Exam 2

Which of the following fourminus firm concentration ratios would be the best indication of a perfectly competitive​ industry? Question content area bottom Part 1 A. 50 percent B. 31 percent C. 78 percent D. 2 percent E. 100 percent

2%

How does the demand for any one​ seller's product in perfect competition compare to the market demand for that​ product? Question content area bottom Part 1 A. The demand for any one seller is proportionally smaller but otherwise identical to the market demand. B. They are identical. C. There is no demand for any one​ seller's competitively sold product. D. The demand for any one​ seller's product is not perfectly elastic while the market demand is perfectly elastic. E. The demand for any one​ seller's product is perfectly elastic while the market demand curve is downward sloping.

A

If firms in a perfectly competitive industry are earning an economic​ profit, then in the​ ________ firms will​ ________ the industry. Question content area bottom Part 1 A. long​ run; enter Your answer is correct. B. short​ run; enter C. short​ run; exit D. long​ run; exit E. More information about the​ firms' costs and the price of the product is needed to determine if firms enter or exit the industry.

A

In the short​ run, firms increase output Question content area bottom Part 1 A. only by increasing the amount of labor used. B. only by decreasing the amount of labor used. C. either increasing the amount of labor used or increasing the size of their plant. D. only by increasing the size of their plant. E. only by decreasing the size of their plant.

A

The equilibrium in the​ prisoners' dilemma i. minimizes the​ prisoners' combined jail time. ii. has one prisoner confessing and the other denying. iii. is a Nash equilibrium. Question content area bottom Part 1 A. iii only B. i only C. ​i, ii, and iii D. ii only E. i and iii

A

The long run average cost curve Question content area bottom Part 1 A. shows the lowest average cost facing a firm as it increases output changing both its plant and labor force. B. is the sum of a​ firm's short run average cost curves. C. initially rises when output increases and then falls when output increases. D. always falls as output increases. E. always rises as output increases.

A

Which of the following always decreases when output​ increases? Question content area bottom Part 1 A. total fixed cost B. marginal cost C. average fixed cost D. average variable cost E. total cost

Average fixed cost

A price-discriminating monopoly charges Question content area bottom Part 1 A. the same price to every buyer for the same product. B. a different price to different types of buyers for the same​ product, even though there are no differences in costs. C. different prices to buyers for different products. D. a different price to different​ buyers, because the costs are different. E. each customer a price that equals the marginal cost of serving that customer.

B

A profitminus maximizing output for a singleminus price monopoly is determined by the intersection of the​ ________ curves and the profitminus maximizing price is found on the​ ________ curve. Question content area bottom Part 1 A. marginal cost and average total​ cost; demand B. marginal cost and marginal​ revenue; demand C. total revenue and total​ cost, total revenue D. marginal cost and marginal​ revenue; marginal revenue E. demand and​ supply; supply

B

If a perfectly competitive firm finds that the price exceeds its ATC​,then the firm Question content area bottom Part 1 A. is incurring an economic loss. B. is earning an economic profit. C. will lower its price to increase its economic profit. D. is earning zero economic profit. E. will raise its price to increase its economic profit.

B

If perfectly competitive lawn care firms are making an economic​ profit, then Question content area bottom Part 1 A. wages will be bid up until the economic profit are gone. B. new firms will enter the industry. C. the firms must be superior and will continue to make an economic profit. D. government regulation will be imposed to decrease their profit. E. they are not equating marginal revenue to marginal cost.

B

One requirement for an industry to be perfectly competitive is that in the industry there Question content area bottom Part 1 A. is one firm that sells a product with no close substitutes. B. are many firms for whom the efficient scale of production is small. C. is a barrier to entry that makes the entry of new firms difficult. D. are many firms selling different products. E. are a few firms who control the market.

B

Patents i. encourage the invention of new products and production methods. ii. generally discourage innovation iii. are exclusive rights granted to the inventor of a product or service. Question content area bottom Part 1 A. ii only B. i and iii C. ii and iii D. i only E. ​i, ii, and iii

B

The table above shows the total product schedule for​ Rick's Lawn​ Service, a yard care company. Increasing marginal returns Question content area bottom Part 1 A. end when the second worker is hired. B. end when the fourth worker is hired. C. occur as long as output increases. D. occur at all levels of employment. E. never occur.high

B

When the long- run average cost curve is downward​ sloping, Question content area bottom Part 1 A. diseconomies of scale are present. B. economies of scale are present. C. the firm experiences constant returns to scale. D. the average fixed cost curve must be upward sloping. E. The premise of the question is wrong because longminus run average cost curves never slope downward.

B

Which of the following statements is FALSE​? Question content area bottom Part 1 A. In the long​ run, a monopoly can earn a larger economic profit than can a perfectly competitive firm. B. A perfectly competitive firm produces where MR​ = MC but a monopoly produces where MR ​> MC. C. The consumer surplus is smaller for a market with a monopoly than for a perfectly competitive market. D. A perfectly competitive market produces more output and charges a lower price than a monopoly. E. In a perfectly competitive​ market, the price is equal to the marginal​ cost, but in a market with a singleminus price ​monopoly,price exceeds marginal cost.

BE

A cartel is a group of firms Question content area bottom Part 1 A. acting separately to limit​ output, lower​ price, and decrease economic profit. B. acting together to erect barriers to entry. C. acting together to limit​ output, raise​ price, and increase economic profit. D. legally fixing prices. E. that compete primarily with each other rather than the other firms in the market.

C

A​ firm's long- run average cost curve shows the​ ________ average cost at which it is possible to produce each output when the firm has had​ ________ time to change both its labor force and its plant. Question content area bottom Part 1 A. ​highest; insufficient B. ​highest; sufficient C. ​lowest; sufficient D. ​average; sufficient E. ​lowest; insufficient

C

For a perfectly competitive​ firm, marginal revenue is Question content area bottom Part 1 A. equal to the change in profit from selling one more unit. B. less than the price. C. equal to the price. D. greater than the price. E. undefined because the​ firm's demand curve is horizontal.

C

If a business owner decided to expand her business but rather than borrowing money from a bank used her own​ funds, then Question content area bottom Part 1 A. there is no cost associated with the expansion. B. she would be unable to earn a normal profit. C. she would forego the opportunity to earn interest on the money. D. the amount of her funds she used is part of her normal profit. E. the amount of her funds she used is an explicit cost.

C

The above figure shows a perfectly competitive firm. If the market price is​ $15, the firm Part 2 A. is incurring an economic loss. B. will immediately shut down. C. is making an economic profit. D. is making zero economic profit. E. might shut down but more information is needed about the AVC

C

The maximum profit for a singleminus price monopoly is found when the firm produces the level of output so that Question content area bottom Part 1 A. marginal revenue exceeds marginal cost by as much as possible. B. total revenue equals total cost. C. marginal revenue equals marginal cost. D. it can charge the highest possible price. E. price equals marginal cost.

C

The​ firm's supply curve is its Question content area bottom Part 1 A. average total cost curve above the marginal cost curve. B. marginal cost curve below the average variable cost curve. C. marginal cost curve above the average variable cost curve. D. average variable cost curve above the marginal cost curve. E. marginal revenue curve above the average total cost curve.

C

Which of the following would create a natural​ monopoly? Question content area bottom Part 1 A. requirement of a government license before the firm can sell the good or service B. an exclusive right granted to supply a good or service C. technology enabling a single firm to produce at a lower average cost than two or more firms D. ownership of all the available units of a necessary input E. a patent granted the producer of the good or service

C

Firms decide how much to spend on product development and marketing by Question content area bottom Part 1 A. ensuring that the marginal cost of product development and marketing is less than or equal to the marginal cost of producing the good or service. B. determining what it will take to eliminate excess capacity. C. spending the historical average of​ 1/4 of total production cost. D. balancing the cost and the benefit of product development and marketing. E. spending the same amount as they did in previous years

D

Increasing marginal returns to labor Question content area bottom Part 1 A. occur when a particularly efficient worker is employed. B. describe the portion of a total product curve where the marginal product is negative. C. mean that two workers produce less than twice the output of one worker. D. are the result of specialization and division of labor in the production process. E. occur only when there are increasing marginal returns to capital.

D

One way a company can cover its costs​ and, at the same​ time, obey a marginal cost pricing rule is by Question content area bottom Part 1 A. increasing production. B. decreasing production. C. choosing output levels according to the profitminus maximizing rule. D. using price discrimination. E. decreasing its marginal cost but not changing its average total cost.

D

A cartel is Question content area bottom Part 1 A. an illegal agreement among firms which most often arises in monopolistically competitive markets. B. the automobile producing industry. C. the only firm selling a particular product. D. a group of firms selling identical products but at slightly different prices. E. an agreement among firms to limit​ output, raise​ prices, and increase economic profit.

E

A cartel is a collusive agreement among a number of firms that is designed to Question content area bottom Part 1 A. expand output and lower prices but not to a predatory level. B. expand output and lower prices to a predatory level. C. expand output and raise prices. D. restrict output and lower prices to a predatory level. E. restrict output and raise prices.

E

A natural monopoly Question content area bottom Part 1 A. faces a horizontal demand curve. B. produces a natural resource. C. sets price equal to marginal revenue. D. sells to a single buyer. E. is a firm than can supply the market at lower cost than two or more firm

E

A perfectly competitive firm will maximize profit when the quantity produced is such that the Question content area bottom Part 1 A. ​firm's marginal revenue exceeds its marginal cost by the maximum amount possible. B. ​firm's marginal revenue is equal to the price. C. price exceeds the​ firm's marginal cost by as much as possible. D. ​firm's total revenue is equal to total cost. E. ​firm's marginal revenue is equal to its marginal cost.

E

For a single- price ​monopoly, Question content area bottom Part 1 A. there are several different price and output combinations that maximize profit. B. marginal revenue will be greater than price if demand is elastic. C. marginal revenue will be greater than price if demand is inelastic. D. if marginal revenue exceeds marginal​ cost, profits will increase if output decreases. E. if marginal cost exceeds marginal​ revenue, profits will increase if output decreases.

E

For a firm in monopolistic​ competition, innovation and product development are Question content area bottom Part 1 A. inconsequential because each firm produces a different product. B. uncommon because other firms already produce similar products. C. senseless because economic profit is always zero in the long run. D. necessary to allow new firms to enter. E. necessary in order to have a chance of earning at least a shortminus run economic profit.

E

If a monopoly is able to perfectly price​ discriminate, then consumer surplus is Question content area bottom Part 1 A. unchanged from what it is with a singleminus price monopoly. B. unchanged from what it is in a perfectly competitive industry. C. not zero but is less than with a singleminus price monopoly. D. equal to zero. E. maximized.

E

If another worker is hired with a marginal product greater than the previously hired​ worker, which of the following will be​ true? Question content area bottom Part 1 A. fixed costs will decrease B. marginal cost will increase C. average fixed costs will increase D. total costs will decrease E. marginal cost will decrease

E

In a perfectly competitive​ market, one​ farmer's barley is Question content area bottom Part 1 A. completely different from another​ farmer's barley. B. a monopolized product in the national market. C. slightly different from another​ farmer's barley. D. a monopolized product in that​ farmer's local market. E. a perfect substitute for another​ farmer's barley.

E

In the​ prisoners' dilemma, each player is​ ________ regardless of the other​ player's actions. Question content area bottom Part 1 A. better off denying B. forced to confess C. forced to deny D. going to go free E. better off confessing

E

The main source of economies of scale is Question content area bottom Part 1 A. constant returns to plant size. B. longminus run cost curves eventually sloping downward. C. better management. D. increases in the labor force not matched by increases in the plant size. E. specialization.

E

When a market has barriers to​ entry, Question content area bottom Part 1 A. then in the long run it might be possible for the firms to make a positive economic profit. B. oligopolies cannot be created. C. the HHI almost always falls below​ 1,000. D. then in the long run it is possible for the firms to incur economic losses. E. then in the long run the only possible outcome for the firms to make zero economic profit.

E

Which of the following is an example of a natural​ monopoly? Question content area bottom Part 1 A. Ford​ Motors, the large automobile producing company B. ​JCPenney, the large department store chain C. the Pittsburgh Penguins hockey​ team, a National Hockey League team D. ​Sony, the Japanese producer of the Playstation III E. Florida Power and​ Light, an electric utility in Florida

E

Which of the following is true if a firm shuts​ down? i. The price is less than minimum average variable cost. ii. The firm is able to avoid an economic loss. iii. The firm incurs a loss equal to its total variable cost. Question content area bottom Part 1 A. ii only B. i and ii C. i and iii D. iii only E. i only

E

Advertising costs and other selling costs are Question content area bottom Part 1 A. efficient. B. marginal costs. C. considered as part of demand because they affect the demand for the good. D. variable costs. E. fixed costs.

Fixed costs

In order to maximize its​ profit, a singleminus price monopoly produces the amount of output so that Question content area bottom Part 1 A. P​ = MC. B. MR​ = MC. C. P​ = MR. D. P​ = MC minus MR. E. P​ =ATC.

MR=MC

When the slope of the total product curve is​ steep, the marginal product is Question content area bottom Part 1 A. low. B. not defined. C. zero. D. negative. E. high.

high

The marginal cost curve is Uminus shaped. Over the range of output for which the marginal cost is falling as output​ increases, the marginal product is Question content area bottom Part 1 A. increasing. B. decreasing. C. constant. D. probably​ changing, but there is no stable relationship between the marginal cost and the marginal product. E. not defined.

increasing

The marginal product of labor equals the change in​ ________ from a oneminus unit increase in the quantity of labor. Question content area bottom Part 1 A. total product B. the slope of the average product curve C. the wage rate D. average product E. total cost

total

The marginal product of labor equals the change in​ ________ from a oneminus unit increase in the quantity of labor. Question content area bottom Part 1 A. average product B. total product C. the wage rate D. the slope of the average product curve E. total cost

total product