ECON Final Exam

40. Refer to the above data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's total costs will be:

$198

11. Refer to the above short-run data. The profit-maximizing output for this firm is:

320 units

18. Refer to the above data. If product price is $75, the firm will produce:

4 units of output

44. Refer to the above diagrams. With the industry structure represented by diagram:

A. (A) there will be only a normal profit in the long run, while in (B) an economic profit can persist.

47. Which of the following conditions is not required for price discrimination?

A. Buyer with different elasticities must be physically separate from each other.

75. Refer to the above diagram for a noncollusive oligopolist. Suppose that the firm is initially in equilibrium at point E where the equilibrium price and quantity are P and Q. Which of the following statements is correct?

A. Demand curve D1 assumes that rivals will match any price change initiated by this oligopolist.

21. Which of the following statements is correct?

A. Economic profits induce firms to enter an industry; losses encourage firms to leave.

42. Refer to the above diagram. At the profit-maximizing level of output, total revenue will be

B. 0AJE.

59. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. The profit-maximizing output for this firm will be:

B. 160

39. Refer to the above data for a nondiscriminating monopolist. This firm will maximize its profit by producing:

B. 4 units.

69. Refer to the above data. The four-firm concentration ratio for this industry is:

B. 95 percent.

41. Refer to the above diagram. To maximize profits or minimize losses this firm should produce:

B. E units and charge price A.

19. Refer to the above diagram. The firm will produce at a loss if price is:

B. P2.

80. A breakdown in price leadership leading to successive rounds of price cuts is known as:

B. a price war

72. Refer to the above diagram wherein the numerical data show profits in millions of dollars. Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell. If Beta commits to a high-price policy, Alpha will gain the largest profit by:

B. adopting a low-price policy.

30. Refer to the above diagram. By producing output level Q

B. both productive and allocative efficiency are achieved.

49. If a monopolist engages in price discrimination, it will:

B. charge a higher price where individual demand is inelastic and a lower price where individual demand is elastic.

89. The marginal productivity theory of income distribution suggests that:

B. each individual should receive income based on his contribution to total output.

71. Refer to the above diagram where the numerical data show profits in millions of dollars. Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell. If both firms follow a high-price policy:

B. each will realize a $20 million profit.

97. The concept of investment in human capital indicates that:

B. expenditures on education can be explained in essentially the same way as expenditures on machinery and equipment.

33. A purely monopolistic firm

B. faces a downsloping demand curve.

81. (Consider This) The prisoner's dilemma is generally demonstrated through:

B. game theory.

23. Assume a purely competitive increasing-cost industry is initially in long-run equilibrium and that an increase in consumer demand occurs. After all economic adjustments have been completed product price will be:

B. higher and total output will be larger than originally.

45. Refer to the above diagrams. The price will be _______ and the quantity will be _______ with the industry structure represented by diagram (B) compared to the one represented in (A).

B. higher; lower

65. The copper, aluminum, cement, and industrial alcohol industries are examples of:

B. homogeneous oligopoly.

91. Increases in the productivity of labor result partly from:

B. improvements in technology

78. In the United States cartels are:

B. in violation of the antitrust laws.

77. Cartels are difficult to maintain in the long run because:

B. individual members may find it profitable to cheat on agreements.-4d

93. On the basis of the above information we

C. can say that the firm is selling its product in a purely competitive market.

61. Refer to the above diagrams, which pertain to monopolistically competitive firms. Short-run equilibrium entailing economic loss is shown by:

C. diagram c only.

100. The idea of efficiency wages is that:

C. firms might get greater work effort by paying above-equilibrium wage rates.

25. Refer to the above diagrams which pertain to a purely competitive firm producing output q and the industry in which it operates. In the long run we should expect:

C. firms to leave the industry, market supply to fall, and product price to rise.

55. The monopolistic competition model assumes that:

C. firms will engage in nonprice competition.

63. A significant benefit of monopolistic competition compared with pure competition is:

C. greater product variety.

68. As a general rule, oligopoly exists when the four-firm concentration ratio:

C. is 40 percent or more.

57. A monopolistically competitive firm's marginal revenue curve:

C. is downsloping and lies below the demand curve.

56. The demand curve of a monopolistically competitive producer is:

C. more elastic than that of a pure monopolist, but less elastic than that of a pure competitor.

67. Concentration ratios measure the:

C. percentage of total industry sales accounted for by the largest firms in the industry.

27. Resources are efficiently allocated when production occurs where: A. marginal cost equals average variable cost.

C. price is equal to marginal cost.

28. The term productive efficiency refers to

C. the production of a good at the lowest average total cost.

29. The term allocative efficiency refers to:

C. the production of the product-mix most desired by consumers.

37. For a pure monopolist marginal revenue is less than price because:

C. when a monopolist lowers price to sell more output, the lower price applies to all units sold.

74. The kinked-demand curve model of oligopoly is useful in explaining:

C. why oligopolistic prices might change only infrequently.

6. Which of the following is not a basic characteristic of pure competition?

Considerable nonprice competition

31. The process by which new firms and new products replace existing dominant firms and products is called:

Creative destruction

62. When a monopolistically competitive firm is in long-run equilibrium:

D. MR = MC and P > minimum ATC

53. (Consider This) Children are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands. Which of the following conditions of price discrimination explain why this occurs?

D. The items cannot be bought by people in the low-price group and transferred to members of the high-price group.

99. The principal-agent problem arises primarily because:

D. agents pursue some of their own objectives that may conflict with the objectives of the principals.

92. Marginal resource cost refers to the:

D. amount by which a firm's total resource cost increases as the result of hiring one more unit of the resource.

64. The automobile, household appliance, and automobile tire industries are all illustrations of:

D. differentiated oligopoly.

46. X-inefficiency refers to a situation in which a firm:

D. fails to achieve the minimum average total costs attainable at each level of output.

26. Suppose that an industry's long-run supply curve is downsloping. This suggests that: A. it is an increasing-cost industry.

D. it is a decreasing-cost industry.

43. The supply curve for a monopolist is:

D. nonexistent.

83. Resource pricing is important because:

D. of all of these reasons.

90. The labor demand curve of a purely competitive seller:

D. slopes downward because the marginal product of successive workers declines

82. (Consider This) The prisoner's dilemma reveals that:

D. sometimes when individuals act independently in their own self-interest, everyone is worse off than if they had cooperated.

51. A dilemma of regulation is that:

D. the regulated price that achieves allocative efficiency is also likely to result in losses.

96. Wage differentials may result from all the following except:

D. the tendency of qualified workers to move from lower pay jobs to higher pay jobs.

58. In the long-run, the price charged by the monopolistically competitive firm attempting to maximize profits:

D. will be equal to ATC.

9. The demand curve in a purely competitive industry is _____, while the demand curve to a single firm in that industry is _____.

Downsloping, perfectly elastic

15. Refer to the above diagram. To maximize profit or minimize losses this firm will produce

E units at price A

7. Price is constant or given to the individual firm selling in a purely competitive market because:

Each seller supplies a negligible fraction of total supply

8. For a purely competitive firm total revenue:

Has all of these characteristics

13. Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation:

Is realizing an economic profit of 40$

4. Which of the following statements applies to a purely competitive producer?

It will not advertise its product

10. A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating:

Marginal Revenue and marginal cost

34. Pure monopolists may obtain economic profits in the long run because:

of barriers to entry

3. An industry comprised of a small number of firms, each of which considers the potential reactions of its rivals in making price-output decisions is called:

oligopoly

2. An industry comprised of a very large number of sellers producing a standardized product is known as:

pure competition

38. In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to:

B. marginal revenue.

50. Refer to the above diagram for a pure monopolist. If the monopolist is unregulated, it will maximize profits by charging:

B. price P3 and producing output Q3.

17. Refer to the above diagram. At P2, this firm will:

B. produce 44 units and earn only a normal profit.

60. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm will realize an economic:

B. profit of $480.

79. If the several oligopolistic firms that comprise an industry behave collusively, the resulting price and output will most likely resemble those of:

B. pure monopoly.

95. Many economists are critical of the minimum wage because they believe that it:

B. reduces the number of available job opportunities.

22. Which of the following statements is correct?

A. The long-run supply curve for a purely competitive increasing-cost industry will be upsloping.

94. Bilateral monopoly occurs where:

A. a monopsonistic employer bargains with an inclusive union.

54. A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from:

A. a relatively large number of firms and the monopolistic element from product differentiation.

1. Which of the following industries most closely approximates pure competition?

A. agriculture

86. Marginal revenue product measures the:

A. amount by which the extra production of one more worker increases a firm's total revenue.

48. Other things equal, in which of the following cases would economic profit be the greatest?

A. an unregulated monopolist which is able to engage in price discrimination

52. If a regulatory commission wants to establish a socially optimal price for a natural monopoly, it should select a price:

A. at which the marginal cost curve intersects the demand curve.

73. The kinked-demand curve of an oligopolist is based on the assumption that:

A. competitors will follow a price cut but ignore a price increase.

12. The MR = MC rule can be restated for a purely competitive seller as P = MC because:

A. each additional unit of output adds exactly its price to total revenue.

70. Game theory:

A. is the analysis of how people (or firms) behave in strategic situations.

35. A natural monopoly occurs when:

A. long-run average costs decline continuously through the range of demand.

66. Which of the following is a unique feature of oligopoly?

A. mutual interdependence

36. Large minimum efficient scale of plant combined with limited market demand may lead to:

A. natural monopoly.

98. Human capital is best defined as:

A. the productive skills and knowledge that workers acquire from education and training

85. The demand for a resource depends primarily on:

B. the demand for the product or service that it helps produce.

14. A purely competitive firm's short-run supply curve is:

B. upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve

84. Which of the following statements best illustrates the concept of derived demand?

C. A decline in the demand for shoes will cause the demand for leather to decline.

20. Which of the following is true concerning purely competitive industries?

C. In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.

88. A profit-maximizing firm employs resources to the point where:

C. MRP = MRC.

24. Refer to the above diagrams which pertain to a purely competitive firm producing output q and the industry in which it operates. Which of the following is correct?

C. The diagrams portray short-run equilibrium, but not long-run equilibrium.

32. Pure monopoly refers to:

C. a single firm producing a product for which there are no close substitutes.

16. Refer to the above data. If the market price for the firm's product is $12, the competitive firm will produce:

Zero units at a loss of 100$

5. A purely competitive seller is:

a "price taker."

76. Refer to the above diagram. Equilibrium output is:

c.g