Econ Exam

In the long-run, monopolistically competitive firms charge prices

Above the minimum of average total cost.

Which of the following is (are) basic feature(s) if a perfectly competitive industry?

All of the statement associated with this question are correct

In a competitive industry with identical firms, long run equilibrium

All of the statements associated with this question are correct

In the long-run, monopolistic competitive firms produce a level of output such that

All of the statements associated with this question are correct

The source(s) of monopoly power for a monopoly may be

All of the statements associated with this question are correct

An unregulated industry has a Lerner index of zero. These numbers

Are consistent with the industry being perfectly competitive

If the cross-price elasticity between good A & B, we know the goods are:

Complements

An electronic company purchases a food company. This is an example of:

Conglomerate integration

The main difference between perfect competition and monopolistic competition is

the degree of product differentiation

If a firm decreases the price of its product and finds its total revenue flow also decreases, then

the demand for this product is price inelastic

Monopolistic competition is literally a kind of competition. Hence, there is no deadweight loss in a monopolistically competitive market

The statement is incorrect

A student figured out that the HHI for industry was 15,000. What is the proper conclusion?

The student made some computational errors

Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets

There is free entry and long run profits are zero

Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets?

There is free entry and long run profits are zero

The industry elasticity of demand for gadgets is -2, while the elasticity of demand for an individual gadget manufacturer's product is -2. Based on the Rothschild approach to measuring market power, we conclude that:

There is significant monopoly power in this industry

At the output flow level where MC=MR,

Total profit flow is maximized

Suppose the demand for a product is QXd = 10 - lnPX then product X is

Unitary elastic

A price elasticity of zero corresponds to a demand curve that is:

Vertical

An electronic company takes over one of its original suppliers in a merger. This is an example of:

Vertical integreation

The demand for good X has been estimated by QXd=12-3PX + 4PY. Suppose that good X sells at $2 per unit and good Y sells for $1 per unit. Calculate the own price elasticity.

-0.6

An industry is comprised of 20 firms, each with an equal market share. What is the 4-firm concentration ratio of this industry?

.2

A firm has a marginal cost of $18 and charges a price of $27. The Lerner index for this firm is:

.33

A firm has a marginal cost of $20 and charges a price of $40. The Lerner index for this firm is

.50

As a general rule of thumb, industries with a Herfindahl index below ? are considered to be competitive, while those above ? are considered non-competitive

1,000, 1,800

For the cost function C(Q) = 100 + 2Q + 3Q2, the marginal cost of producing 2 units of output is

14

Suppose the production function is given by Q=3K+4L. What is the average product of capital when 10 units of capital and 10 units of labor are employed?

7

Suppose the production function is Q= min {K,2L}. How much output is produced when 4 units of labor and 9 units of capital are employed

8

Which of following statements concerning monopoly is NOT true?

A monopoly is always undesirable

Economies of scope exist when

C(Q1)+C(Q2)>C(Q1,Q2)

If a firm's production function is Leontief and the wage rate goes up the

Cost minimizing combination of capital and labor does not change

Assume that the price elasticity of demand is -2 for a certain firm's product. If the firm raises price, the firm's managers can expect total revenue to:

Decrease

Which of the following are measures of industry concentration?

Four-firm concentration ration and HHI index

In the long-run, monopolistically competitive firms:

Have excess capacity

A frozen food company buys a fresh food company. This takeover is an example of:

Horizontal integration

Which of the following integration types exploits economies of scope?

Horizontal integration

Which of the following is true?

In the short run a monopoly will shutdown if P < AVC

Demand is perfectly elastic when the absolute value of the own price elasticity of demand is:

Infinite

As the usage of an input increases, marginal product

Initially increases then begins to decline

Which of the following is a correct representation of the profit maximization condition for a monopoly

MC=MR

Which of the following market structures would you expect to yield the greatest product variety

Monopolistic Competition

Firms have market power in

Monopolistically competitive markets and monopolistic markets

A Herfindahl index of 10,000 suggests

Monopoly

Suppose the marginal product of labor is 8 and the marginal product of capital is 2. If the wage rate is $4 and the price of capital is $2, then in order to minimize costs the firm should use

More labor and less capital.

The primary difference between Monopolistic Competition and Perfect Competition is

None of the statements associated with this question are correct

The production function for a competitive firm is Q=K.5L.5. The firm sells its output at a price of $10, and can hire labor at a wage of $5. Capital is fixed at 25 units. The profit-maximizing quantity of labor is

None of the statements associated with this question are correct

Which of the following is true under monopoly

None of the statements associated with this question are correct

In the long-run, perfectly competitive firms produce a level of output such that:

P=MC and P=minimum of AC

Which of the following is true under monopoly

P>MC

Which of the following is true for a price-maker seller (a monopolist or a member of an oligopoly or monopolistic competition) that is maximizing its profit or minimizing its loss?

P>MR

A Herfindahl index of 0 suggests

Perfect competition

A perfectly competitive firm faces a

Perfectly elastic demand function

If a monopolistically competitive firm's marginal cost increases, then in order to maximize profits the firm will

Reduce output and increase price

You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w = $40, r = $100, MPL = 20, and MPK = 40 the firm:

Should use more L and less K to cost minimize

Which of the following conditions is true when a producer minimizes the cost of producing a given level of output?

The MRTS is equal to the ratio of input prices and the marginal product per dollar spent on all inputs is equal.

Assume a firm employs 10 workers and pays each $15 per hour. Also assume that the marginal product of an 11th worker would be 5 additional units of output per hour and that the price the firm receives for its good is $4 per unit. In the short run,

The firm should hire at least one additional worker.

Cost complementary exits in a multiproduct cost function when

The marginal cost of producing one output is reduced when the output of another product is increased

A firm using two inputs (call them "capital" and "labor") has an efficient combination of capital and labor levels when

The ratio of the marginal product of capital over the price of capital equals the ratio of the marginal product of labor over the price of labor

Economies of scale exist whenever

average total costs decline as output increases.

The own-price elasticity of demand for apples is -1.2. If the price of apples falls by 5%, what will happen to the quantity of apples demanded?

it will increase 6%

There is a no market supply curve in a

monopolistically competitive and monopolistic markets.

Differentiated goods are a feature of a:

monopolistically competitive market

If firms are earning positive economic profit in a monopolistically competitive market, which of the following is most likely to happen in the long run?

new firms will enter the market, driving economic profit to zero

A Lerner index of 0 suggests

perfect competition

Differentiated good are not a feature of a

perfectly competitive market and monopolistic market

Assume a firm in a perfectly competitive market has the short run total cost function TC= 100+ 160Q+3Q2. If the market price is $196, what should it do?

product 6 units per time period

When a one-percent change in price causes a change in quantity demanded greater than one percent, demand for the product is

relatively elastic

The the short run, the marginal cost of producing a good increases as output flow increases because

the marginal product of the variable inputs decreases as the amounts used increase