Econ Final Exam

Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency? a. output will be too small and its price too high. b. output will be too large and its price too high. c. output will be too small and its price too low. d. output will be too large and its price too low.

Answer: A

In the business world, a _________________ is recognized as a legally acceptable way for any business to keep knowledge of its particular methods of production from being known by competing firms. a. patent b. monopoly c. trade secret d. trademar

Answer: C

When J.K. Rowling exerts copyright ownership of her literary works, she creates a monopoly by restricting a. the number of inventors. b. unit production costs. c. entry into the market. d. demand for the product.

Answer: C

________________________ arises where many firms are competing in a market to sell similar but differentiated products. A. Oligopolistic competition B. Perfect competition C. Monopolistic competition D. Monogopolised competition

Answer: C

If a paper mill shuts down its operations for three months so that it produces nothing, its __________________ will be reduced to zero? A. variable costs B. fixed costs C. opportunity costs D. total cost

Answer: A

In the competitive market for figure skate blades, manufacturers offer an array of products that are A. distinctly different in a particular way. B. distinctly similar in a particular way. C. virtually identical on the competition spectrum. D. at opposite ends of the competition spectrum.

Answer: A

Perfect competition and monopoly stand at _____________ of the spectrum of competition. A. opposite ends B. the high end C. the low end D. the mid-way point

Answer: A

The economies-of-scale curve is a long-run average cost curve, because A. it allows all factors of production to change. B. fixed costs cannot be changed. C. only variable costs are allowed to change. D. only marginal costs are allowed to change

Answer: A

A monopolist is able to maximize its profits by a. setting the price at the level that will maximize its per-unit profit. b. producing output where MR = MC and charging a price along the demand curve. c. setting output at MR = MC and setting price at the demand curve's highest point. d. producing maximum output where price is equal to its marginal cost.

Answer: B

A manufacturer would likely make an ___________ in a market following the long-run process of beginning and expanding production in response to ________________ . A. accounting profit; a strategy to grow profits B. accounting profit; an incentive for profit C. entry; a sustained pattern of profits D. entry; an incentive to add to profits

Answer: C

Perfect competition displays _____________________ because the social benefits of additional production, as measured by the price that people are willing to pay, are in balance with the ____________ to society of that production. A. allocative efficiency; total costs B. economic efficiency; total revenues C. allocative efficiency; marginal costs D. economic efficiency; marginal revenues

Answer: C

The demand curve as perceived by a monopolistic competitor is ______________ . A. upward-sloping B. U shaped C. downward-sloping D. flat

Answer: C

The form of legal protection intended to prevent reproduction of original works is referred to as ______________ law. a. patent b. trademark c. copyright d. trade secret

Answer: C

The term _________________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product. A. price setter B. business entity C. price taker D. trend setter

Answer: C

The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls. A. diminishing marginal returns B. marginal cost output C. economies of scale D. diseconomies of scale

Answer: C

I'MABigCorp. produces and sells kitchen wares. Last year, it produced 7,000 can openers and sold each one for $6. To produce the 7,000 can openers, the company incurred variable costs of $28,000 and a total cost of $45,000. I'MABIGCorp.'s average fixed cost to produce the 7,000 can openers was A. $1.50 B. $1.23 C. $2.25 D. $2.43

Answer: D

The slope of the demand curve for a monopoly firm is a. horizontal, parallel to the x-axis b. vertical, parallel to the y-axis c. upward sloping d. downward sloping

Answer: D

Which of the following is most unlikely to present a barrier to entry into a market? A. market forces B. patent laws C. technological advantages D. deregulation

Answer: D

In a monopolistic competitive industry, firms can try to differentiate their products by A. creating optimal perceptions of the product. B. choosing optimal locations from which the product is sold. C. enhancing the intangible aspects of the product. D. enhancing product's physical aspects and all of the above.

Answer: D

In economics, the term "shutdown point" refers to the point where the A. marginal cost curve crosses the total revenue curve. B. average variable cost curve crosses the total revenue curve. C. average variable cost curve crosses the marginal cost curve. D. marginal cost curve crosses the average variable cost curve.

Answer: D

In order to determine ____________, the firm's total costs must be divided by the quantity of its output. A. diminishing marginal returns B. fixed costs C. variable cost D. average cost

Answer: D

In the highly competitive setting in which oligopoly firms operate, which of the following are considered to be typical temptations each may face? A. to cooperate to generate and then divide up monopoly-like profits B. to cooperate to mutually decide what price to charge C. to cooperate to make decisions about what quantity to produce D. to cooperate to act as a single monopoly and all of the above

Answer: D

A _________ refers to a group of firms colluding with one another to produce at the monopoly output and sell at the monopoly price. A. prisoner's dilemma B. cartel C. game theory D. duopoly

Answer: A

A __________________ exists when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curve. a. natural monopoly b. monopoly c. oligopoly d. monopolistic competition

Answer: A

A firm that holds a monopoly position in the market place is a. a price maker b. a price taker c. monopolistically competitive d. subject to infinite market forces

Answer: A

A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production. A. fixed costs; do not change, B. variable costs; are constantly changing, C. fixed costs; are consistently changing, D. variable costs; do not change,

Answer: A

An _________________ is calculated by subtracting the firm's costs from its total revenues, _______________________________ . A. accounting profit; excluding opportunity cost B. accounting profit; including opportunity cost C. economic profit; excluding opportunity cost D. opportunity cost; including economic profit

Answer: A

Copyright protection legislation provides protection for original works a. during the author's life plus 70 years b. during the author's life plus 20 years c. until the author is 70 years of age d. until the author is 75 years of age

Answer: A

If oligopolistic firms banded together with the intention of acting like a monopoly, it would likely result in their being able to A. divide up the monopoly level of profit amongst themselves. B. hold down output in the short-run. C. charge a higher price in the short-run. D. both b and c above are correct.

Answer: A

In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice? A. what quantity to produce B. what price to charge C. what quantity of labor is needed D. what quality to produce

Answer: A

In a monopolistically competitive market, the rule for maximizing profit is to set MR = MC, which means A. price is higher than marginal revenue. B. price is equal to marginal revenue. C. price is equal to marginal cost. D. price is lower than marginal revenue.

Answer: A

In the framework of an oligopoly, what strategy can work like a silent form of cooperation? A. always match other cartel firms' price cuts, but don't match price increases B. always match other cartel firms' price increases, but don't match price cuts C. immediately match price increases D. legally enforceable agreements

Answer: A

Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella requires to operate her business. Which is it? A. physical space for the gallery B. costs of purchasing art work to sell in the gallery C. wages paid to three part-time employees D. accountant's fees for preparing tax returns

Answer: A

Monopolistic competitors can make a _____________ in the short-run, but in the long run, ______________ will drive these firms toward _______________________ . A. profit or loss; entry and exit; a zero-profit outcome B. loss; exit; losses on their earnings C. profit or loss; exit; economic profits D. profit; entry; a price that lies at the very bottom of the AC curve

Answer: A

Roughly speaking, patent law covers __________ and __________ law protects an author's original books. a. original inventive creations; copyright b. trade secrets; trademark c. all inventions; trademark d. original audiovisual creations; copyright

Answer: A

The demand curve as perceived by a perfectly competitive firm is __________ . A. flat B. downward sloping C. upward sloping D. hump shaped

Answer: A

Why are the underlying economic meanings of the perceived demand curves for a monopolist and monopolistic competitor different? A. a monopolist faces the market demand curve and a monopolist competitor does not B. a monopolist competitor faces the market demand curve and a monopolist does not C. because the demand curve for a monopolistic competitor is upward sloping D. because the demand curve perceived by the monopolist is flatter than that of a monopolist competitor

Answer: A

__________________ law implies ownership over an idea or concept or image a. Intellectual property b. Copyright c. Patent d. Trademark

Answer: A

______________________ refers to the additional revenue gained from selling one more unit. A. Marginal revenue B. Total revenue C. Economic profit D. Accounting profit

Answer: A

As the name monopolistic competition implies, a firm's decisions in this setting will in certain ways resemble ______________ and in other ways resemble________________ . A. monopoly; imperfect competition B. monopoly; perfect competition C. imperfect competition; perfect competition D. imperfect competition; oligopoly

Answer: B

Economic profit can be derived from calculating total revenues minus all of the firm's costs, A. excluding its opportunity costs. B. including its opportunity costs. C. including its marginal revenue. D. excluding its marginal revenue.

Answer: B

Fixed costs are important because, at least in the ___________, the firm _______________. A. long run; cannot alter them B. short run; cannot alter them C. long run; can alter them D. short run; can alter them

Answer: B

For a perfectly competitive firm, the marginal cost curve is identical to the firm's ________________ . A. demand curve B. supply curve C. average total cost curve D. average variable cost curve

Answer: B

Idaho farmers can sell as large a quantity of their potato crop as they wish, A. if they set their own price in the short run, but in the long run, the market sets the price. B. provided each is willing to accept the prevailing market price. C. if they set their own price in the long run, but in the short run, the market sets the price. D. provided quality is perceptible and determines the market price.

Answer: B

If a perfectly competitive firm raises its price, the quantity demanded of its product _____________. A. diminishes temporarily in the short run B. falls to zero C. stays the same D. falls below marginal cost

Answer: B

If each of two competing monopolists undertakes equal advertising efforts to attract consumers away from the other, the total result is A. they will both increase market share. B. they will simply neutralize one another's efforts. C. they will both lose market share. D. they will both improve their industrial position.

Answer: B

If it was possible for one company to gain ownership control all of the uranium processing plants in the US, then a. they will strive to reach efficiencies only they know how to make. b. that firm could set up barriers to entry to discourage competition. c. government will deregulate to ensure the company's monopoly. d. the factors of market demand and supply will set the price.

Answer: B

In economics, a firm that faces no competitors is referred to as _________________. A. an oligopoly B. a monopoly C. a perfect competitor D. an oligopolizor

Answer: B

In order to determine the average variable cost, the firm's variable costs are divided by _______________________. A. its' fixed costs B. the quantity of output C. its' average costs D. diminishing marginal costs

Answer: B

The marginal revenue curve for a monopolist ____________________ the market demand curve. a. always rises above b. always lies beneath c. always runs parallel d. always is the same

Answer: B

The single most common form of competition in the U.S. is A. perfect competition among firms with differentiated products. B. monopolistic competition among firms with differentiated products. C. oligopolistic competition in a certain market with similar products. D. perfect competition because it displays product and allocative efficiencies.

Answer: B

The two primary factors determining monopoly market power are the firm's a. revenues and size of its customer base demand curve and its cost structure c. variable cost curve and its fixed cost structure d. demand curve and level of wealth within its market

Answer: B

Under perfect competition, any profit-maximizing producer faces a market price equal to its A. average costs B. marginal costs C. total costs D. variable costs

Answer: B

What role can advertising play with respect to differentiated products? A. allows a firm to sell any quantity it wishes B. shapes consumers intangible preferences C. shapes perceived demand for a price taker D. allows a firm to raise the prevailing market price

Answer: B

When entry occurs in a monopolistically competitive industry, A. the perceived demand and marginal revenue curves for each firm will shift to the right. B. the perceived demand and marginal revenue curves for each firm will shift to the left. C. the perceived demand curve for each firm will shift to the right. D. the marginal revenue curves for each firm will shift to the right.

Answer: B

Which of the following is most likely to be a monopoly? a. local fast-food restaurant b. local electricity distributor c. local bathroom fixtures shop d. local television broadcaster

Answer: B

Which of the following would be classified as a differentiated product produced by a monopolistic competitor? A. natural gas B. Channel No. 5 C. electricity D. tap water

Answer: B

_________ arises when firms act together to reduce output and keep prices high. A. Collusion B. A cartel C. A monopoly D. An oligopoly

Answer: B

______________ include all of the costs of production that increase with the quantity produced. A. Fixed costs B. Variable costs C. Average costs D. Average variable costs

Answer: B

Choice Questions 40. The largest cattle rancher in a given region will be unable to have a __________ when sufficient numbers of smaller cattle ranchers provide sources of competition. A. oligopoly B. patent C. monopoly D. monopolistic competition

Answer: C

How can parties who find themselves in a prisoner's dilemma situation avoid the undesired outcome and cooperate with each other? A. one oligopoly can physically beat up another oligopoly B. by seeking alternatives to create pressure for members to keep output up and prices up C. find effective ways to penalize firms who do not cooperate D. sign legally enforceable contracts setting out their mutual agreement to act like a monopoly

Answer: C

If a graph is used to compare total revenue and total cost of a perfectly competitive firm, then the horizontal axis of the graph will represent the _______________ and the vertical axis will represent ______________________ . A. price, measured in dollars; quantity of goods produced B. total costs measured in dollars; quantity of goods produced C. quantity produced; both total revenue and total costs, measured in dollars. D. quantity produced; total revenue and total variable costs, measured in dollars.

Answer: C

If oligopolists compete hard against each other, A. they end up acting very much like imperfect competitors. B. costs for all are driven up. C. zero profits result for all. D. they end up acting very much like monopolistic competitors.

Answer: C

In order to calculate marginal cost, the change in ______________ is divided by the amount of change in quantity. A. either total cost or average cost B. increasing marginal returns C. either total cost or variable cost D. decreasing marginal returns

Answer: C

Shopping malls typically lease retail space to a large number of clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call ________________________. A. a cartel B. collusion C. monopolistic competition D. perfect competition

Answer: C

The perceived demand curve for a group of competing oligopoly firms will appear kinked as a result of their commitment to A. match price increases, but not price cuts. B. stand at opposite ends of the competition spectrum. C. match price cuts, but not price increases. D. stand at the high point of the competition spectrum.

Answer: C

Through the process of exit, monopolistically competitive firms remaining in the market A. are no longer earning zero economic profits. B. will each have ongoing negative earnings. C. are no longer earning losses. D. have positive earnings.

Answer: C

Whatever the firm's quantity of production, _____________ must exceed total costs if it is to earn a profit. A. marginal costs B. average costs C. total revenue D. variable costs

Answer: C

Which of the following will present the least amount of concern to a firm that has a monopoly over a particular industry? a. whether consumers will purchase its product b. whether consumers will spend on different products c. the competitive actions of other business firms d. barriers to entry and competitors' patent protection

Answer: C

____________ tells a firm whether it can earn profits given the price in the market. A. Marginal cost B. Total cost C. Average cost D. Average marginal cost

Answer: C

_____________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry. A. Collusion B. A monopoly C. An oligopoly D. A cartel

Answer: C

The fact that a consumer is not required to buy the goods that a given firm produces, as well as the fact that the consumer might want the goods a firm produces, but may choose to buy from other firms instead A. will reduce the revenue a firm receives and it should shut down. B. means the firm has reached it shutdown point and should exit. C. is part of the process to a sustained pattern of profits. D. are two stark realities any business firm must recognize.

Answer: D

What happens in a perfectly competitive industry when economic profit is greater than zero? A. existing firms may expand their operations B. firms may move along their LRAC curves to new outputs C. there may be pressure on the market price to fall D. new firms may enter the industry and all of the above

Answer: D

Which of the following best identifies what the concept of differentiated products is closely related to? A. unique style. B. the degree of monopolistic competition that exists. C. optimal location. D. the degree of product variety that is available.

Answer: D