ECON Final

For a firm in a perfectly competitive market, the price of the good is always: a. equal to marginal revenue. b. equal to total revenue. c. greater than average revenue. d. equal to the firm's efficient scale of output.

a.

Refer to Figure 14-1. The firm will earn a positive economic profit in the short run if the market price is: a. above $6.30. b. less than $6.30 but more than $4.50. c. less than $4.50. d. exactly $6.30.

a.

Refer to Figure 14-7. In the long run, the firm will exit the market if the price of the good is: a. $75. b. $85. c. $95. d. All of the above are correct.

a.

Refer to Table 13-8. What is the average fixed cost (AFC) of producing 5 units of output? a. $4 b. $5 c. $40 d. $44

a.

The fundamental source of monopoly power is: a. barriers to entry. b. profit. c. decreasing average total cost. d. a product without close substitutes.

a.

Refer to Figure 16-2. Suppose that average total cost is $36 when Q=24. What is the profit-maximizing price and resulting profit? a. P=$24, profit=$0 b. P=$36, profit=$144 c. P=$36, profit=$48 d. P=$36, profit=$0

d.

Refer to Table 13-8. What is the marginal cost (MC) of producing the fifth unit of output? a. $4 b. $40 c. $50 d. $70

d.

Which of the following is an example of an implicit cost? a. salaries paid to owners who work for the firm b. interest on money borrowed to finance equipment purchases c. cash payments for raw materials d. foregone rent on office space owned and used by the firm

d.

A competitive firm a. and a monopolist are price takers. b. and a monopolist are price makers. c. is a price taker, whereas a monopolist is a price maker. d. is a price maker, whereas a monopolist is a price taker.

c.

A monopolist faces a a. horizontal demand curve. b. vertical demand curve. c. downward-sloping demand curve. d. U-shaped demand curve.

c.

At the profit-maximizing level of output, a. marginal revenue equals average total cost. b. marginal revenue equals average variable cost. c. marginal revenue equals marginal cost. d. average revenue equals average total cost.

c.

Average total cost equals: a. change in total costs divided by quantity produced. b. change in total costs divided by change in quantity produced. c. (fixed costs + variable costs) divided by quantity produced. d. (fixed costs + variable costs) divided by change in quantity produced.

c.

BONUS QUESTION: Marginal cost tells us the a. value of all resources used in a production process. b. marginal increment to profitability when price is constant. c. amount by which total cost rises when output is increased by one unit. d. amount by which output rises when labor is increased by one unit.

c.

Refer to Figure 14-1. If the market price is $4.00, the firm will earn: a. positive economic profits in the short run. b. negative economic profits in the short run but remain in business. c. negative economic profits and exit in the long run. d. negative economic profits and exit in the short run.

c.

Refer to Figure 14-1. The firm's short-run supply curve is its marginal cost curve above: a. $1. b. $3. c. $4.50. d. $6.30.

c.

Refer to Figure 14-7. BONUS QUESTION: When the price of the good is $175, the firm's maximum profit is: a. $16,500. b. $20,375. c. $25,750. d. $90,125.

c.

Refer to Figure 15-6. How much output will the monopolist produce? a. O b. T c. W d. Z

c.

Refer to Figure 15-6. What price will the monopolist charge? a. A b. C c. K d. L

c.

Refer to Figure 15-7. A profit-maximizing monopolist would earn profits of: a. $96. b. $117. c. $120. d. $126.

c.

Refer to Figure 15-7. In order to maximize profits, the monopolist should charge a price of: a. $9. b. $12. c. $20. d. $23.

c.

Refer to Table 13-8. What is the average variable cost (AVC) of producing 5 units of output? a. $4 b. $5 c. $40 d. $44

c.

Refer to Table 14-7. If the firm is currently producing 14 units, what would you advise the owners based on the profit- maximization condition? a. decrease quantity to 13 units b. increase quantity to 15 units c. continue to operate at 14 units d. increase quantity to 16 units

c.

Which of the following is a key characteristic of monopolistic competition market compared to perfect competition market? a. many sellers b. free entry c. differentiated products d. all of the above is correct

c.

Which of the following is not a characteristic of a competitive market? a. Buyers and sellers are price takers. b. Each firm sells a virtually identical product. c. Entry is limited. d. Each firm chooses an output level that maximizes profits.

c.

Explicit costs: a. require an outlay of money by the firm. b. include all of the firm's opportunity costs. c. include the value of the busines s owner's time. d. Both b and c are correct.

a.

A downward-sloping demand curve: a. is a feature of all monopolistic competition firms. b. means that the firm will never experience a zero profit. c. causes marginal revenue to exceed price. d. prohibits firms from earning positive economic profits in the long run.

a.

A firm operating in a monopolistic competition market can earn economic profits in: a. the short run but NOT in the long run. b. the long run but NOT in the short run. c. both the short run and the long run. d. neither the short run nor the long run.

a.

A production function is a relationship between inputs and a. quantity of output. b. revenue. c. costs. d. profit.

a.

The relationship between advertising and product differentiation is: a. positive; the more differentiated the product, the more a firm is likely to spend on advertising. b. negative; the more differentiated the product, the less a firm is likely to spend on advertising. c. zero; there is no relationship between product differentiation and advertising. d. irrelevant; firms with differentiated products do not need to advertise.

a.

Which of the following expressions is correct? a. accounting profit = total revenue - explicit costs b. economic profit = total revenue - implicit costs c. economic profit = total revenue - explicit costs d. Both a and b are correct.

a.

Economists normally assume that the goal of a firm is to: a. maximize its total revenue. b. maximize its profit. c. minimize its explicit costs. d. minimize its total cost.

b.

Profit is defined as: a. net revenue minus depreciation. b. total revenue minus total cost. c. average revenue minus average total cost. d. marginal revenue minus marginal cost.

b.

Refer to Figure 14-1. If the market price is $5.00, the firm will earn: a. positive economic profits in the short run. b. negative economic profits in the short run but remain in business. c. negative economic profits and shut down. d. zero economic profits in the short run.

b.

Refer to Figure 14-7. Suppose the price of the good is $175. If the firm produces and sells 515 units of output, its total revenue is: a. $100,525. b. $90,125. c. $84,500. d. $75,250.

b.

Refer to Figure 15-3. Which of the following statements is correct? a. Panel C represents the typical demand curve for a perfectly competitive firm, and Panel B represents the typical demand curve for a monopoly. b. Panel B represents the typical demand curve for a perfectly competitive firm, and Panel A represents the typical demand curve for a monopoly. c. Panel A represents the typical demand curve for a perfectly competitive firm, and Panel C represents the typical demand curve for a monopoly. d. Panel C represents the typical demand curve for a perfectly competitive firm, and Panel D represents the typical demand curve for a monopoly.

b.

Refer to Figure 15-7. A profit-maximizing monopolist would incur total costs of: a. $81. b. $120. c. $144. d. $240.

b.

Refer to Figure 15-7. In order to maximize profits, the monopolist should produce: a. 9 units. b. 12 units. c. 15 units. d. more than 15 units.

b.

Refer to Figure 16-2. The firm's profit-maximizing level of output is: a. 16 units. b. 24 units. c. 32 units. d. 48 units.

b.

Refer to Table 13-2. What is the marginal product of the second worker? a. 300 units b. 200 units c. 100 units d. 50 units

b.

Refer to Table 14-9. If the firm produces 3 units of output, a. marginal cost is $4. b. total revenue is greater than variable cost. c. marginal revenue is less than marginal cost. d. the firm is maximizing profit.

b.

The general term for market structures that fall somewhere between monopoly and perfect competition is: a. incomplete markets. b. imperfectly competitive markets. c. oligopoly markets. d. monopolistically competitive markets.

b.

When the marginal product of labor declines as the quantity of that input increases, the production function exhibits: a. increasing marginal product of labor. b. diminishing marginal product of labor. c. diminishing total product of labor. d. Both b and c are correct.

b.

A monopolistically competitive firm chooses: a. the quantity of output to produce, but the market determines price. b. the price, but competition in the market determines the quantity. c. price, but output is determined by a cartel production quota. d. the quantity of output to produce and the price at which it will sell its output.

d.

Critics of advertising argue that advertising: a. causes consumers to perceive differences of products that might not even exist. b. makes consumer's willingness to pay more for brand names is irrational. c. often fails to convey substantive and true information. d. All of the above are correct.

d.

Defenders of advertising: a. concede that advertising can signal the quality of their product to consumers b. concede that advertising lowers firm market power and increases competitions c. contend that firms use advertising to provide useful information to consumers. d. All of the above are correct.

d.

Free entry means that: a. the government pays any entry costs for individual firms. b. government-funded research lowers the costs of patents and other barriers to entry. c. a firm's marginal cost is zero. d. no legal barriers prevent a firm from entering an industry.

d.

If firms in a monopolistically competitive market are earning positive profits, then: a. firms will likely be subject to regulation. b. barriers to entry will be strengthened. c. some firms will exit the market. d. new firms will enter the market.

d.

Refer to Figure 15-4. The marginal cost curve for a monopoly firm is depicted by curve: a. A. b. B. c. C. d. D.

d.

Refer to Figure 15-7. A profit-maximizing monopolist would earn total revenues of: a. $81. b. $144. c. $225. d. $240.

d.

Refer to Figure 16-2. In order to maximize profit, the firm will charge a price of: a. $16. b. $24. c. $32. d. $36.

d.