microeconomics exam

The provided graph depicts a situation where, if the market demand for the product increases, the prices of the resources used by the firms in the industry would

increase. decrease. stay constant. be set by the government. A

If a pure monopolist is operating in a range of output where demand is elastic,

it cannot possibly be maximizing profits. marginal revenue will be positive but declining. marginal revenue will be positive and rising. total revenue will be declining. B

Long-run competitive equilibrium

is realized only in constant-cost industries. will never change once it is realized. is not economically efficient. results in zero economic profits. D

One feature of pure monopoly is that the demand curve

is vertical. is horizontal. slopes upward. slopes downward. D

A pure monopolist

will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output. will realize an economic profit if ATC exceeds MR at the profit-maximizing/loss-minimizing level of output. will realize an economic loss if MC intersects the downsloping portion of MR. always realizes an economic profit. A

Assume that this monopolist faces zero production costs. The profit-maximizing monopolist will set a price of

$10. $1. $7. $5. D

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

$82. zero. $54. $27. B

The marginal revenue obtained from selling the third unit of output is

$9. $1. $6. $8. C

Suppose that a pure monopolist can sell 7 units of output at $9 per unit and 8 units at $8.50 per unit. For the monopolist to profitably produce and sell the eighth unit of output, its marginal cost must be anywhere at or below

$9. $8.50. $6.50. $5.00. D

Refer to the graph, which shows the revenue curves for a monopolist. The elastic portion of the demand curve ranges from quantity

0 to Q 4. Q2 to Q 4. 0 to Q 3. Q 3 to Q 4. C

A monopolist sells 6 units of a product per day at a unit price of $15. If it lowers the price to $14, its total revenue increases by $22. This implies that its sales quantity increases by

4 units per day. 3 units per day. 2 units per day. 1 unit per day. C

The profit-maximizing level of output will be

4 units. 7 units. 6 units. 5 units. D

Productive efficiency refers to

cost minimization, where P = minimum ATC. production at a level where P = MC. maximizing profits by producing where MR = MC. setting TR = TC. A

Which of the following conditions is true for a purely competitive firm in long-run equilibrium?

P> MC = minimum ATC. P> MC > minimum ATC. P = MC = minimum ATC. P< MC < minimum ATC. C

(Consider This) Which of the following statements is true about U.S. firms?

Over half are bankrupt within the first two years after starting up. Over half are bankrupt within the first five years after starting up. Nearly 65 percent last 10 years or more. The life expectancy of a U.S. firm is approximately 22 years. B

Allocative efficiency is achieved when the production of a good occurs where

P = minimum ATC. P = MC. P = minimum AVC. total revenue is equal to TFC. B

Resources are efficiently allocated when production occurs at that output at which

P equals MR. P equals AVC. P exceeds MR. P equals MC. D

Because the monopolist's demand curve is downsloping,

MR will equal price. price must be lowered to sell more output. the elasticity coefficient will increase as price is lowered. its supply curve will also be downsloping. B

What happens in a decreasing-cost industry when some firms leave and the industry's output contracts?

The average cost will increase. The average cost will decrease. The total cost will decrease. The product price will decrease. A

Refer to the accompanying graphs for a competitive market in the short run. Which of the following statements is true?

The representative firm will increase production. The representative firm is experiencing economic losses. The representative firm is breaking even. The representative firm is making economic profits. B

What do economies of scale, the ownership of essential raw materials, and patents have in common?

They must all be present before price discrimination can be practiced. They are all barriers to entry. They all help explain why a monopolist's demand and marginal revenue curves coincide. They all help explain why the long-run average cost curve is U-shaped. B

Refer to the two diagrams for individual firms. Figure 2 pertains to

a market characterized by government regulation of price and output. either an imperfectly competitive or a purely competitive seller. a purely competitive seller. an imperfectly competitive seller. D

Creative destruction is illustrated by which of the following pairs of products?

bicycles and helmets digital cameras and film DVD players and DVDs Netflix and iPads B

The long-run supply curve would be perfectly elastic when

an increase in demand does not cause a change in product price. an increase in demand causes an increase in product price. a decrease in demand causes an increase in short-run supply. a decrease in demand causes an increase in product price. A

Pure monopoly refers to

any market in which the demand curve for the firm is downsloping. a standardized product being produced by many firms. a single firm producing a product for which there are no close substitutes. a large number of firms producing a differentiated product. C

The accompanying graph represents the purely competitive market for a product. When the market is at equilibrium, the total opportunity cost of producing the equilibrium output level would be represented by the area

b + c. b. c. a + b + c. C

Refer to the diagram for a pure monopolist. Monopoly profit

cannot be determined from the information given. will be ae per unit sold. will be bc per unit sold. will be ac per unit sold. A

An exclusive legal right as sole producer for 20 years granted to an inventor of a product is called a

copyright. franchise. patent. license. C

The accompanying graph shows the long-run supply and demand curves in a purely competitive market. We know that in this market, the marginal

cost equals marginal benefit at P 1 Q 1. benefit exceeds marginal cost at the output level of Q 2. cost exceeds marginal benefit at the output level of Q 2. benefit equals marginal cost at all points on the supply curve. B

Suppose that a monopolist calculates that at its present output level, marginal revenue is $1.00 and marginal cost is $2.00. It could maximize profits or minimize losses by

decreasing price and increasing output. increasing price and decreasing output. decreasing price and leaving output unchanged. decreasing output and leaving price unchanged. B

If the entry or exit of firms does not affect the resource prices in an industry, we refer to it as a

fixed-price industry. price-controlled industry. constant-cost industry. price-taking industry. C

Assume that a monopolist faces a linear demand curve and that it produces the output quantity where total revenue is maximized. At that output, the price elasticity of demand for the product is

greater or equal to one. less than one. equal to one. impossible to determine. C

In long-run equilibrium, a purely competitive firm will operate where price is

greater than MR but equal to MC and minimum ATC. greater than MR and MC, but equal to minimum ATC. greater than MC and minimum ATC, but equal to MR. equal to MR, MC, and minimum ATC. D

If there is a decrease in demand for a product in a purely competitive industry, it results in an industry contraction that will end when the product price is

greater than its marginal cost. equal to its marginal cost. less than its marginal cost. greater than its average cost. B

Assume a pure monopolist is charging price P and selling output Q, as shown on the diagram. On the basis of this information, we can say that

if marginal costs were somehow zero, the firm would be maximizing its profits. if marginal costs were positive, the firm would increase profits by reducing price and selling more output. the firm is producing where the price elasticity coefficient is less than one. the firm is a "price taker." A

In response to a cost-reducing technological breakthrough in the production of its product, a profit-maximizing monopolist will normally

increase price and decrease production. not change its level of output or price. decrease the price it charges for its product. increase its output and practice price discrimination. C

One explanation for the existence of an increasing-cost industry is that

increasing marginal returns to labor occur. firms produce beyond the point of minimum long-run average total costs. perfectly elastic long-run supply schedules are observed in the industry. as the industry expands, prices are bid up for some factors of production. D

The diagram shows the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's total cost

is $10. is $40. is $400. cannot be determined from the information provided. C

Assume a purely competitive increasing-cost industry is in long-run equilibrium. If a decline in demand occurs, firms will

leave the industry, price will fall, and quantity produced will rise. enter the industry and price and quantity will both rise. leave the industry and price and quantity will both rise. leave the industry, price will fall, and quantity produced will fall. D

Under pure competition, in the long run

neither allocative efficiency nor productive efficiency is achieved. both allocative efficiency and productive efficiency are achieved. productive efficiency is achieved, but allocative efficiency is not. allocative efficiency is achieved, but productive efficiency is not. B

In the diagram, at output level Q1,

neither productive nor allocative efficiency is achieved. both productive and allocative efficiency are achieved. allocative efficiency is achieved, but productive efficiency is not. productive efficiency is achieved, but allocative efficiency is not. A

Refer to the graph for a profit-maximizing monopolist. At equilibrium, the firm will be earning

positive profits. negative profits. zero profits. profits that cannot be determined from the given graph. A

Refer to the diagram for a nondiscriminating monopolist. Marginal revenue will be zero at output

q 1. q 2. q 3. q 4. B

Refer to the diagram. If this somehow was a costless product (that is, the total cost of any level of output was zero), the firm would maximize profits by

selling the product at the highest possible price at which a positive quantity will be demanded. producing Q 1 units and charging a price of P 1. producing Q 3 units and charging a price of P 3. producing Q 2 units and charging a price of P 2. D

In pure competition, if the market price of the product is higher than the minimum average total cost of the firms, then

some firms will exit the industry and the industry supply will decrease. other firms will enter the industry and the industry supply will increase. some firms will exit the industry and the industry supply will increase. other firms will enter the industry and the industry supply will decrease. B

One defining characteristic of pure monopoly is that

the monopolist is a price taker. the monopolist uses advertising. the monopolist produces a product with no close substitutes. there is relatively easy entry into the industry, but exit is difficult. C

Creative destruction is

the process by which large firms buy up small firms. the process by which new firms and new products replace existing dominant firms and products. a term coined many years ago by Adam Smith. applicable to planned economies but not to market economies. B

Suppose the market for corn is a purely competitive, constant-cost industry that is in long-run equilibrium. Now assume that an increase in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price will be

the same as the initial equilibrium price, but the new industry output will be greater than the original output. greater than the initial price, and the new industry output will be greater than the original output. less than the initial price, but the new industry output will be greater than the original output. the same as the initial equilibrium price, and the industry output will remain unchanged. A

In a decreasing-cost industry,

there will be no firm entry because the increased supply will reduce the long-run equilibrium price. the law of demand does not apply. greater demand leads to higher long-run equilibrium prices. lower demand leads to higher long-run equilibrium prices. D

Refer to the graph, which shows a linear demand curve for a monopolist. In which range of the demand curve (or output quantity) will the firm operate?

to the right of point W between V and W between S and T between quantities 0 and S D