Micro 2nd test

(51) If Dixies Dry Cleaners competes in a monopolistically competitive market, and if the firm is earning a normal profit, then: A. P<MR B. P=MR C. P=ATC D. P=MC

C. P=ATC

(34) A monopolist has four distinct groups of customers. Group A has an elasticity of demand of 0.2, B has an elasticity of demand of 0.8, C has an elasticity of demand of 1.0, and D has an elasticity of demand of 2.0. The group paying the highest price for the product will be: A. A B. B C. C D. D

A. A

(33) If marginal cost is constant, what happened to a market if it evolves from perfect competition to monopoly without any change in position of the market demand curve or any change in costs? A. Consumer surplus decreases, producer surplus increases, and a deadweight loss is created B. Consumer surplus increases, producer surplus increases, and a deadweight loss is not created C. Consumer surplus increases, producer surplus decreases, and a deadweight loss is not created D. Consumer surplus decreases, producer surplus decreases, and a deadweight loss is created

A. Consumer surplus decreases, producer surplus increases, and a deadweight loss is created

(41) In a ____ market, the sheer threat of entry keeps prices low. A. contestable B. public C. competitive D. natural monopoly

A. contestable

(39) Coupons in the Sunday circular segment the market by: A. elasticity of demand because the more price-sensitive buyers will cli coupons B. frequency of purchased because people who go to the store more often clip more coupons C. willingness to pay because each buyer will pay the maximum price D. utility because those with a higher marginal utility clip more coupons

A. elasticity of demand because the more price-sensitive buyers will cli coupons

(6) An economic institution that combines factors of production into outputs for consumers A. firm B. industry C. plant D. multinational

A. firm

(19) The MAIN characteristic of the perfectly competitive market that causes economic profits and losses to go to zero in the long run is: A. free entry and exit B. homogenous product C. many buyers and sellers D. known prices

A. free entry and exit

(8) All of the following are examples of implicit costs, EXCEPT: A. office rent expense B.earnings that an entrepreneur could have made in another job C. opportunity cost of a firm's capital D. depreciation expense

A. office rent expense

(48) Which of the following characteristics is NOT typical of monopolistic competition? A. one seller B. easy entry into the market C. easy exit from the market D. product differentiation

A. one seller

(15) Constant returns to scale are defined as long-run average total costs that: A. remain the same ad the output increases B. decreases as a firm produces another product C. increase as output increases D. decreases as output increases

A. remain the same ad the output increases

(31) Which of the following is NOT an example of natural monopoly? A. the chemical industry B. the railroad industry C. electric utilities D. the local newspaper

A. the chemical industry

(16) In the short run: A. the number of firms is fixed B. firms will leave the industry if they are not making enough profit C. perfectly competitive firms cannot make positive economic profits D. all factors of production are variable

A. the number of firms is fixed

(27) A perfectly competitive firm shuts down in the short run when: A. the price is below the average variable cost curve B. economic losses occur C. the price is below the average fixed cost curve D. the price is below the average total cost curve

A. the price is below the average variable cost curve

(35) An important difference between a perfectly competitive firm and a monopolist is: A. the price it charges to sell additional units of a good B. the primary objective of the firms C. a monopolist only produces in the long run, while a perfect competitor only produces in the short run D. the size of the industry

A. the price it charges to sell additional units of a good

(5) In economic terms, the short run is: A. the time over which at least one factor of production is fixed B. the time period in which factors of production are variable C. no more than six months D. no more than two years

A. the time over which at least one factor of production is fixed

(7) The wonderful Gadget Company produces 500 gadgets per week with 50 employees. It hires an additional worker and output rises to 507 gadgets. The marginal product of the las worker hired is___ gadgets. A. 507 B. 7 C. 500 D. 1

B. 7

(30) Which of the following statements about marginal revenue (MR) is false? A. MR helps to determine the profit-maximizing output for a firm B. MR is the total revenue dividend by the quantity sold C. MR is the change in total revenue dividend by the change in the quantity sold D. In a perfectly competitive market, MR equals the market price

B. MR is the total revenue dividend by the quantity sold

(44) In 1890, Congress passed the first antitrust act, called the: A. Hart-Scott-Rodino Act B. Sherman Act C. Clayton Act D. Federal Trade Commission Act

B. Sherman Act

(14) Which statement about costs of pharmaceutical and software industries is FALSE? A. the average total cost curve does not have a U shape B. The average fixed cost curve does not continually decline C. The majority of the costs of production are fixed costs D. Marginal costs are virtually zero

B. The average fixed cost curve does not continually decline

(47) All of the following are characteristics of monopolistic competition, EXCEPT: A. price maker B. barriers to entry C. free entry and exit D. product differentiation

B. barriers to entry

(32) In using a marginal cost pricing rule to regulate a natural monopolist, losses would be sustained by the firm because the price is: A. above the average total cost B. below the average total cost C. below the marginal cost D. above the marginal cost

B. below the average total cost

(49) When Doritos brand tortilla chips spends money for television commercials, it intends to shift the: A. demand curve to the right and make demand more elastic B. demand curve to the right and make demand less elastic C. supply curve to the right and make supply less elastic D. supply curve to the right and make supply more elastic

B. demand curve to the right and make demand less elastic

(46) Which of the following is a downside of monopolistic competition and oligopoly? A. higher trade barriers B. market power C. higher input prices D. higher transportation costs

B. market power

(23) Market structure analysis allows economists to: A. remodel the economy B. predict the behavior of firms C. eliminate economic profits D. create the conditions of competition

B. predict the behavior of firms

(50) Product differentiation: A. reduces product price B. reduces price elasticity of demand C. contributes to production efficiency D. adds product information without increasing product cost

B. reduces price elasticity of demand

(3) In a partnership, legal resposibility for all debts of the partnership are: A. limited to the investments B. shared by all partners C. shared by the founding owners D. shared by the stockholders

B. shared by all partners

(28) In the short run, a competitive firm with economic losses will: A. leave the industry B. shut down if its marginal revenue falls short of its average variable cost C. enter another industry D. change its plant size

B. shut down if its marginal revenue falls short of its average variable cost

(37) For both the monopolist and the perfectly competitive firm: A. the profit-maximizing output occurs where P=MC B. the profit-maximizing output occurs where MR=MC C. profits are not maximized D. the profit-maximizing output occurs where P=MR

B. the profit-maximizing output occurs where MR=MC

(25) _____ is the process by which products are produced and sold to consumers at their lowest possible opportunity cost. A. Allocative efficiency B. Diminishing marginal returns C. Productive efficiency D. Marginal pricing

C. Productive efficiency

(42) Government regulators calculate that the share of industry sales accounted for by Industry X's eight largest firms is 22%. This is an example of: A. the Producer Price Index B. the Consumer Price Index C. a concentration ratio D. the Herfindahl-Hirschman Index

C. a concentration ratio

(45) Companies that sell products through infomercials fit the monopoly market structure because they: A. practice perfect price discrimination B. experience significant economies of scale C. advertise their products as one-of-a-kind D. earn economic profits

C. advertise their products as one-of-a-kind

(20) Corn is a perfectly competitive commodity. In the market place, the demand curve for corn is: A. perfectly elastic B. perfectly inelastic C. downward sloping D. upward sloping

C. downward sloping

(4) AFC: A. increases due to diminishing marginal returns B. will fall in early stages of production but rise when capacity is maximized C. falls continuously as output increases D. is constant at any given level of output

C. falls continuously as output increases

(13) Money that is a real cost to the company but is not actually paid at the time a machine wears down is called a(n): A. sunk cost B. explicit cost C. implicit cost D. total cost

C. implicit cost

(17) Which of the following industries is likely to be an increasing cost industry? A. beer B. cell phones C. steel D. satellite radio

C. steel

The short run is: A. up to two years B. the period of time during which the firm can alter its output C. the period of time in which the firm cannot change its use of at least on input D. a year or less

C. the period of time in which the firm cannot change its use of at least on input

(9) Which of the following things contribute to economies of scale? A. complementary production techniques B. specialization of labor C. better use of capital D. All of these contribute

D. All of these contribute

(12) A bicycle factory finds that it can lower costs if it also produces tricycles and unicycles. This is an example of: A. comparative advantage B. opportunity costs C. economies of scale D. economies of scope

D. economies of scope

(26) A price taker is a firm that: A. takes the maximum price that each and every consumer is willing to pay B. takes bribes C. has the ability to control the price it charges D. has no control over the market price

D. has no control over the market price

(24) If many firms enter a competitive market, and the demand for raw materials increases, then the: A. SRATC curve will shift down B. long-run industry supply curve will slope down C. average fixed cost curve will slope up D. long-run industry supply curve will slope up

D. long-run industry supply curve will slope up

(36) Which is NOT necessary for price discrimination to exist? A. the demand curve must be downward sloping for the firm B. Resale of the product or service needs to be difficult C. the buyers must have different elasticities of demand D. the firm must set different prices to reflect marginal cost

D. the firm must set different prices to reflect marginal cost

(38) Martha takes her 72-year old mother and her 11-year old son to the local water park. Martha pays $12 for her ticket, $8 for her mothers senior citizen tocket, and $6 for her sons. This is an example of: A. second-degree price discrimination B. perfect price discrimination C. a kinked oligopoly demand curve D. third degree price discrimination

D. third degree price discrimination

(43) Charging different groups of people different prices (such as children's prices and seniors prices versus regular prices) is and example of __ price discrimination A. fourth-degree B. second-degree C. first-degree D. third-degree

D. third-degree