AGB 144 Sudbrock Modules 8-14 Quizzes

An extraordinarily small crop of farm products due to drought causes:

a large increase in the price of farm products bc the demand for farm products is inelastic

What does pure monopoly refer to?

a single firm producing a product for which there are no close substitutes

What does nonprice competition refer to?

advertising, product promotion, and changes in the real or perceived characteristics of a product

What does OPEC provides an example of?

an international cartel

The MR = MC rule:

applies to both pure monopoly and pure competition

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

at which the marginal cost curve intersects the demand curve

For a purely competitive seller, what does price equal?

average revenue, marginal revenue, and total revenue divided by output

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

average total cost

What is the process by which new firms and new products replace existing dominant firms and products called?

creative destruction

Other things equal, economists would prefer:

free trade to tariffs and tariffs to important quotas

The demand for agricultural products:

has a price elasticity coefficient of about .20-.25

If the demand for an agricultural product is inelastic, a bumper crop will:

lower price and decrease total revenues

The monopolistically competitive seller maximizes profit by producing at the point where:

marginal revenue equals marginal cost

To maximize utility, a consumer should allocate money income so that the:

marginal utility obtained from the last dollar spent on each product is the same

Tariffs:

may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs)

The restaurant, legal assistance, and clothing industries are each illustrations of:

monopolistic competition

The primary gain from international trade is:

more goods than would be attainable through domestic production alone

At its profit-maximizing output, a pure non discriminating monopolist achieves:

neither productive efficiency nor allocative efficiency

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then:

new firms will enter this market

Pure monopolists may obtain economic profits in the long run because:

of barriers to entry

In a two-nation model, where will the equilibrium price occur?

one nation's export supply curve intersects the other nation's import demand curve

Marginal utility can be:

positive, negative, or zero

Economic profit in the long run is:

possible for a pure monopoly, but not for a pure competitor

A breakdown in price leadership leading to successive rounds of price cuts is known as:

price war

Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's:

price would be higher, but output would be lower

What are the degrees of competition (highest to lowest)?

pure competition, monopolistic competition, oligopoly, pure monopoly

Acreage allotment programs were designed to:

reduce the supply of agricultural products

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from:

relatively easy entry

Long-run competitive equilibrium:

results in zero economic profits

What does utility refer to?

satisfaction that a consumer derives from a good or service

Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point by everywhere below ATC. Given this, the firm:

should continue producing in the short run, but leave the industry in the long run if the situation persists

Monopolistic competition is characterized by a:

large number of firms and low entry barriers

What percentage of their spending do US consumers allocate to food purchases?

12%

Which of the following industries most closely approximates pure competition? A. agriculture B. farm implements C. clothing D. steel

A. agriculture

Which of the following is a unique feature of oligopoly? A. mutual interdependence B. advertising expenditures C. product differentition D. nonprice competition

A. mutual interdependence

Which of the following is not a characteristic of pure competition? A. price strategies by firms B. a standardized product C. no barriers to entry D. a larger number of sellers

A. price strategies by firms

Which of the following is not a barrier to entry? A. patents B. X-inefficiency C. economies of scale D. ownership of essential resources

B. X-inefficiency

Which of the following is the best example of oligopoly? A. women's dress manufacturing B. automobile manufacturing C. restaurants D. cotton farming

B. automobile manufacturing

The US is a member of which international trade agreements? A. the EU B. TPP C. NAFTA D. all of the above

C. NAFTA

Which of the following conditions is true for a purely competitive firm in long-run equilibrium? A. P > MC = minimum ATC B. P > MC > minimum ATC C. P = MC = minimum ATC D. P < MC < minimum ATC

C. P = MC = minimum ATC

Which of the following best approximates a pure monopoly? A. the foreign exchange market B. the Kansas City wheat market C. the only small bank in town D. the soft drink market

C. the only small bank in town

An unregulated pure monopolist will maximize profits by producing the output at which:

MR = MC

When a monopolistically competitive firm is in long-run equilibrium:

P = MC = ATC

What is a purely competitive seller?

a "price taker"

What does the term oligopoly indicate?

a few firms producing either a differentiated or a homogeneous product

The law of diminishing marginal utility states that:

beyond some point additional unit of a product will yield less and less extra satisfaction to a consumer

Check off programs were designed to:

bolster the demand for agricultural commodities

A purely competitive firm:

cannot earn economic profit in the long run

What is marginal revenue?

change in total revenue associated with the sale of one more unit of output

Marginal utility is the:

change in total utility obtained by consuming one more unit of a good

Countries engaged in international trade specialize in production based on:

comparative advantage

The kinked-demand curve of an oligopolist is based on the assumption that:

competitors will follow a price cut but ignore a price increase

The law of diminishing marginal utility explains why:

demand curves slope downward

Differences in production efficiencies among nations in producing a particular good result from:

different endowments of fertile soil, different amounts of skilled labor, and different levels of technological knowledge

The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is _______.

downsloping, perfectly elastic

The primary force encouraging the entry of new firms into a purely competitive industry is:

economic profits earned by firms already in the industry

Suppose the domestic price (no-international-trade price) of wheat is $3.50 a bushel in the US, while the world price is $4.00 a bushel. Assuming no transportation costs, the US will:

export wheat

What is the best way to distinguish the short run from the long run in pure competition?

firms can enter and exit the market in the long run, but not in the short run

Suppose the domestic price (no-international-trade price) of copper is $1.20 a pound in the US, while the world price is $1.00 a pound. Assuming no transportation costs, the US will:

import copper

In the US, cartels are:

in violation of the antitrust laws

Bc the government price supports cause surplus production, government policies have been designed to:

increase demand and decrease supply of farm products

Cartels are difficult to maintain in the long run because:

individual members may find it profitable to cheat on agreements

The demand for most agricultural products is:

inelastic with respect to both price and income

Entrepreneurs in purely competitive industries:

innovate to lower operating costs and generate short-run economic profits

What is game theory?

the analysis of how people (or firms) behave in strategic situations

Which of the following arguments for trade protection is based on the premise that a nation should have a wide enough range of domestic industries to be self-sufficient if necessary? A. the increase-domestic-employment argument B. the cheap-foreign-labor argument C. the diversification-for-stability argument D. the infant-industry argument

the diversification-for-stability argument

Which of the following arguments for trade protection contends that new domestic industries need support to establish themselves and survive? A. the increase-domestic-employment argument B. the cheap-foreign-labor argument C. the diversification-for-stability argument D. the infant-industry argument

the infant-industry argument

For a purely competitive producer, what is the short-run supply curve?

the marginal cost line greater than the minimum average variable cost

A dilemma of regulation is that:

the regulated price that achieves allocative efficiency is also likely to result in losses

What does price discrimination refer to?

the selling of a given product at different prices that do not reflect cost differences

In a purely competitive industry:

there may be economic profits in the short run, but not in the long run

What do economies of scale, the ownership of essential raw materials, and patents have in common?

they're all barriers to entry

Where does the MR = MC rule apply?

to firms in all types of industries