Sample Questions Examination 5. Chapters 23-24

2) When there are large numbers of buyers and sellers, then A) no one buyer or seller has any influence on price. B) the products sold must look identical. C) firms will move labor and capital in pursuit of profit-making opportunities to whatever business venture gives them the highest return on their investment. D) consumers are able to find out about lower prices charged by other firms.

A)No one buyer or seller has any influence on price

4) Which of the following statements is correct? A) The market demand curve of the perfectly competitive industry is downward sloping while the demand curve of an individual firm is horizontal with a height equal to the product price. B) The market demand curve of perfect competition is inelastic because the individual consumers are buying a homogeneous product. C) The demand curve of the perfectly competitive industry is elastic as are the demand curves facing the individual firms. D) The market demand curve of the perfectly competitive industry is downward sloping, so the demand curves of the individual firms are also downward sloping.

A)The market demand curve of the perfectly competitive industry is downward sloping while the demand curve of an individual firm is horizontal with a height equal to the product price.

6) A company finds that at its present level of production, MR= MC at $14, MC= AVC at $15, and MC = ATC at $20. Your advice to the firm regarding its short-run operations is A) to shut down. B) to continue production, as it is earning an economic profit of $1 per unit. C) to continue production, as it is earning an economic profit of $6 per unit. D) to continue production at a loss.

A)To shut down

3) A perfectly competitive market has A) homogeneous products. B) high barriers to entry or exit. C) to do a lot of advertising to attract buyers. D) few firms.

A)homogeneous Products

1) All of the following are characteristics of a perfect competition EXCEPT a)homogenous products b)a lack of barriers c)product differentation d)each firm is a price taker

c)product differentation

13) Economists criticize monopolies because monopolies A) make consumers pay more for their product than the customers value the product. B) restrict output and raise prices compared to a competitive situation. C) receive accounting profits. D) always price discriminate.

B)Restrict output and raise prices compared to a competitive situation

12) A monopolist engages in price discrimination A) by charging a higher price to consumers whose demand is more elastic. B) by charging a lower price to consumers whose demand is more elastic. C) by charging the same price to all consumers. D) by charging a higher price when marginal cost is lower.

B)by charging a lower price to consumers whose demands are more elastic

5) Which is always true at a firm's profit-maximizing rate of production? A) Marginal Revenue> Marginal Cost B) The total revenue curve lies below the total cost curve. C) Marginal Revenue= Marginal Cost D) Total Revenue= Total Costs

C)Marginal Revenue=Marginal Cost

8) A firm typically achieves its position as a monopolist as a result of A) a small market and a constant average cost. B) the absence of long-run profits in an industry. C) barriers to entry. D) a downward sloping demand for the product.

C)barriers to entry

9) A monopolist faces A) a two-tiered demand curve. B) a perfectly elastic demand curve. C) the market demand curve. D) a perfectly inelastic demand curve.

C)the market demand curve

7) For a perfectly competitive firm at its long-run equilibrium, A) there are no opportunity costs to be concerned with. B) P= MR> MC. C) accounting profit must be zero. D) P= MR= MC = AC.

D)P=MR=MC=AC