Exam B- Review

One characteristic of monopolistic competition is that it has: a) a few firms producing a slightly differentiated product b) many firms producing a slightly differentiated product c) large barriers to entry d) many firms producing identical goods e) one firm producing a unique good

B

Assume a market is in equilibrium. There is an increase in supply, but no change in demand. As a result the equilibrium price_______, and the equilibrium quantity_______. a) rises; increases b) rises; decreases c) falls; increases d) falls; decreases e) rises; does not change

C

Measures of concentration: a) measure how concentrated a firm's sales are among certain types of goods b) measure the concentration of a large number of firms in a certain area c) measure whether the market is dominated by a small number of firms d) have high values for perfect competition e) refer to the concentration of customers in a certain area

C

The production possibilities frontier is the boundary between the: a) wanted and unwanted combinations of goods and services b) affordable and unaffordable combinations of production c) attainable and unattainable combinations of goods and services d) rational and irrational choices facing a society e) goods and services that the economy can produce

C

To be able to price discriminate, a firm must: a) sell a product that can be resold b) raise prices for all customers c) be able to identify and separate different types of buyers d) lower prices for all customers e) both answers b and c are correct

C

What does monopolistic competition have in common with perfect competition: a) a standardized product b)the ability to earn an economic profit in the long run c) a large number of firms and freedom of entry and exit d) barriers to exit but no barriers to entry e) product differentiation

C

When the Herfindal-Hirschman Index for an industry is: a) 10,000 the industry is perfectly competitive b) very large, the industry can be perfectly competitive c) very small, the industry can be perfectly competitive d) very small, the industry can be a monopoly e, above 5,000, the industry is considered not very competitive, and when it is below 5,000, the industry is considered very competitive

C

You are just about to finish college and are about to start a high paying job. Because of this new job, what is the most likely outcome in the market for cars?: a) the market supply of cars will increase b) your demand for cars will decrease c) your demand for cars will increase d) the market supply of cars will decrease e) the demand and the supply for cars will decrease

C

A single price monopoly is producing at an output level where marginal revenue is $15, marginal cost is $13 and price is $20. This monopoly is: a) not maximizing its profit and should decrease output to increase its profit b) maximizing its profit and should not shut down c) maximizing its profit but should shut down d) not maximizing its profit and should increase output to increase its profit e) maximizing its profit but still should decrease output to earn even more profit

d

A monopolist can make an economic profit in the long run because of: a) barriers to entry b) the relatively elastic demand for its product c) the fact that the firm produces where MR=MC d) the relatively I elastic demand for its product e) the firms price setting behavior

A

Accounting profits are _______ economic profits: a) always larger than b) about the same as c) often larger than d) less than

A

Government licensing of occupations or trades: a) is often controlled by firms in the licensed industry to alter competition b) will not reduce competition if it merely imposes higher costs in prospective entrants into the industry c) usually protects the public against poor quality products d) is prohibited by the US constitution e) has usually been established over the objections of sellers in the licensed industry

A

If a firm goes out of business, its losses are limited to approximately to the: a) fixed costs b) total cost c) variable cost d) marginal cost

A

If demand is price inelastic and the price is lowered, which of the following occurs?: a) the total revenue of the firms selling the product decreases b) the quantity sold decreases c) the total expenditure decreases and the total revenue increases d) the total expenditure increases and the total revenue decreases e) the total revenue of the firms selling the product is unchanged

A

In the standard oil case, the US Supreme Court ________ identified standard oil as a monopoly. a) incorrectly b) correctly c) later d) none of these

A

Rank the following goods from least to most elastic: high octane unleaded gasoline, unleaded gasoline, and gasoline: a) gasoline, unleaded gasoline, high octane unleaded gasoline b) high octane unleaded gasoline, gasoline, unleaded gasoline c) unleaded gasoline, high octane unleaded gasoline, gasoline d) high octane unleaded gasoline, unleaded gasoline, gasoline e) none of the above

A

Soda and hot dogs are complements for one another. If a shortage of carbonated water leads to an increase in the price of soda, then the: a) demand for hot dogs decreases b) quantity of hot dogs demanded decreases c) quantity of hot dogs demanded decreases d) demand for hot dogs increases e) more information is needed to determine if the demand increases or decreases

A

The Gallo brothers succeeded, in large part, due to a) division of labor b) government subsidies c) exporting their wine d) initial superior skills

A

The income elasticity of demand for used cars is less than zero, so used cars are: a) an inferior good b) a substitute good c)a perfectly inelastic good d) a normal good e) an inelastic good

A

Firms in monopolistic competition have demand curves that are: a) vertical b) downward sloping c) upward sloping d) horizontal e) U- shaped

B

If Microsoft wanted to prove to the Justice Department that it's Windows software has many substitutes that personal computer owners can use, Microsoft hopes to find: a) that the demand for Windows is elastic b) a large positive value for the cross elasticity of Windows and other software c) a negative income elasticity for Windows d) a positive income elasticity for Windows e) that the demand for Windows in inelastic

B

If a monopolistically competitive sellers marginal cost is $3.56, the firm will likely increase its output if: a) it's marginal revenue is less than $3.56 b) its marginal revenue is more than $3.56 c) its marginal revenue is equal to $3.56 d) average total cost is less than $3.56 e) both answers A and D are correct

B

If beef and pork are substitutes for consumers, the cross elasticity of demand between the two products must be: a) great her than one b) positive c) elastic d) negative e) indeterminate

B

Once a monopoly has determined how much it produces, it will charge a price that: a) is determined by the intersection of the marginal cost and average total cost curves b) is determined by its demand curve c) is equal to its average total cost d) minimizes marginal cost e) is independent of the amount produced

B

The law of supply states that other things remaining the same, a decrease in the price of a kayak leads to: a) an increase in the supply of kayaks b) a decrease in the quantity of kayaks supplied c) a decrease in the supply of kayaks d) an increase in the quantity of kayaks supplied e) an increase in the supply of kayaks and a decrease in the quantity of kayaks supplied

B

Which of the following four firm concentration rations would be the best indication of a perfectly competitive industry: a) 31 percent b) 2 percent c) 78 percent d) 50 percent e) 100 percent

B

A major earthquake occurs in the central part of the United States. What impact would this have on the nations production possibilities frontier and why?: a) nothing would happen because the nation would still have the same capabilities b) it would shift outward because unemployment would be reduced c) a trade off would occur to replace the resources and goods destroyed d) it would shift inward because some of the nations resources, such as capital and labor would be destroyed e) it would not shift because people would get to work to replace any capital that was destroyed

D

If the price of a DVD falls: 1. The demand curve for DVDS will shift rightward 2. The demand curve for DVDS will not shift 3. There will be a movement along the demand curve for DVDS a) 2 only b) 1 only c) 1 & 3 only d) 2 &3 e) 3 only

D

In order to determine whether to major in economics, a rational individual compares the ________ of the decision: a) opportunity cost and the sunk cost b) normative benefits and positive costs c) self interest and social interest d) marginal benefit and marginal cost e) positive benefits and normative costs

D

Market demand curves are obtained by: a) averaging the quantities every consumer is willing to buy at each different price b) determining the price each consumer is willing to pay for the good and summing those prices across all consumers c) observing the behavior of an individual consumer in a market d) summing the quantities every consumer is willing to buy at each different price e) observing the prices and quantities sold in a market over time and plotting those price-quantity combinations in a graph

D

Suppose that a monopoly is currently producing the quantity at which marginal revenue is less than marginal cost. The monopoly can increase its profit by: a) lowering its price and increasing its output b)not changing its price and increasing its output c) lowering its price and decreasing its output D) raising its price and decreasing its profit e) shutting down

D

Which of the following statements is correct for the price elasticity of demand along a linear, downward sloping demand curve?: a) the price elasticity of demand is constant because the slope is constant b) at low prices, demand is elastic but at high prices demand is inelastic c) the price elasticity of demand is not define for a linear demand curve because the slope is constant d) at high prices, demand is elastic but at low prices demand is inelastic e) none of the above answers are correct

D

A cartel is: a) a market with only two firms b) a market structure with a small number of large firms c) another name for an oligopoly d) a market structure with a large number of small firms e) a group of firms acting together to raise price, decrease output, and increase economic profit

E

A competitive market is in equilibrium. Then there is a decrease in demand and a decrease in supply. The equilibrium price ________, and the equilibrium quantity ________. a) falls; increases b) rises; decrease c) perhaps changes but we can't say if it rises, falls, or stays the same; increases d) rises; increases e) perhaps changes but we can't say if it rises, falls, or stays the same; decreases

E

One reason the demand for laptop computers might increase is a: a) fall in the price of a laptop computers b) poor quality performance record for laptop computers c) fall in price of desktop computers d) decrease in income if laptops are a normal good e) change in preference as laptops have become more portable, with faster processors and larger hard drives

E

Perfectly inelastic demand means that consumers: a) increase their consumption as price rises b) are willing to buy any quantity of the good at a given price, but none at higher prices c) will buy a huge, almost infinite amount more, if the price falls just a little d) decrease their consumption as price rises e) will buy a certain quantity, regardless of price

E

Pizza and tacos are substitutes, and the price of pizza increases. Which of the following correctly indicates what happens?: a) the demand for pizza decreases and demand for tacos increases b) the quantity of tacos demanded increases and the quantity of pizza demanded decreases c) the demand for both goods decreases d) the demand for each decreases because both are normal goods e) the quantity of pizza demanded decreases and the demand for tacos increases

E

Suppose that instead of taking this test, you could either have worked and earned income or partied and had a pleasurable time. Your opportunity cost of taking the test is the: a) forgone working and partying b) test because you are taking it c) forgone party d) forgone work e) forgone working or partying, depending on which was your next best choice

E

What does monopolistic competition have in common with monopoly?: a) a large number of firms b) barriers to entry c) the ability to collude with respect to price d)mutual interdependence e) a downward sloping demand curve

E

Which of the following is a "positive" statement?: a) taxes should be lower because then people get to keep more of what they earn, so they will work more b) my economic class should last for two terms because it is my favorite class c) given their negative impact on productivity, the government should eliminate labor unions d) the class average on this test should be more than 80 percent e) a ten percent increase income leads to a 4 percent increase in the consumption of beef

E

Which of the following must be a firm be able to do to successfully price discriminate?: 1. divide buyers into different groups according to their willingness to pay 2. prevent resale of the good or service 3. identify into which group (high willingness to pay or low willingness to pay) a buyer falls a) 1 & 3 b) 3 only c) 1 & 2 d) 2 only e) 1, 2, & 3

E