Economics Chapters (10, 11, 12, 13, 14, 15)

X-inefficiency is said to occur when a firm's: a. average costs of producing any output are greater than the minimum possible average costs b. marginal costs of producing any output are greater than the minimum possible total costs c. total costs of producing any output are greater than the minimum possible average cost d. short-run costs are producing any output are greater than the long-run costs

a. average costs of producing any output are greater than the minimum possible average costs

The long-run equilibrium of a purely competitive industry ensures: a. consumer and producer surplus are maximized b. consumer and producer surplus are minimized c. only producer surplus is maximized d. only consumer surplus is maximized

a. consumer and producer surplus are maximized

Productive efficiency refers to: a. cost minimization, where P = minimum ATC b. production, where P = MC c. maximizing profits by producing where MR = MC d. setting TR = TC

a. cost minimization, where P = minimum ATC

If a monopolist produces 100 units of output at a market price of $5 per unit with marginal revenue per unit equaling $4, we would expect that if the monopolist's good was provided under pure competition, quantity would be a. higher than 100 units, price lower than $5, and MR = price b. lower than 100 units, price greater than $5, and MR = price c. higher than 100 units, price greater than $5, and MR = price d. Lower than 100 units, price lower than $5, and MR = price

a. higher than 100 units, price lower than $5, and MR = price

An economy is producing at the least-cost rate of production when: a. price and the minimum average total cost are equal b. marginal cost is greater than average total cost c. marginal revenue is greater than price price and marginal revenue are equal

a. price and the minimum average total cost are equal

The Herfindahl index is: a. the sum of the squared percentage market shares of all firms in the industry b. the sum of the market shares for the top 10 firms in the industry c. a measure of product differentiation in the market d. a measure if how easy it is for new firms to enter the market

a. the sum of the squared percentage market shares of all firms in the industry

The long-run supply curve in a constant-cost industry would be: a. vertical b. horizontal c. up-sloping d. down-sloping

b. horizontal

A constant-cost industry is one in which: a. a higher price per unit will not result in an increase output b. if 100 units can be produced for $100, the 150 can be produced for $150, 200 for $200, and so forth c. the demand curve and therefore the unit price and quantity sold seldom change d. the total cost of producing 200 or 300 units is no greater than the cost of producing 100 units

b. if 100 units can be produced for $100, the 150 can be produced for $150, 200 for $200, and so forth

Suppose that a monopolist calculates that at present and sales levels, marginal revenue is $1.00 and marginal cost is $2.00. He or she could maximize or minimize losses by: a. decreasing price and increasing output b. increasing price and decreasing output c. decreasing price and leaving output unchanged d. decreasing output and leaving price unchanged

b. increasing price and decreasing output

A pure monopolist should never produce in the: a. elastic segment of its demand curve, because it can increase total revenue and reduce total cost by lowering prices b. inelastic segment of its demand curve. because it can increase total revenue and reduce total cost by increasing price c. inelastic segment of its demand curve, because it can always increase total revenue by more than it increases total cost by reducing price d. segment of its demand curve where the price elasticity coefficient is greater than one

b. inelastic segment of its demand curve, because it can increase total revenue and reduce total cost by increasing price

In a monopolistically competitive market, the firm's marginal revenue schedule: a. is the same as the demand schedule b. lies below the demand schedule c. lies above the demand schedule d. is not dependent on the demand schedule

b. lies below the demand schedule

In the short-run, the individual competitive firm's supply curve is that segment of the: a. average variable cost curve lying below the marginal cost curve b. marginal cost curve lying about the average cost curve c. marginal revenue curve lying below the demand curve d. marginal cost curve lying between the average total cost and average variable cost curves

b. marginal cost curve lying above the average variable cost curve

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then: a. the selling price for this firm is above the market equilibrium price b. new firms will enter this market c. some existing firms in this market will leave d. there must be price fixing by the industry's firms

b. new firms will enter this market

When a purely competitive industry is in long-run equilibrium, which statement is true? a. average total cost is less than marginal cost b. price and average total cost are equal c. marginal cost is at ints maximum level d. marginal revenue is greater than price

b. price and average total cost are equal

When a purely competitive firm is in long-run equilibrium: a. marginal revenue exceeds marginal cost b. price equals marginal cost c. total revenue exceeds total cost d. maximum average total cost is less that that the production price

b. price equals marginal cost

A purely competitive firm's short-run supply curve is: a. perfectly elastic at the minimum average total cost b. up-sloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve c. up-sloping and equal to the portion of the marginal cost curve that lies above the average total cost curve d. up-sloping only when the industry has constant costs

b. up-sloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve

In the short run, a purely competitive firm that seeks to maximize profit with produce: a. where the demand and the ATC curves intersect b. where the total revenue exceeds total cost by the maximum amount c. that output where economic profits are zero d. at any point where the total revenue and total cost curves intersect

b. where the total revenue exceeds total cost by the maximum amount

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 value (in percentage form) of the four-firm concentration ratio is most likely to indicate a monopolistically competitive market? a. 100% b. 60% c. 30% d. 2%

c. 30%

Allocative inefficiency due to unregulated monopoly is characterized by the condition: a. P = MC b. P = MR c. P > MC d. P > AVC

c. P > MC

In the short-run, a profit-maximizing monopolistically competitive firm sets its price: a. equal to marginal revenue b. equal to marginal cost c. above marginal cost d. below marginal cost

c. above marginal cost

Nonprice competition refers to: a. competition between products of different industries, for example, competition between aluminum and steel in the manufacture of automobile parts b. price increases by a firm that is ignored by its rivals c. advertising, product promotion, and changes in the real or perceived characteristics fo a product d. reductions in production costs that are not reflected in price reductions

c. advertising, product promotion, and changes in the real or perceived characteristics fo a product

The wage rate increases in a purely competitive industry. This change will result in a(n): a. decrease in average total cost for a firm in the industry b. decrease in average variable cost for a firm in the industry c. increase in the marginal cost curve for a firm in the industry d. increase in short-run supply curve for a firm in the industry

c. increase in the marginal cost curve for a firm in the industry.

Product differentiation is an important characteristic in a monopolistically competitive market because: a. it results in zero profits in the short run b. it promotes productive efficiency in the long run c. it provides firms with some market power d. it implies market share in zero in the long run

c. it provides firms with some market power

Price discrimination refers to: a. selling a given product for different prices at two different points in time b. any price above that which is equal to a minimum average total cost c. the selling of a given product at different prices that do not reflect cost differences d. the difference between the prices a purely competitive seller and a purely monopolistic seller would charge

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

In a typical graph for a purely competitive firm, the intersection of the total cost and total revenue curves would be: a. a point of maximum economic profit b. a point of minimum economic loss c. a point where MR = MC d. a breaker-even point

d. a break-even point

For a purely competitive seller, price equals: a. average revenue b. marginal revenue c. total revenue divided by output d. all of these

d. all of these

Recourse costs increase in a purely competitive industry. This charge will result in a(n): a. increase in average fixed cost for a firm in the industry b. decrease in average variable cost for a firm in the industry c. decrease in the marginal cost curve for a firm in the industry d. decrease in the short-run supply curve for a firm in the industry

d. decrease in the short-run supply curve for a firm in the industry

Creative destruction: a. stimulates growth b. contributes to the production of new goods c. forces firms to be innovative d. does all of the above

d. does all of the above

If profits are negative in a monopolistically competitive market, then: a. the industry will stop production b. new firms will enter the market until economic profits are zero c. firms will exit the market until economic profit returns to the optimal positive level d. firms will exit the market until economic profit returns to zero

d. firms will exit the market until economic profit returns to zero

For a purely competitive firm, total revenue: a. is price x quantity sold b. increase by a constant absolute amount as output expands c. graphs as a straight up-sloping line from the origin d. has all of these characteristics

d. has all of these characters

In moving down the elastic segment of the monopolist's demand curve, total revenue is: a. increasing, and marginal revenue is negative b. decreasing, and marginal revenue is positive c. decreasing, and marginal revenue is negative d. increasing, and marginal revenue is positive

d. increasing, and marginal revenue is positive

A monopolistically competitive firm in the short run is producing where price is $3.00 and marginal cost is $1.50. To maximize profits: a. the firm should continue to produce this quantity b. the firm should increase output and decrease price c. the firm should decrease output and increase price d. it is unclear what the firm should do without knowing marginal revenue

d. it is unclear what the firm should do without knowing marginal revenue

Many people believe that monopolies charge any price they want to without affecting sales. Instead, the output level for a profit-maximizing monopoly is determined by: a. marginal cost = demand b. marginal revenue = demand c. average total cost = demand d. marginal cost = marginal revenue

d. marginal cost = marginal revenue

Other things equal, a price discriminating monopolist will: a. realize a smaller economic profit than a non-discriminating monopolist b. produce a larger output than a non-discriminating monopolist c. produce the same output as a non-discriminating monopolist d. produce a smaller output than a non-discriminating monopolist

d. produce a smaller output than a non-discriminating monopolist

In the short-run, purely competitive firms earn _______ in equilibrium while in the long-run firm earn _______ in equilibrium, respectively: a. normal profits; economic profits b. profits or losses; profits or losses c. profits; normal profit d. profits or losses; normal profit

d. profits and losses; normal profit

In a monopolistically competitive market: a. there is a relatively small number of sellers b. all products are identical c. it is typically difficult to enter the market d. there is a relatively large number of sellers

d. there is a relatively large number of sellers

A firm reaches a break-even point (normal profit position) where: a. marginal revenue cuts the horizontal axis b. marginal cost intersects the average variable cost curve c. total revenue equals total variable cost d. total revenue and total cost are equal

d. total revenue and total cost are equal

In the standard model of pure competition, a profit-maximizing entrepreneur will shut down in the short run if: a. marginal cost is greater than average revenue b. average cost is greater than average revenue c. average fixed cost is greater than average revenue d. total revenue is less than total variable costs

d. total revenue is less than total variable costs

In the long-run, new firms will enter a monopolistically competitive industry: a. provided economies of scale are being realized b. even though losses are incurred in the short run c. until minimum average total cost is achieved d. until economic profits are zero

d. until economic profits are zero