of the demand curve for a monopoly firm is A. horizontal, parallel to the x-axis B. vertical, parallel to the y-axis C. upward sloping D. downward sloping
D. downward sloping
If the North American newsprint paper market has barriers to entry, then A. abnormally high profits will attract the entry of new firms. B. the entry of new firms will eventually cause price to decline. C. surviving firms earn only a normal level of profit in the long run. D. entry will be blocked even if firms are earning high profits.
D. entry will be blocked even if firms are earning high profits.
In the US, which of the following has likely been the most influential with respect to the increased level of competition faced by many local retail businesses? A. vast improvement in communications technologies B. development of the Internet C. global business-to business websites D. globalization and all of the above
D. globalization and all of the above
Why would regulators find that a proposed merger is likely to lessen competition? A. it can lead to lower prices B. it can increase availability of goods C. it can enhance innovation D. it can lead to lower quality products
D. it can lead to lower quality products
When a monopolist increases sales by one unit, A. it gains some marginal revenue from selling that extra unit. B. more low priced sales cause negative marginal revenues. C. every other unit must now be sold at a lower price. D. it loses some marginal revenue and all of the above.
D. it loses some marginal revenue and all of the above.
When a natural monopoly exists in a given industry, the per-unit costs of production will be A. lowest when there are a large number of producers in the industry. B. lower for the smaller firms than for larger firms. C. minimized at the output that maximizes the industry's profitability. D. lowest when a single firm generates the entire output of the industry.
D. lowest when a single firm generates the entire output of the industry.
Which of the following typically leads to two formerly separate firms being under common ownership? A. government regulation B. business mergers C. business acquisitions D. mergers and acquisitions
D. mergers and acquisitions
For the restaurant industry in Seattle, with dozens or hundreds of extremely small competitors, the value of the HHI A. might drop as low as 100, but not less. B. might reach as low as 1,000, but not less. C. might reach as high as 1,000, but not more. D. might drop as low as 100 or even less.
D. might drop as low as 100 or even less.
Which of the following poses a difficult challenge for U.S. competition policy? A. monopoly B. monopolistic competition C. perfect competition D. natural monopoly
D. natural monopoly
The term ______________ refers to a situation where the firms supposedly being regulated end up playing a large role in setting the regulations that they will follow. A. regulatory tie-in B. deregulation C. privatization D. regulatory capture
D. regulatory capture
Practices that reduce competition without actual documented agreements between firms to raise price are commonly referred to as ______________________ . A. legal practices B. competitive practices C. regulated practices D. restrictive practices
D. restrictive practices
In the 1980s, the FTC followed guidelines stipulating that, should a proposed merger result in an HHI between 1,000 and 1,800, then it would A. make a case-by-case decision on the proposal. B. probably challenge the proposal. C. probably approve the proposal. D. scrutinize the proposal prior to doing a above.
D. scrutinize the proposal prior to doing a above.
The total revenue curve for a monopolist will A. start high, rise, and then decline. B. start low, decline, and then rise. C. start high, decline, and then rise. D. start low, rise, and then decline.
D. start low, rise, and then decline.
The following figure shows the average cost curve, demand curve, and marginal revenue curve for a monopolist. After maximizing profits, what does the firm's revenue equal? A. the area of rectangle ABGH B. the area of rectangle BDEG C. the area of rectangle BCFG D. the area of rectangle ADEH
D. the area of rectangle ADEH
The figure below shows the demand curve and the long run average cost curve for an electric company. This market is a natural monopoly because A. the long run average cost curve is U-shaped B. when producing large quantities, the long run average cost is greater than demand C. when producing small quantities, the demand is higher than long run average cost D. the demand curve intersects the long run average cost curve at a point where the long run average cost curve is downward sloping
D. the demand curve intersects the long run average cost curve at a point where the long run average cost curve is downward sloping
If an industry is perfectly competitive or monopolistically competitive, then the government has relatively little reason for concern about A. regulatory recapture. B. taking advantage of economies of scale. C. new ways of pleasing customers. D. the extent of competition.
D. the extent of competition.
If two companies are seeking regulatory approval to merge their respective businesses, which of the following will most likely be the focus of the arguments that they will present in favor of the merger? A. consumers can purchase better quality goods or services at a lower price B. the newly created firm is able to take advantage of economies of scale C. the newly created firm could eliminate duplicative investments D. the new firm will produce more efficiently and all of the above
D. the new firm will produce more efficiently and all of the above
The fundamental belief behind the market-oriented US economy is that firms are in the best position to know if their actions will A. contravene antitrust regulations. B. lead to attracting more customers. C. let them produce more efficiently. D. the right answer is both b and c
D. the right answer is both b and c.
The main challenge for antitrust regulators is A. to figure out how to best benefit consumers. B. to facilitate privatization of government assets. C. to promote the concept of a market-oriented economy. D. to determine when a merger may hinder competition.
D. to determine when a merger may hinder competition.
Why would a competition regulator need details relating to how firms are competing to cut prices, raise output levels, or build a high quality reputation? A. to be able to determine and specify how competition occurs in an industry B. to build a statistical model to estimate the likely outcome of a merger C. to block mergers that would reduce competition and harm consumers D. to permit competitive mergers to proceed, as well as all of the above
D. to permit competitive mergers to proceed, as well as all of the above
If the two smallest firms in a competitive market merged, the four-firm concentration ratio _______________ because ____________________________ . A. would change; the degree of competition is notably diminished B. would not change; especially high concentration ratios can benefit consumers C. would change; the largest firms high concentration ratio is diminished D. would not change; the degree of competition isn't notably diminished
D. would not change; the degree of competition isn't notably diminished
__________ arises when firms act together to reduce output and keep prices high.
a cartel
Why are the underlying economic meanings of the perceived demand curves for a monopolist and monopolistic competitor different?
a monopolist faces the market demand curve and a monopolist competitor does not
____________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry.
an oligopoly
Through the process of exit, monopolistically competitive firms remaining in the market
are no longer earning zero economic profits
Oligopoly firms acting individually may seek to gain profits _________.
by expanding levels of output and cutting prices
The demand curve as perceived by a monopolistic competitor is _________.
downward-sloping
In a perfectly competitive market, each firm produces at a quantity where price is set _________.
equal to marginal cost, both in the short run and in the long run
f a perfectly competitive firm raises its price, the quantity demanded of its product ___________.
falls to zero
The branch of mathematics that analyzes situations in which players must make decisions and then receive payoffs most often used by economists is
game theory
Which of the following would most likely create the setting for an oligopoly?
government grants Alex, Trent, and Alyse each a patent for their respective molybdenum based electric car batteries
If the CEO of I'MaBigBank is playing prisoner's dilemma then, from his perspective, the gains to be had from cooperation are
larger than the rewards from pursuing self-interest.
The perceived demand curve for a group of competing oligopoly firms will appear kinked as a result of their commitment to _________.
match price cuts, but not price increases
The perceived demand curve for a group of competing oligopoly firms will appear kinked as a result of their commitment to
match price cuts, but not price increases.
Shopping malls typically lease retail space to a large number of clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call ________________________.
monopolistic competition
In a monopolistically competitive market, the rule for maximizing profit is to set MR = MC, which means _______.
price is higher than marginal revenue
If monopolistic competitors must expect a process of entry and exit like perfectly competitive firms, ___________.
they will be unable to earn higher-than-normal profits in the long run
If each of two competing monopolists undertakes equal advertising efforts to attract consumers away from the other, the total result is
they will simply neutralize one another's efforts.
In the highly competitive setting in which oligopoly firms operate, which of the following are considered to be typical temptations each may face?
to cooperate to generate and then divide up monopoly-like profits to cooperate to mutually decide what price to charge to cooperate to make decisions about what quantity to produce to cooperate to act as a single monopoly and all of the above
If a monopoly or a monopolistic competitor raises their prices, the quantity demanded ___________.
will decline
Would raising the price for a product create a larger decline in quantity demanded for a monopolistic competitor's than it would for a monopoly?
yes; consumers will buy from competitors offering lower priced
39. Given the data provided in the table below, what will the amount of profit be for production at quantity (Q) level 7? A. -$10.00 B. zero C. -$5.00 D. $1.00
A
33. Refer to the diagram above. In this instance, at the range of output represented at point c, A. the shutdown point has been reached. B. profits will be maximized. C. physical input levels have been reduced. D. capital input levels have been reduced.
B
Idaho farmers can sell as large a quantity of their potato crop as they wish, A. if they set their own price in the short run, but in the long run, the market sets the price. B. provided each is willing to accept the prevailing market price. C. if they set their own price in the long run, but in the short run, the market sets the price. D. provided quality is perceptible and determines the market price.
B
32. Refer to the diagram above. In this instance, at the range of output represented at point b, A. total costs exceed total revenues. B. total revenues exceed total costs. C. the firm is earning profits. D. the firm should shut-down.
A
43. Refer to the diagram above. Based on the information illustrated in this graph, which of the following is an accurate statement? A. MC is initially downward sloping in the region of increasing MR at low output levels B. As production increases, marginal revenue always increase so profits rise C. as production decreases, marginal revenue will increase so profits will rise D. a profit-seeking firm should continue to expand production as long as MR is less than MC
A
55. Refer to the table below. In this instance, expansion of output A. causes input prices to rise as demand for inputs increases. B. leaves input prices constant as demand for inputs increases. C. causes diseconomies of scale to occur. D. occurs because of increasing returns to scale.
A
I'maGoldMiner has benefited from a record rise in gold prices in the global commodities market. While the price of its output is highly influenced by market speculation, if it wants to increase production to take advantage of the current profit-maximizing opportunity, the company A. must accept market price for its physical capital inputs. B. must reduce what it pays for inputs that make up its costs of production. C. must reduce production to encourage speculators to drive gold prices higher. D. must alter the price of its labor inputs to maximize profits.
A
If a competitive firm experiences a shift in costs of production that decreases marginal costs at all levels of output, A. expanding output levels at any given price will be profitable. B. producing less at any market price will off-set marginal cost . C. the firm's marginal cost curve will shift to the left. D. the firm's demand curve will also shift to the left.
A
If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have reached its A. allocative efficiency B. productive efficiency C. utility-maximizing efficiency D. minimum price efficiency
A
If a perfectly competitive firm is a price taker, then A. pressure from competing firms will force acceptance of the prevailing market price. B. it must be a relatively small player compared to its competitors in the overall market. C. it can increase or decrease its output without affecting overall quantity supplied in the market. D. quality differences will be very perceptible and will play a major role in purchasers' decisions.
A
If the price that a firm charges is lower than its ____________ of production, the firm will suffer losses. A. average cost B. marginal cost C. fixed cost D. variable cost
A
In Sam's greenhouse operation, labor is the only short term variable input. After completing a cost analysis, if the marginal product of labor is the same for each unit of labor, this will imply that A. the average product of labor is always equal to the marginal product of labor. B. the average product of labor is always greater that the marginal product of labor. C. the average product of labor is always less than the marginal product of labor. D. as more labor inputs are used, the average product of labor inputs will fall.
A
In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice? A. what quantity to produce B. what price to charge C. what quantity of labor is needed D. what quality to produce
A
When a firm makes plans for investments in physical capital, it compares the _______________ on these investments with ______________________ . A. projected rates of return; the cost of financial capital to the firm B. present inputs of physical capital; future hurdle rates C. present inputs of physical capita; future marginal revenue product D. projected rates of return; the competitive pressures for labor
A
______________________ refers to the additional revenue gained from selling one more unit. A. Marginal revenue B. Total revenue C. Economic profit D. Accounting profit
A
What role does the US government play with respect to market competition? A. policing anticompetitive behavior and prohibiting contracts that restrict competition B. preserving competition by regulating price and/or quantity of output C. intervening in the price and output decision of businesses D. maintaining abundant government-owned firms to ensure consumer friendly pricing
A. policing anticompetitive behavior and prohibiting contracts that restrict competition
Which of the following concerns would groups like the Consumer Federation of America and Public Knowledge most likely raise with regulators considering a merger application? A. the merger would reduce competition B. the merger would create regulatory capture C. the merger would lead to future decades of lower prices D. the merger would increase output and all of the above
A. the merger would reduce competition
A minimum resale price maintenance agreement requires a dealer who buys from a manufacturer ______________________________ . A. to sell for at least a certain minimum price B. to avoid engaging in restrictive practices. C. to guarantee a certain percentage of market share D. to sell for at least a certain maximum price
A. to sell for at least a certain minimum price
38. Given the data provided in the table below, what will the marginal cost equal for production at quantity (Q) level 4? A. $5.00 B. $4.00 C. $1.00 D. $3.00
B
50. Refer to the diagram above. At the point marked m, A. price is determining production at a level where P = MC. B. TR is exactly equal to TC, so profits equal zero. C. price is above average cost of production. D. the leftover rectangle is the profit earned.
B
61. Neil's Bakery is famous for its giant cinnamon buns. The bakery has fixed costs of $100. Neil must pay each worker a wage of $10.00 per hour and each works an 8 hour shift. He earns $2 for each cinnamon bun that is sold. The following table shows how many cinnamon buns he can sell, depending on the number of workers he hires. Refer to the table below. To maximize his profits in this competitive market, how many workers should he hire?A. 2 workers B. 3 workers C. 4 workers D. 5 workers
B
Firms operating in a market situation that creates ___________________, sell their product in a market with other firms who produce identical or extremely similar products. A. a perfect monopoly B. perfect competition C. an oligopoly D. a free-market
B
For a perfectly competitive firm, the marginal cost curve is identical to the firm's ________________ . A. demand curve B. supply curve C. average total cost curve D. average variable cost curve
B
I'maSolarPanelCo. manufactures and distributes solar panels in the US market. Two years ago, it had 5 US competitors, but government stimulus in the industry has encouraged 7 new US competitors to enter the market. In these circumstances, I'maSolarPanelCo.'s price for its output A. can be tailored to exceed the price of its inputs. B. is dictated by the forces of demand and supply. C. can be tailored to meet the price of its inputs. D. can be set by management to maximize profits.
B
In order to produce 100 oatmeal cookies, GoodieCookieCo incurs an average total cost of $0.25 per cookie. The company's marginal cost is constant at $0.10 for all oatmeal cookies produced. The total cost to produce 50 oatmeal cookies is A. $25 B. $20 C. $50 D. $60
B
In the ________, the perfectly competitive firm will react to losses by __________________________ . A. short run; reducing production or shutting down B. long run; reducing production or shutting down C. short run; increasing physical inputs D. long run; increasing capital inputs
B
Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should A. raise her prices above the perfectly competitive level set by the market. B. keep the business open in the short-run, but plan to go out of business in the long-run. C. keep the business open in the short-run, and plan to expand the business in the long-run. D. lay-off her staff, break her lease, and close the business down immediately.
B
When a business adopts a strategy of reducing and/or discontinuing production in response to a sustained pattern of losses, it is A. considering opportunity costs. B. preparing to exit operations. C. preparing to reach its shutdown point. D. considering capital investments.
B
When a firm uses retained profits to invest in more energy efficient equipment, an economist would calculate the _________________ of investing in physical capital. A. typical hurdle rate B. opportunity cost C. degree of risk D. hurdle rate premium
B
In competitive settings, profits will lead firms to _________________ and losses will lead firms ___________, so the incentives for producing at low cost and coming up with new ways of pleasing customers are strong. A. privatize; nationalize B. enter the market; to exit C. monopolize; to lower costs D. reduce output; increase price
B. enter the market; to exit
34. Refer to the diagram above. In this instance, the range of production possibilities at point d, A. is a steeper slope reflecting increasing profits due to diminishing costs. B. is a steeper slope reflecting a lower price. C. is a steeper slope reflecting a return to losses due to diminishing returns. D. is a steeper slope reflecting higher total revenue.
C
37. Given the data provided in the table below, what will the marginal revenue equal for production at quantity (Q) level 4? A. $20.00 B. $15.00 C. $5.00 D. $1.00
C
66. The table below sets out the amount of capital needed for certain investment projects and the rate of return for each project. What is this firm's demand for physical capital if their hurdle rate is 5%? A. $11 million B. $12 million C. $23 million D. $33 million
C
A manufacturer would likely make an ___________ in a market following the long-run process of beginning and expanding production in response to ________________ . A. accounting profit; a strategy to grow profits B. accounting profit; an incentive for profit C. entry; a sustained pattern of profits D. entry; an incentive to add to profits
C
A perfectly competitive industry is a A. realistic extreme. B. hypothetical assumption. C. hypothetical extreme. D. realistic assumption
C
If a graph is used to compare total revenue and total cost of a perfectly competitive firm, then the horizontal axis of the graph will represent the _______________ and the vertical axis will represent ______________________ . A. price, measured in dollars; quantity of goods produced B. total costs measured in dollars; quantity of goods produced C. quantity produced; both total revenue and total costs, measured in dollars. D. quantity produced; total revenue and total variable costs, measured in dollars.
C
If accounting profits for a firm are 20% of output, and the opportunity cost of financial capital is 8% of output, then what do the firm's economic profits equal? A. 6% of output B. 10% of output C. 12% of output D. 8% of output
C
If marginal cost is rising in a competitive firm's short-run production process and its average variable cost is falling as output is increased, then A. marginal cost is above average variable cost. B. marginal cost is below average fixed cost. C. marginal cost is below average variable cost. D. average fixed cost is constant
C
If the average product for six workers is fifteen and the marginal product of the seventh worker is eighteen, then A. marginal product is rising. B. marginal product is falling. C. average product is rising. D. average product is falling.
C
If the price that a firm charges is higher than its ________________ cost of production for that quantity produced, then the firm will earn profits. A. marginal B. variable C. average D. fixed
C
It is said that in a perfectly competitive market, raising the price of a firm's product from the prevailing market price of $179.00 to $199.00, ____________________. A. will likely cause the firm to reach its shutdown point immediately B. will cause the firm to recover some of its opportunity costs C. could likely result in a notable loss of sales to competitors D. is a sure sign the firm is raising the given price in the market
C
Temperatures have persisted below freezing levels in Florida throughout the months of December and January. As a result, demand for electricity sharply increased and the price of electricity rose sharply. The price of coal also rose. In these circumstances, any resulting shifts in the supply curves for coal miners and electricity producers A. will determine what price to produce at given the market demand. B. at all levels of output shifts marginal costs to the right. C. can also be interpreted as shifts of their respective marginal cost curves. D. shifts marginal costs to the right enabling both to produce more at any given market price.
C
The term _________________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product. A. price setter B. business entity C. price taker D. trend setter
C
Which of the following can be thought of as an adjustment for the risks involved with respect to the cost of a firm acquiring financial capital? A. higher retained earnings from past profits B. cost of financial capital paid by a firm C. imposition of hurdle rates of interest D. tax credits for physical capital investments
C
Why are some producers forced to sell their products at the prevailing market price? A. price takers find market analysis is too costly B. they are very small players in the overall market C. high degree of similarity to competitor's products D. they can increase output without affecting quality
C
The four-firm ___________________ measures the percentage share of the total sales in the industry that is accounted for by the largest four firms. A. coordination ratio B. market share ratio C. concentration ratio D. production ratio
C. concentration ratio
An agreement between a manufacturer and a distributor stipulating that a dealer will only distribute that manufacturer's products would be classified as a form of A. predatory pricing. B. tie-in-sales arrangement. C. exclusive dealing. D. price maintenance.
C. exclusive dealing.
31. Refer to the diagram above. Which of the following explains the slope of the total revenue curve illustrated in this graph? A. total revenue shown as a straight line sloping up indicates a perfectly competitive firm B. the slope of the total revenue curve is determined by the price of the goods produced C. at higher levels of output, diminishing returns will cause total cost to slope downward steeply D. the slope of the total revenue curve is explained by both a and b above.
D
40. Given the data provided in the table below, what will the fixed costs equal for production at quantity (Q) level 4? A. $35.00 B. $4.00 C. $36.00 D. $9.00
D
41. Refer to the diagram above. In this instance, the marginal revenue curve A. reflects a perfectly competitive firm B. is equal to the price of the good C. is a horizontal straight line D. reflects each of the above
D
44. Refer to the diagram above. Based on the information illustrated in this graph, which of the following is an accurate statement? A. production should keep expanding because MR is always less than MC B. because this is a perfectly competitive firm, the profit maximizing rule is not P = MC C. because this is a perfectly competitive firm, the profit maximizing rule is not P = MR D. profits will be reduced by production in the zone where MC exceeds MR
D
54. Refer to the table below. In this instance, confirmation that this firm is operating in a perfectly competitive market can readily be ascertained by the fact that its A. marginal cost is increasing. B. total cost is increasing. C. economic profits are zero. D. marginal revenue is constant.
D
In a perfectly competitive market setting, which of the following would be a true statement? A. Market price automatically sets itself exactly at equilibrium. B. Market price rarely trends toward the equilibrium value. C. Wage rates mirror marginal revenue product levels exactly. D. Wage rates trend toward marginal revenue product levels.
D
In economics, labor demand is synonymous with A. market demand. B. average demand. C. marginal demand. D. derived demand.
D
In economics, the term "shutdown point" refers to the point where the A. marginal cost curve crosses the total revenue curve. B. average variable cost curve crosses the total revenue curve. C. average variable cost curve crosses the marginal cost curve. D. marginal cost curve crosses the average variable cost curve.
D
In order to produce 100 pairs of oven gloves, Marcia incurs an average total cost of $2.50 per pair. Marcia's marginal cost is constant at $10.00 for every pair of oven gloves produced. The total cost to produce 50 pairs of oven gloves is A. $250.00 B. $500.00 C. $300.00 D. $200.00
D
In the ________, the perfectly competitive firm will react to profits by __________________________ . A. short run; increasing quality of products B. long run; tailoring their quality controls C. short run; reducing its labor inputs D. long run; increasing its production
D
The fact that a consumer is not required to buy the goods that a given firm produces, as well as the fact that the consumer might want the goods a firm produces, but may choose to buy from other firms instead A. will reduce the revenue a firm receives and it should shut down. B. means the firm has reached it shutdown point and should exit. C. is part of the process to a sustained pattern of profits. D. are two stark realities any business firm must recognize.
D
What happens in a perfectly competitive industry when economic profit is greater than zero? A. existing firms may expand their operations B. firms may move along their LRAC curves to new outputs C. there may be pressure on the market price to fall D. new firms may enter the industry and all of the above
D
When I'MaGoldMiner chooses what quantity of gold each of it/s mines will produce over the next 12 months, this quantity, along with the prices prevailing in the market for output and inputs, will A. determine the company's annual revenue, variable costs and its profits. B. no longer be dictated by the forces of demand and supply. C. have no effect on the market forces of demand and supply. D. determine the company's total revenue, total costs, and its profits
D
Why would a profit-seeking firm need to tailor its decisions about the quantity of labor inputs that it purchases? A. to produce the highest profitable quantity of output at the lowest possible marginal cost B. deciding what quantity to produce is one of the major choices a profit-seeking firm makes C. the quantity of labor is the only variable cost choice a profit-seeking firm can make D. to produce the profit-maximizing quantity of output at the lowest possible average cost
D
