Unit III A Assessment

Refer to the above figures. We would expect industry entry and exit to be relatively easy in: A) Figure A only. B) Figure C only. C) both Figures A and C. D) both Figures B and D.

D) both Figures B and D.

In long-run equilibrium, the price charged by the monopolistically competitive firm: A) must be less than ATC. B) must be more than ATC. C) may be either equal to ATC, less than ATC, or more than ATC. D) will be equal to ATC.

D) will be equal to ATC.

Refer to the above data. Total fixed cost is: A) $6.25. B) $100.00. C) $150.00. D) $50.00.

D) $50.00.

Refer to the above figures. Both allocative and productive efficiency are being realized in: A) all four figures. B) Figures B and D. C) Figure D only. D) Figure B only.

D) Figure B only.

A pure monopolist is: A) any firm realizing all existing economies of scale. B) any firm whose demand curve is downsloping. C) any firm which can engage in price discrimination. D) a one-firm industry.

D) a one-firm industry

A firm's total variable cost will depend on: A) the prices of variable resources. B) the production techniques that are used. C) the level of output. D) all of the above.

D) all of the above

Now suppose the market is in long-run equilibrium. The government gives a lump-sum subsidy to each firm producing in the industry. Indicate whether each of the following will increase, decrease, or remain the same. (i) The firm's quantity in the short run. Explain.

the firms quantity will remain the same in the short run and MR will not change.

A typical profit-maximizizng firm in a perfectly competitive constant-cost industry is earning a positive economic profit. a) is the market price greater than, less than, or equal to the firm's price? explan.

the market price is equal to the firms price because in a perfecly competitive market, firms are price takers

State what will happen to the market equilibrium price and quantity of corn in the long run. explain.

the market quantity will increase and price will decrease. new farmers will enter the market which increases the market supply curve

Soybeans are produced in a perfectly competitive market. Assume farmers can grow wither corn or soybeans on the same land. What happens to the price of soybeans in the next planting season if the price of corn increases? Explain

the price of sybeans will increase because if more corn farmers (suppliers) enter the market than there will not be as many producing soybeans. there for soybean price increases.

Refer to the above data. If the market price for the firm's product is $32, the competitive firm will produce: A) 8 units at an economic profit of $16. B) 5 units at a loss of $10. C) 8 units at a loss equal to the firm's total fixed cost. D) 7 units at an economic profit of $41.50.

A) 8 units at an economic profit of $16.

Which of the following industries most closely approximates pure competition? A) agriculture B) farm implements C) clothing D) steel

A) agriculture

The Law of diminishing returns indicates that: A) as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point. B) because of economies and diseconomies of scale a competitive firm's long-run average total cost curve will be U-shaped. C) the demand for goods produced by purely competitive industries is downsloping. D) beyond some point the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.

A) as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point

Refer to the above diagram for a pure monopolist. Monopoly profit: A) cannot be determined from the information given. B) will be ae per unit. C) will be bc per unit. D) will be ac per unit.

A) cannot be determined from the information given.

Marginal cost: A) equals both average variable cost and average total cost at their respective minimums. B) is the difference between total cost and total variable cost. C) rises for a time, but then begins to decline when diminishing returns set in. D) declines continuously as output increases.

A) equals both average variable cost and average total cost at their respective minimums

Refer to the above data. If the market price for the firm's product is $28, the competitive firm will: A) produce 4 units at a loss of $17.40. B) produce 7 units at a loss of $14.00. C) close down in the short run. D) produce 6 units at a loss of $23.80.

A) produce 4 units at a loss of $17.40.

In which of the following industry structures is the entry of new firms the most difficult? A) pure monopoly B) oligopoly C) monopolistic competition D) pure competition

A) Pure Monopoly

if one firm in the market were to raise its price, what will happen to its total revenue?

the firms TR will fall to zero because quantity decreases to zero.

Refer to the above data. If the firm closed down and produced zero units of output, its total cost would be: A) zero. B) $50. C) $150. D) $100.

B) $50.

Refer to the above data. The average total cost of five units of output is: A) $69. B) $78. C) $3. D) $10. .

B) $78.

Refer to the above diagram. To maximize profits or minimize losses this firm should produce: A) E units and charge price C. B) E units and charge price A. C) M units and charge price N. D) L units and charge price LK.

B) E units and charge price A.

The purely competitive market model is portrayed in the above figures by: A) Figure A. B) Figure B. C) both Figures B and D. D) Figure C.

B) Figure B.

Which of the following is a characteristic of pure monopoly? A) close substitute products B) barriers to entry C) the absence of market power D) "price taking"

B) barriers to entry

Refer to the above diagram for a pure monopolist. Monopoly price will be: A) e. B) c. C) b. D) a.

B) c.

The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______. A) perfectly inelastic, perfectly elastic B) downsloping, perfectly elastic C) downsloping, perfectly inelastic D) perfectly elastic, downsloping

B) downsloping, perfectly elastic

When a firm is maximizing profit it will necessarily be: A) maximizing profit per unit of output. B) maximizing the difference between total revenue and total cost. C) minimizing total cost. D) maximizing total revenue.

B) maximizing the difference between total revenue and total cost.

Which of the following is not a basic characteristic of monopolistic competition? A) the use of trademarks and brand names B) recognized mutual interdependence C) product differentiation D) a relatively large number of sellers

B) recognized mutual interdependence

Which of the following is correct? A) Both purely competitive and monopolistic firms are "price takers." B) Both purely competitive and monopolistic firms are "price makers." C) A purely competitive firm is a "price taker," while a monopolist is a "price maker." D) A purely competitive firm is a "price maker," while a monopolist is a "price taker."

C) A purely competitive firm is a "price taker," while a monopolist is a "price maker."

In equilibrium which of the following conditions are common to both unregulated monopoly and to pure competition? A) MC = P B) MC = ATC C) MR = MC D) P = MR

C) MR = MC

A fixed cost is: A) associated with any productive resource whose price is fixed. B) any cost which increases proportionately with output. C) any cost which a firm would incur even if output was zero. D) associated with all inputs whose short-run supply is perfectly inelastic.

C) any cost which a firm would incur even if output was zero.

A monopolistically competitive firm's marginal revenue curve: A) is downsloping and coincides with the demand curve. B) coincides with the demand curve and is parallel to the horizontal axis. C) is downsloping and lies below the demand curve. D) does not exist because the firm is a "price maker."

C) is downsloping and lies below the demand curve.

If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes: A) the likelihood of realizing economic profits in the long run would be enhanced. B) individual firms would now be operating at outputs where their average total costs would be higher. C) the industry would more closely approximate pure competition. D) the likelihood of collusive pricing would increase.

C) the industry would more closely approximate pure competition.

Now suppose the market is in long-run equilibrium. The government gives a lump-sum subsidy to each firm producing in the industry. Indicate whether each of the following will increase, decrease, or remain the same. (ii) The market price and quantity in the long run. Explain.

MP will decrease and MQ will increase. positive profits lead to entry of new firms that will increase the industry supply.