Micro embaye

From society's standpoint, cooperation among oligopolists is a. undesirable, because it leads to output levels that are too low and prices that are too high. b. desirable, because it leads to an outcome closer to the competitive outcome than what would be observed in the absence of cooperation. c. undesirable, because it leads to output levels that are too high and prices that are too high. d. desirable, because it leads to less conflict among firms and a wider variety of products for consumers.

A

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production. T/F

True

If all existing firms and all potential firms have the same cost curves, there are no inputs in limited quantities, and the market is characterized by free entry and exit, then the long-run market supply curve a. is horizontal and equal to the minimum of long-run average cost for each firm. b. must slope upward. c. is horizontal and equal to the minimum of long-run marginal cost for each firm. d. must slope downward

A

Marginal revenue can become negative for a. monopoly firms but not for competitive firms. b. both competitive and monopoly firms. c. neither competitive nor monopoly firms. d. competitive firms but not for monopoly firms.

A

Select the type of market that is described by the following attributes: many firms, differentiated products, and free entry. a. monopolistic competition b. monopoly c. natural monopoly d. perfectly competition

A

The long-run supply curve for a competitive industry may be upward sloping if a. some resources are available only in limited quantities. b. firms that enter the industry are able to do so at lower average total costs than the existing firms in the industry. c. accounting profits are positive. d. there are barriers to entry.

A

The nature of a firm's cost (fixed or variable) depends on the a. time horizon under consideration. b. price the firm charges for output. c. explicit but not implicit costs. d. firm's revenues.

A

Suppose that Emily opens a restaurant. She receives a loan from a bank for $200,000. She withdraws $100,000 from her personal savings account. The interest rate on the loan is 6%, and the interest rate on her savings account is 2%. Emily's explicit cost of capital is a. $12,000. b. $14,000. c. $2,000. d. $4,000.

A, (200,000 x .06) because this is EXPLICIT cost so you would not take into account the 100,000 she took out of her personal savings account. -Explicit Costs: Input costs that require an outlay of money by the firm -Implicit Costs: input costs that do not require an outlay of money by the firm

A key characteristic of a competitive market is that a. producers sell nearly identical products. b. firms have price setting power. c. firms minimize total costs. d. government antitrust laws regulate competition.

A, NEARLY identical. Not Identical. Similar.

Regardless of the cost structure of firms in a competitive market, in the long run a. the marginal firm will earn zero economic profit. b. firms will experience rising demand for their products. c. firms will experience a less competitive market environment. d. exit and entry is likely to lead to a horizontal long-run supply curve.

A, always in the long run a competitive market will earn zero economic profit.

Profit is defined as total revenue a. minus total cost. b. plus total cost. c. divided by total cost. d. times total cost.

A, if you didn't know this... you're ****ed.

By comparing marginal revenue and marginal cost, a firm in a competitive market is able to adjust production to the level that achieves its objective, which we assume to be a. maximizing profit. b. maximizing total revenue. c. minimizing average total cost. d. minimizing variable cost.

A, in a competitive market the firm will be maximizing it's profit when it's MR=MC.

A firm in a monopolistically competitive market faces a a.horizontal demand curve because there are many firms in the market. b.downward-sloping demand curve because the firm's product is different from those offered by other firms. c.downward-sloping demand curve because there are only a few firms in the market. d.horizontal demand curve because firms can enter the market without restriction.

B

A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following? a. marginal revenue exceeds average revenue b. average revenue exceeds marginal revenue c. revenue is always maximized along with profit d. average revenue is equal to marginal revenue

B

Antitrust laws have economic benefits that outweigh the costs if they a. prevent mergers that would decrease competition and lower the costs of production. b. prevent mergers that would decrease competition and raise the costs of production. c. allow mergers that would decrease competition and raise the costs of production. d. None of the above is correct because antitrust laws never have economic benefits that outweigh the costs.

B

As part of an estate settlement Mary received $1 million. She decided to use the money to purchase a small business in Anywhere, USA. Her business operates in a perfectly competitive industry. If Mary would have invested the $1 million in a risk-free bond fund she could have earned $100,000 each year. She also quit her job with Lucky.Com Inc. to devote all of her time to her new business. Her salary at Lucky.Com Inc. was $75,000 per year. How large would Mary's accounting profits need to be to allow her to attain zero economic profit? Answers: a. $225,000 b. $175,000 c. $100,000 d. $125,000

B

A sunk cost is one that a. should determine the rational course of action in the future. b. was paid in the past and will not change regardless of the present decision. c. changes as the level of output changes in the short run. d. has the most impact on profit-making decisions.

B, a sunk cost is the same as a fixed cost and should not influence your decision in exiting or shutting down your business.

Which of the following industries has the highest concentration ratio? a. jeans b. household laundry equipment c. fruit d. restaurants

B, confusing ass question but I guess its true because there are less companies that make household laundry equipment.

A distinguishing feature of an oligopolistic industry is the tension between a. short-run decisions and long-run decisions. b. cooperation and self interest. c. producing a small amount of output and charging a price above marginal cost. d. profit maximization and cost minimization.

B, difference between "whats best for you, and whats best for the both of you"

Profit-maximizing firms enter a competitive market when existing firms in that market have a. average total costs that exceed average revenue. b. average total costs less than market price. c. total revenues that exceed total variable costs. d. total revenues that exceed fixed costs.

B, firms will enter the competitive market if ATC<P. Firms will see that there is cash money$$$ to be made.

Christopher is a professional tennis player who gives tennis lessons. The industry is competitive. Christopher hires a business consultant to analyze his financial records. The consultant recommends that Christopher give fewer tennis lessons. The consultant must have concluded that Christopher's Answers: a. total revenues exceed his total accounting costs. b. marginal cost exceeds his marginal revenue. c. marginal revenue exceeds his total cost. d. marginal revenue exceeds his marginal cost.

B, if his marginal cost(cost per unit) is more than his marginal revenue(price per unit) then he should cut back on his lessons.

A firm operating in a monopolistically competitive market can earn economic profits in a. the long run but not in the short run. b. the short run but not in the long run. c. both the short run and the long run. d. neither the short run nor the long run.

B, they can actually earn negative profits in the short run but in the long run they always produce at where MR=MC if they are trying to maximize their profits.

Constant returns to scale occur when a firm's a. long-run average total costs are increasing as output increases. b. long-run average total costs do not vary as output increases. c. long-run average total costs are decreasing as output increases. d. marginal costs are constant as output increases.

B, think of the word "constant" (not changing).

In the long run, a profit-maximizing firm will choose to exit a market when a. variable costs exceed sunk costs. b. total revenue is less than total cost. c. average fixed cost is falling. d. marginal cost exceeds marginal revenue at the current level of production.

B, when TR<TC you are spending more on making the unit then you are selling it.

In the long run, all of a firm's costs are variable. In this case the exit criterion for a profit-maximizing firm is to shut down if a. average revenue is greater than average fixed cost. b. average revenue is greater than marginal cost. c. price is less than average total cost. d. price is greater than average total cost.

C

When firms in a competitive market have different costs, it is likely that a. long-run market supply will be downward sloping. b. the market will no longer be considered competitive. c. some firms will earn positive economic profits in the long run. d. free entry and exit in the market will be violated.

C

When oligopolistic firms interacting with one another each choose their best strategy given the strategies chosen by other firms in the market, we have a. a group of oligopolists behaving as a monopoly. b. a cartel. c. a Nash equilibrium. d. the perfectly competitive outcome.

C

The most likely explanation for economies of scale is a. coordination problems. b. increasing marginal cost. c. specialization of labor. d. decreasing marginal cost.

C, Economies of Scale is like Walmart it produces so much that it can afford to set price at low prices.

Product differentiation in monopolistically competitive markets ensures that, for profit-maximizing firms, a. marginal revenue will equal average total cost. b. marginal cost will exceed average revenue. c. price will exceed marginal cost. d. average variable cost will be declining.

C, P>MC.

A monopoly chooses to supply the market with a quantity of a product that is determined by the intersection of the a. marginal cost and demand curves. b. average total cost and demand curves. c. marginal revenue and marginal cost curves. d. marginal revenue and average total cost curves.

C, a monopolist sets his price at MR=MC and then the highest possible price on the demand curve.

In a competitive market, the actions of any single buyer or seller will a. discourage entry by competitors. b. influence the profits of other firms in the market. c. have a negligible impact on the market price. d. None of the above is correct.

C, a single buyer or seller has no effect on the market price in a competitive market.

Consider a competitive market with a large number of identical firms. The firms in this market do not use any resources that are available only in limited quantities. In this market, an increase in demand will Answers: a. not affect price in either the short or the long run. b. increase price in the long run but not in the short run. c. increase price in the short run but not in the long run. d. increase price both in the short and the long run.

C, eventually the economic profit will equal zero.

Which of the following is not a characteristic of monopolistic competition? a. free entry into the market b. a differentiated product c. firms are price takers d. a large number of sellers

C, monopolies and monopolistic competition firms are NOT price takers. Perfect Competition is where they are price takers.

A government-created monopoly arises when a. government spending in a certain industry gives rise to monopoly power. b. the government exercises its market control by encouraging competition among sellers. c. the government gives a firm the exclusive right to sell some good or service. d. Both a and c are correct.

C, this is referring to copyrights and patents.

An oligopoly is a market in which a. there are many price-taking firms, each offering a product similar or identical to the products offered by other firms in the market. b. firms are price takers. c. there are only a few sellers, each offering a product similar or identical to the products offered by other firms in the market. d. the actions of one seller in the market have no impact on the other sellers' profits.

C, very similar to Monopolistic Competing markets but there are few firms.

A particular cable TV company requires a household to subscribe to its high-speed Internet service if it subscribes to cable TV, and vice versa. This practice a. is referred to as tying. b. is regarded by some economists as a form of price discrimination. c. is controversial among economists because they disagree on whether it has adverse effects for society as a whole. d. All of the above are correct.

D

For a monopoly firm, the shape and position of the demand curve play a role in determining the (i)profit-maximizing price. (ii)shape and position of the marginal-cost curve. (iii)shape and position of the marginal-revenue curve. a. (i) and (ii) only b. (ii) and (iii) only c. (i), (ii), and (iii) d. (i) and (iii) only

D

If all existing firms and all potential firms have the same cost curves, there are no inputs in limited quantities, and the market is characterized by free entry and exit, then the long-run market supply curve Answers: a. must slope upward. b. must slope downward. c. is horizontal and equal to the minimum of long-run marginal cost for each firm. d. is horizontal and equal to the minimum of long-run average cost for each firm.

D

Which of the following statements is (are) true of a monopoly? (i)A monopoly has the ability to set the price of its product at whatever level it desires. (ii)A monopoly's total revenue will always increase when it increases the price of its product. (iii)A monopoly can earn unlimited profits. a. (ii) only b. (ii) and (iii) only c. (i) and (ii) only d. (i) only

D

Which of the following statements is correct? a. If duopolists successfully collude, then their combined output will be equal to the output that would be observed if the market were a monopoly. b. Although the logic of self-interest decreases a duopoly's price below the monopoly price, it does not push the duopolists to reach the competitive price. c. Although the logic of self-interest increases a duopoly's level of output above the monopoly level, it does not push the duopolists to reach the competitive level. d. All of the above are correct.

D

Gloria has decided to start her own snow removal business. To purchase the necessary equipment, Gloria withdrew $2,000 from her savings account, which was earning 3% interest, and borrowed an additional $4,000 from the bank at an interest rate of 7%. What is Gloria's annual opportunity cost of the financial capital that has been invested in the business? a. $660 b. $60 c. $280 d. $340

D, (2000 x .03) + (4000 x .07)

Predatory pricing occurs when a. firms collude to set prices. Economists are certain this practice is profitable. b. firms collude to set prices. Economists are skeptical that this practice is profitable. c. A monopolist decreases its prices to maintain its monopoly. Economists are certain this practice is profitable. d. A monopolist decreases its prices to maintain its monopoly. Economists are skeptical that this practice is profitable.

D, Predatory pricing is when an ogilipoly firm lowers its unit price so far that it steals all the competition from the other firms so they exit the market and then they take over running a Monopoly setting there price. Economist say it ends up hurting them more than profiting them.

The supply curve for the monopolist a. is horizontal. b. is vertical. c. is upward sloping. d. does not exist.

D, a monopolist DOES NOT have a supply curve.

Critics of markets that are characterized by firms that sell brand name products argue that brand names encourage consumers to pay more for branded products that a. consumer-advocate groups have found to be inferior. b. are very different from generic products. c. have elastic demand curves. d. are indistinguishable from generic products.

D, critics believe that the generic products are the same as brand names.

A profit-maximizing firm operating in a monopolistically competitive market that is in a long-run equilibrium has a. produced the efficient scale of output. b. chosen to produce where demand is unitary elastic. c. minimized average total cost. d. chosen a quantity of output where average revenue equals average total cost.

D, in the long run eq'm AR=ATC.

Diseconomies of scale occur when a. long-run average total costs fall as output increases. b. average fixed costs are falling. c. average fixed costs are constant. d. long-run average total costs rise as output increases

D, in the long run you end up with diminishing marginal product.

Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 12, Q = 122) and (L = 13, Q = 132). Then the marginal product of the 13th worker is a. 8 units of output. b. 122 units of output. c. 132 units of output. d. 10 units of output.

D, just remember to write this out on the test in table form and you should be fine.

Which of the following statements is not correct? a. Cigarettes are likely to be produced in an oligopoly industry. b. Novels are likely to be produced in a monopolistically competitive industry. c. Cable television is likely to be produced in a monopoly industry. d. Milk is likely to be produced in a monopolistically competitive industry.

D, milk brands are run by only a few sellers. Oligopoly(Oak farm, Borden) Cigarettes- few sellers (Marlboro, Camel, Parliaments) Cable- Monopoly Novels- many authors fighting to sell there book at competing prices(monopolistic)

Which of the following statements is not correct? a. Monopolistic competition is similar to perfect competition because both market structures are characterized by free entry. b. Monopolistic competition is similar to monopoly because in each market structure the firm can charge a price above marginal costs. c. Monopolistic competition is similar to perfect competition because both market structures are characterized by many sellers. d. Monopolistic competition is similar to oligopoly because both market structures are characterized by barriers to entry.

D, only monopolies have barriers to entry (owning all of key resource, patents, etc.)

An equilibrium occurs in a game when a. price equals marginal cost. b. all independent strategies counterbalance all dominant strategies. c. quantity supplied equals quantity demanded. d. all players follow a strategy that they have no incentive to change.

D, rarely happens because of self interest.

The textile industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses, and many sellers have left the industry. Economic theory suggests that these conditions will a. cause firms in the textile industry to suffer long-run economic losses. b. shift the demand curve outward so that price will rise to the level of production cost. c. cause the remaining firms to collude so that they can produce more efficiently. d. cause the market supply to decline and the price of textiles to rise.

D, the more firms that leave the industries reduces competition within the existing firms, allowing firms to fluctuate there prices to be higher.

A miniature golf course is a good example of where fixed costs become relevant to the decision of when to open and when to close for the season. T/F

False, fixed cost should not determine whether to enter or exit a market.

A popular resort restaurant will maximize profits if it chooses to stay open during the less-crowded "off season" when its total revenues exceed its fixed costs. T/F

False, it does not maximize profits.