AG BUSINESS FINAL REVIEW
In a perfectly competitive market, if the price of the product is greater than the break-even price, we would expect to see a. firms increasing the price of the product b. firms decreasing the price of the product c. firms leaving the industry d. firms entering the industry e. a demand shift
Firms entering the industry
There are few firms and entry is difficult in a monopolistic competition structure.
False
Higher price variability is expected in those industries with higher a. fixed cost b. marginal cost c. government regulations d. variable cost e. technologies
Fixed cost
Those firms with relatively high __________ have relatively high _______________ a. costs; profits b. fixed costs; losses c. variable costs; profits d. fixed costs; price variability e. none of the above
Fixed costs; price variability
Profit is maximized when a. marginal cost = average total cost b. marginal revenue = average total cost c. total cost = total revenue d. marginal revenue is maximized e. none of the above
None of the above
The supply curve of a firm is equal to a. the demand curve of the firm b. the average variable cost curve of the firm c. the production function d. average total cost curve of the firm e. none of the above
None of the above
To maximize profits, the firm in monopolistic competition will adjust output to the point at which a. Revenue is maximized b. Variable costs are minimized c. Fixed costs are minimized d. Marginal revenue equals average revenue e. None of the above
None of the above
If the price of the product is less than the minimum average variable cost, then the form produces __________ and earns ___________ a. at MR = MC; negative profits b. at MR = MC; positive profits c. nothing; negative profits d. at minimum AVC; negative profit e. at minimum AVC; positive profit
Nothing; negative profits
The market structure in which the typical firm is reactive is a. oligopoly b. monopoly c. perfect competition d. monopolistic competition e. monopsony
Oligopoly
If fixed cost increase, then for the profit-maximizing firm?
Output remains constant
The "average" in average variable cost and average revenue means
Per unit of output
At the break-even point a. marginal cost is equal to average variable cost b. the economic profits of the firm are zero c. the rational range of production begins d. marginal revenue exceeds marginal cost e. none of the above
The economic profits of the firm are zero
A firm produces 20 units of stuff using 5 units of labor. The value of the total product is $60 and the total variable input cost is $20. What is the marginal revenue of the firm? a. $20 b. $60 c. $4 d. $3 e. cannot be determined from the information provided
$3
Which of the following is a constant with respect to output for the perfectly competitive firm? 1. Marginal revenue 2. Total fixed costs 3. Average fixed costs 4. Total revenue 5. Average revenue a. All five b. 1 and 5 only c. 1, 2, and 5 only d. 2, 4, and 5 only e. 1 only
1, 2, and 5 only
The distinguishing difference between a perfectly competitive firm and monopoly firm is a. marginal cost b. profit-maximizing behavior c. average revenue d. cost structure e. fixed cost
Average revenue
The defining characteristic of a monopoly is a. a perfectly horizontal demand curve b. entry is blocked c. they are always profitable d. profit maximization does not require MR=MC e. none of the above
Entry is blocked
A market size saturated by existing firms in the market is one of the necessary conditions for the presence of monopoly.
False
A typical supply curve is discontinuous at the break-even price.
False
Average cost can be defined as additional cost associated with producing one additional unit of output
False
Average variable cost and average fixed cost curves have a U-shape
False
Firms in low fixed-cost industries are slow to enter or leave the industry.
False
In the short-run, the production function is endogenous
False
Monopolistic competition is characterized by many firms selling homogeneous products.
False
The entry of other firms is completely blocked in the monopolistic competition structure.
False
The firm supply curve is the marginal cost curve above the break-even price.
False
An industry that experience wide price swings that are not accompanied by firm entering or leaving the industry is an industry in which the typical firm a. has high profits b. has high fixed costs c. is operating below the shut-down point d. has pure economic profits of zero e. none of the above
Has high fixed costs
The monopolistic competition market structure differs from the perfectly competitive market structure most strongly with regards to which assumption? a. many firm b. homogeneous product c. no limits to entry/exit d. perfect knowledge e. mobile resources
Homogenous product
Oligopolistic firms are characterized by a. a unique cost structure b. product differentiation c. price discimination d. elastic demand e. interdependence
Interdependence
In an oligopolistic market, the firms are _________ and pricing tends to be __________ a. many; competitive b. large; controlled by the largest firm c. small; competitive d. Interdependent; reactive e. none of the above
Interdependent; Reactive
The marginal revenue curve for the perfectly competitive firm
Is a straight, horizontal line
For a monopoly firm, the profit-maximizing output is at that level where __________ and the price of the product is determined from ___________ a. AR = MR; MR b. MC = MR; MR c. AR = MR; AR d. MC = MR; AR e. none of the above
MC = MR; AR
In the short-run, the supply curve of the firm is equal to a portion of the firm's a. MR curve b. MC curve c. AFC curve d. TVC curve e. Production function
MC curve
To maximize profit, the perfectly competitive firm should adjust output to that point at which a. AVC = ATC b. MC = AVC c. MR = MC d. TVC = AVC
MR = MC
In a perfectly competitive, long-run equilibrium, the price of the product is equal to the a. shut-down price b. minimum average total cost c. minimum marginal cost d. minimum average variable cost e. none of the above
Minimum average total cost
A change in the ____________ would NOT cause a shift in the supply of yellow squash a. price of bell peppers b. price of fertilizer c. price of yellow squash d. price of labor e. number of squash producers
Price of yellow squash
A firm in a monopolistically competitive industry finds that the additional cost of producing one additional unit of output is $4 and the additional revenue that could be earned from that additional output is $5. This firm should a. increase costs b. reduce price c. produce more d. produce less e. advertise more
Produce more
In monopolistic competition, the firm attempts to acquire a quasi-monopoly position by a. pricing the product below cost b. product differentiation c. maintaining market share d. cutting price to a level below the prices of competitors e. none of the above
Product differentiation
What drives and distinguishes monopolistic competition is a. product differentiation b. price retaliation c. uniform prices d. market expansion e. none of the above
Product differentiation
For a perfectly competitive, profit-maximizing firm, an increase in the fixed costs would cause the
Profits of the firm to fall
The typical, perfectly competitive, corn farmer has no control over each of the following in the short run EXCEPT
Quantity of fertilizer used
If the marginal revenue is less than the marginal cost, then profit-maximizing firm should a. reduce output b. increase output c. leave output where it is d. increase cost
Reduce output
The rational range of production begins at the a. minimum average total cost b. maximum average variable cost c. minimum marginal cost d. shut-down point e. break-even point
Shut- down point
Which of the following is NOT a supply shifter for tomatoes grown in south Florida? a. the price of labor b. productivity of labor c. the price of fertilizer d. the price of tomatoes e. none of the above
The price of tomatoes
In order for a monopoly to continue to be a monopoly a. marginal revenue must equal to marginal cost b. marginal revenue curve must be downward sloping c. there must be no close substitutes d. average total costs must be decreasing e. none of the above
There must be no close substitutes
Fixed costs are exogenous
True
For monopoly firm, a marginal revenue curve lies always below an average revenue curve.
True
If price is below the minimum average variable cost, then it is better to produce nothing
True
In a perfectly competitive structure, the firm's supply curve is the firm's marginal cost curve.
True
In the real world, both perfect competition and pure monopoly are rare.
True
Profit maximization will always occur in the rational range of production.
True
The firm will stop producing if average revenue is less than minimum average variable cost.
True
A profit-maximizing firm is producing 40 units of stuff using 10 units of labor. The price of stuff is $3/unit and the price of labor is $10. What is the average variable cost? a. $2.5 b. $3 c. $5 d. $10 e. cannot be determined from the information provided
a. $2.5
In a perfectly competitive market, if the price of the product is greater than the break-even price, we would expect to see a. firms increasing the price of the product b. firms decreasing the price of the product c. firms leaving the industry d. firms entering the industry e. a demand shift
c. additional firms will enter the industry, driving the price of the product down
In the widget industry, a high proportion of total costs is fixed costs. In the gadget industry, fixed costs are a small proportion of total costs. Therefore, a. the price of widget is greater than the price if gadgets b. the average total costs of widgets is greater than for gadgets c. a higher degree of price variability is expected in the market for gadgets than for widgets d. a higher degree of price variability is expected in the market for widgets than for gadgets e. none of the above
d. a higher degree of price variability is expected in the market for widgets than for gadgets
