micro t3

A firm's total revenue can be determined by A. Price times quantity. B. Profits minus costs. C. Total costs minus variable costs. D. Fixed costs minus quantity.

a

A perfectly competitive market results in efficiency because A. price is driven down to minimum ATC B. price rises high enough to equal marginal cost C. zero economic profit is achieved D. MC < P

a

At equilibrium in a monopoly, economic profits will most likely be A. Greater than zero. B. Zero. C. Normal. D. Negative.

a

If a firm can change market prices by altering its output, then it A. Has market power. B. Faces a horizontal demand curve. C. Is a price taker. D. Is a competitive firm.

a

If a new sushi restaurant opens, then A. The market supply curve for sushi will shift to the right. B. The market supply curve for sushi will shift to the left. C. There will be a movement up along the market supply curve for sushi. D. There will be a movement down along the market supply curve for sushi.

a

If economic profits are earned in a competitive market, then over time A. additional firms will enter the market B. the market supply curve will shift to the left C. equilibrium price will rise as more firms enter D. normal profit will fall to zero as more firms enter

a

If someone invests a lower cost way to produce frozen pizzas, then A. the market supply curve for frozen pizzas will shift to the right B. the market supply curve for frozen pizzas will shift to the left C. there will be movement up along the market supply curve for frozen pizzas D. there will be movement down along the market supply curve for frozen pizzas

a

In a perfectly competitive market economy, business failures can benefit society by causing A. a relocation of resources to better ones B. an increase in market power for the remaining firms C. a decline in market prices as remaining firms attempt to increase sales and say in business D. an increase in the number of jobs for bankruptcy lawyers and accountants

a

In the long run, an oligopolist is most likely to A. Experience economic profits because of barriers to entry. B. Experience zero economic profits because barriers to entry do not exist in the long run. C. Produce at the most technically efficient output level due to long-run competition. D. Face a straight demand curve.

a

Marginal cost is the increase in total cost associated with a one-unit A. increase in production B. decrease in production C. increase in output usage D. decease in output usage

a

Marginal revenue is the change in A. total revenue when output is changed B. total revenue when price is changed C. average revenue when output is changed D. average revenue when price is changed

a

Product differentiation refers to A. Features that make one product appear different from competing products in the same market. B. Different prices for the same product in a certain market. C. The selling of identical products in different markets. D. The charging of different prices for the same product in different markets.

a

Profit A. is the difference between total revenue and total cost B. is the difference between variable costs and fixed costs C. is always a number greater than zero D. must be reported to wall street quarterly

a

Suppose there are only three firms in a market. The largest firm has sales of $500 million, the second-largest has sales of $300 million, and the smallest has sales of $200 million. The market share of the largest firm is A. 50 percent. B. 100 percent. C. 60 percent. D. 40 percent.

a

Technological improvements cause A. ATC to shift down B. The supply curve to shift to the left C. MC to shift up D. P to increase

a

Technological improvements cause A. ATC to shift down. B. The supply curve to shift to the left. C. MC to shift up. D. P to increase.

a

The potential for maximizing total industry profits is greater in oligopolies than in perfect competition because A. There are fewer firms and each is dependent on the actions of rivals. B. Firms in an oligopoly are more profitable. C. There are independent firms in an oligopoly. D. Perfectly competitive firms can easily cooperate to restrict supply.

a

When economic profits exist in the market for a particular product, this is a signal to producers that A. Consumers would like more scarce resources devoted to the production of this product. B. The market is oversupplied with this product. C. The best mix of goods and services is being produced with society's scarce resources. D. Price is at the minimum of the ATC curve.

a

Which of the following is likely to be a monopolist? A. A drug firm that has a patent granting it the exclusive right to produce a drug. B. A large firm like GM, which has a substantial portion of the car market. C. The Boeing Company, which is one of the largest producers of airplanes. D. An Indonesian restaurant in a large city.

a

A catfish farmer will shut down production when A. He is losing money B. price falls below AVC C. total revenue falls below total costs D. the best he can do is break even

b

A perfectly competitive firm will maximize profits by choosing an output level A. Where Price is greater than marginal cost. B. Where Price equals marginal cost. C. Where Price equals total cost. D. Where Price is greater than total cost.

b

As a "Rule of Thumb", the concentration ratio for an oligopoly is A. Under 40 percent. B. Over 60 percent. C. 90 percent. D. 100 percent.

b

Economic loses are a signal to producers A. that they are using resources in the most efficient way B. that they are not using resources in the best way C. that consumer demand is being satisfied D. that consumers are content with the allocation of resources

b

Entrepreneurship A. always involves greater rewards than risks B. can result in economic losses C. cannot earn an economic profit D. occur in small business, but not larger corporations

b

For perfectly competitive firms, price A. Is greater than marginal revenue. B. Is equal to marginal revenue. C. Is less than marginal revenue. D. And marginal revenue are not related.

b

For the perfectly competitive firm, the marginal revenue is always A. increasing B. constant C. equal to average total costs D. decreasing

b

In making a production decision, an entrepreneur A. Decides whether to enter or exit the market. B. Decides what level of output will maximize profits. C. Determines plants and equipment. D. Can change both fixed and variable inputs.

b

In marketing a production decision, an entrepreneur A. decides whether to enter or exit the market B. decides what level of output will maximize profits C. determines plants and equipment D. can change both fixed and variable inputs

b

Market power is A. A characteristic of all market structures. B. The ability to alter the market price of a product. C. Most common for competitive firms. D. Enjoyed by all firms at high levels of output.

b

Market structure is determined by the A. Annual revenue, costs, and profits for an industry. B. Number and relative size of the firms in an industry. C. Amount of compensation given to the CEOs. D. Price charged for the good or service produced.

b

Monopolistic competition results in allocative A. Inefficiency and productive efficiency. B. Inefficiency and productive inefficiency. C. Efficiency and productive efficiency. D. Efficiency and productive inefficiency.

b

The decision to start or expand a business is known as the A. output decision B. investment decision C. production decision D. profit maximization decision

b

The decision to start or expand a business is known as the A. Output decision. B. Investment decision. C. Production decision. D. Profit maximization decision.

b

The demand curve confronting a competitive firm is A. Horizontal, as is market demand. B. Horizontal, while market demand is downward-sloping. C. Downward-sloping, while market demand is flat. D. Downward-sloping, as is market demand.

b

The demand curve facing an oligopoly firm is kinked because A. Its competitors will match only price hikes. B. It is most likely that rivals will match price cuts but not price increases. C. The demand curve that is most inelastic is the most probable situation facing the company. D. It is most likely that competitors will match price hikes as they practice price leadership.

b

The pricing strategy in which one firm is allowed by its rivals to establish the market price for all firms in the market is called A. Overt collusion. B. Price leadership. C. Pattern pricing. D. Price-fixing.

b

Which of the following market structures will have lower output in the long run than perfect competition, ceteris paribus? A. Monopolistic competition, but not oligopoly or monopoly. B. Monopolistic competition, oligopoly, and monopoly. C. Monopolistic competition and oligopoly, but not monopoly. D. Oligopoly and monopoly, but not monopolistic competition.

b

A monopolist will find that its marginal revenue curve A. Is the same as its demand curve. B. Lies above its demand curve and is flatter than its demand curve. C. Lies below its demand curve and is steeper than its demand curve. D. Lies below its demand curve and has the same slope as its demand curve.

c

Competitive firms cannot individually affect market price because A. There is an infinite demand for their goods. B. Demand is perfectly inelastic for their goods. C. Their individual production is insignificant relative to the production of the industry. D. The government exercises control over the market power of competitive firms

c

High profits in a particular industry indicate that A. consumers want less of that industry's goods B. consumers are satisfied with the level of production of that industry's goods C. consumers want more of that industry's goods D. producers are satisfied with the level of production of that industry's goods

c

If the equilibrium price in a perfectly competitive market for walnuts is $4.99 per pound, then an individual firm in this market can A. not sell additional walnuts unless the firm lower its prices B. not sell additional walnuts at any price because the market is at equilibrium C. sell an additional pound of walnuts at $4.99 D. sell more only by increasing advertising budget

c

Implicit costs A. include only payments to workers and lenders B. Represent actual monetary payments made for resources used to produce a good such as oil C. are the costs to produce a good or service for which no direct payment is made D. are the total opportunity costs of resources and inputs used to produce a good

c

In a competitive market, A. buyers don't have market power but sellers do B. sellers don't have market power but buyers do C. neither buyers nor sellers have market power D. buyers and sellers both have market power

c

Monopolistically competitive firms have a "monopoly" element to them because A. There is only one seller. B. There are high barriers to entry. C. Brand loyalty gives them a captive audience. D. The cross-price elasticity is very high.

c

Profit per unit is equal to A. TR - TC B. P - MR C. P - ATC D. TR- ATC

c

Suppose the cost of insectidle ( a variable input) decrease for broccoli farmers. In order to maximize profits, ceteris paribus, broccoli famers should A. decrease output B. keep output the same since the market price did not change C. increase output D. increase prices

c

The correct ranking of degree of market power (from highest to lowest) is A. Monopoly, monopolistic competition, perfect competition, oligopoly. B. Monopoly, monopolistic competition, oligopoly, perfect competition. C. Monopoly, oligopoly, monopolistic competition, perfect competition. D. Oligopoly, monopoly, monopolistic competition, perfect competition.

c

The long run is A. a period longer than one year B. the period required to produce a unit of the firms output C. a period long enough for all inputs to be variable D. approximately one year

c

The perfectly competitive market structure includes all of the following except A. many firms B. identical products C. large advertising budgets D. low entry barriers

c

Which of the following characterizes monopolistic competition? A. Many interdependent firms sell a homogeneous product. B. A few firms produce a particular type of product. C. Many firms produce a particular type of product, but each maintains some independent control over its own price. D. A few firms produce all of the market supply of a good.

c

Which of the following is characteristic of a perfectly competitive market A. differentiated products B. price below marginal revenue C. a large number of firms D. significant barriers to entry

c

Which of the following is characteristic of a perfectly competitive market? A. A small number of firms. B. Exit of small firms when profits are high for large firms. C. Zero economic profit in the long run. D. Marginal revenue lower than price for each firm.

c

Which of the following is characteristic of a perfectly competitive market? A. Long-run economic profit. B. High barriers to entry. C. Identical products. D. A small number of firms.

c

Which of the following is the best explanation for why entrepreneurs take risks in operating a business? A. because they cannot earn a living working for corporate America B. to provide a product consumers want C. the explanation of profit D. to gain experience for their next job

c

Which of the following is true about advertising? A. It is an efficient form of competition. B. It is less important than price competition in oligopolistic and monopolistic competition. C. It is a form of nonprice competition. D. It is a major component of competition in perfectly competitive markets

c

Which of the following is true about the output level where marginal revenue equals marginal cost? A. Economic profits are equal to zero. B. The firm should increase its output. C. The firm is maximizing profit. D. The firm should reduce its output.

c

A cartel is A. A type of market structure. B. Is legal in the United States. C. An organization intended to increase competition in an industry. D. An explicit agreement between firms or countries to restrict production and raise prices.

d

A perfectly competitive firm should expand output when A. P < ATC B. P > ATC C. P < MC D. P > MC

d

Assume a monopoly confronts the same costs and demand as a competitive industry. In this case, the monopolist produces A. The same output and charges the same price as the competitive industry. B. More output and charges a higher price than the competitive industry. C. Less output and charges a lower price than the competitive industry. D. Less output and charges a higher price than the competitive industry.

d

In a competitive market where firms are earning economic profits, which of the following should be expected as the industry moves to long-run equilibrium, ceteris paribus A. a higher price and fewer firms B. a higher price and more firms C. a lower price and fewer firms D. a lower price and more firms

d

In a perfectly competitive industry, economic profit A. can persist in the long run because of barriers to entry B. can persist in the long run because of homogeneous products C. will always be negative in the long run because of ease of entry D. will approach zero in the long run as more firms enter the market

d

In order to sell additional units of their products, competitive firms must A. increase their advertising B. lower their price C. cut their expense D. increase output

d

Investment decisions are made on the basis of relationship of price to A. short run average total cost B. short run marginal cost C. long run fixed cost D. long run average total cost

d

Perfect competition is a situation in which A. Every year, owners are likely to earn economic profits. B. Every year, owners are likely to earn economic losses. C. There are many firms and several buyers or sellers have market power. D. There are many firms and no buyer or seller has market power.

d

Short run profits are maximized at the rate of output where A. average total costs are minimized B. total revenue is maximized C. marginal revenue is zero D. marginal revenue is equal to marginal cost

d

The marginal cost curve A. is not affected by changes in the price of variable inputs B. slopes downward to the right as output increases C. is the long run supply curve for a competitive firm at prices below the AVC curve D. is the short run supply curve for competitive firm at prices above the AVC curve

d

The market supply curve in a perfectly competitive market is usually A. downward sloping B. horizontal C. vertical D. upward sloping

d

Which of the following characterizes a competitive market? A. a downward sloping demand curve for the firm B. a vertical demand curve facing each firm in the market C. some of the firms sell at a price above the market equilibrium price D. a downward sloping demand curve for the market

d