Ch 8, 9, 10, 12 Test
A plan under which families below a certain break-even level of income would receive cash payments that decrease as their incomes increase is called a
Negative income tax
The government insurance program that pays income for a short time period to unemployed workers is called .
Unemployment compensation
As presented in Exhibit 1, the long-run profit-maximizing output for the monopolistic competitive firm is: a. zero units per week. b. 200 units per week. c. 400 units per week. d. 600 units per week. e. 800 units per week.
c. 400 units per week
As shown in Exhibit 1, if the price is either $10, $15, $20, or $40, the firm's economic profit is maximum at which of the following outputs? a. 20 units per day b. 40 units per day c. 60 units per day d. 80 units per day
d. 80 units per day
Market structure describes which of the following characteristics? a. The ease of entry into and exit from the market. b. The similarity of the product sold. c. The number of firms in each industry. d. All of the answers above are correct.
d. All of the answers above are correct.
Industry's Short Run Supply Curve
for a perfectly competitive firm is the horizontal summation of all firm's short-run supply curves in the industry.
Marginal Revenue
A change in total revenue from a one unit change in output is called
Price Taker
A firm in perfect competition is a ________ because it can sell all it wishes at the market determined price, but it will sell nothing above the given market price.
Price Maker
A firm that faces a downward sloping demand curve is called a (an)
Imperfect competition
A market structure between the extremes of perfect competition and monopoly is called
Which of the following statements is true? a. Discrimination against women and blacks reduces the demand for these workers resulting in lower wages paid these workers. b. Discrimination is no longer a problem in the United States. c. A negative income tax system is a plan in which everyone pays the same percentage of their income as taxes. d. A negative income tax system is a plan where those below a certain income receive a cash payment from the government.
A. Discrimination against women and blacks reduces the demand for these workers resulting in lower wages paid these workers.
Which of the following are not counted when we compare a family's income to the poverty line? a. In-kind transfers such as food stamps, Medicaid, and public housing. b. Cash welfare payments such as from social security. c. Cash payments when a worker become unemployed. d. Both answers a. and b. above are correct.
A. In-kind transfers such as food stamps, Medicaid, and public housing.
Non-price competition
Advertising, packaging, product development, better quality, and better service are examples of
Constant-Cost Industry
An industry in which the expansion of industry output by the entry of new firms has no effect on the firm's cost curves is called
Increasing cost industry
An industry in which the expansion of industry output by the entry of new firms increases the firm's cost curves is called
As shown in Exhibit 1, the short-run supply curve for the firm corresponds to which segment of its marginal cost curve? a. C and all points above. b. B and all points above. c. A and all points above. d. A to C only.
B. B and all points above
Consider a law that limits women's access to certain "dangerous" occupations like coal mining and military combat service. Such a law would likely reduce women's wages because: a. women would be overqualified for "non-dangerous" jobs. b. labor supply in female-intensive occupations would increase. c. women would be less likely to obtain college degrees. d. comparable worth would no longer exist between men's and women's occupations.
B. labor supply in female-intensive occupations would increase.
Which of the following statements is true? a. All people in poverty are on welfare. b. Unemployment compensation is an in-kind transfer. c. Temporary Assistance to Needy Families (TANF) is an example of a cash payment made by government to the impoverished. d. After cash assistance and in-kind transfers are considered, the distribution of income in the United States is more unequal. e. All of the answers above are correct.
C. Temporary Assistance to Needy Families (TANF) is an example of a cash payment made by government to the impoverished.
Which of the following statements is true? a. Income distribution in the United States has gotten progressively more unequal since 1929. b. The Lorenz curve indicates the degree of discrimination in an economy. c. The Lorenz curve indicates the degree of income inequality in an economy. d. The richest 5 percent of Americans earn approximately half of the nation's income. e. All of the answers above are correct.
C. The Lorenz curve indicates the degree of income inequality in an economy.
Which of the following correctly describes the Lorenz curve? a. The Lorenz curve shows that the increasing income inequality in U.S. society is actually good for the economy, and makes everyone better off. b. The Lorenz curve shows the growth rate in real median family income over time. c. The Lorenz curve shows the cumulative distribution of family income, ranked from the poorest to the richest families, and compares that curve with the straight line indicating perfectly equal income distribution. d. The Lorenz curve shows the cumulative distribution of family income, ranked from the richest to the poorest families, and compare that curve with the ideal of having all income received by the richest 5 percent of society.
C. The Lorenz curve shows the cumulative distribution of family income, ranked from the poorest to the richest families, and compares that curve with the straight line indicating perfectly equal income distribution.
Which of the following government programs provides recipients with in-kind benefits? a. Temporary Assistance to Needy Families (TANF). b. Social Security. c. The food stamp program. d. Unemployment compensation.
C. The food stamp program.
is the principle that employees who work for the same employer must be paid the same wage when their jobs, even if different, require similar levels of education, training, experience, and responsibility. It involves a non-market wage-setting process to evaluate and compensate jobs according to point scores assigned to different jobs.
Comparable worth
To maximize long-run profits, the monopolistically competitive firm shown in Exhibit 1 will charge a price per unit of: a. zero. b. $10 c. $20. d. $30. e. $40.
D. $30
A monopoly: a. faces the market demand curve which is downward sloping. b. has a marginal revenue curve which slopes downward and lies below its demand curve. c. will maximize profits by producing an output level where MR = MC. d. All of the answers above are correct.
D. all of the answers above are correct
t or f: A monopolist that maximizes total revenue earns maximum economic profit.
F
t or f: A monopolistic competitive firm in the long run sets price equal to the minimum point on the long-run average cost curve.
F
t or f: A natural monopoly maximizes profits at the point at which price equals minimum average total cost.
F
t or f: Cartels are generally legal in the United States.
F
t or f: Discrimination raises the average wage of members of one group of workers in spite of laws that require equal pay for all workers.
F
t or f: For a monopoly, price always equals marginal revenue.
F
t or f: If marginal revenue exceeds marginal cost, the perfectly competitive firm earns an economic profit in the short-run.
F
t or f: Monopolies may earn economic losses in the long run
F
t or f: Negative income tax plans have the disadvantage of decreasing work incentives in comparison to existing welfare programs without work incentives.
F
t or f: Official figures indicate that the percentage of persons below the poverty level in the U.S. is more today than it was in 1965
F
t or f: The Lorenz curve represents the distribution of non-cash benefits.
F
t or f: To earn an economic profit in the short run, a monopolist sets marginal revenue equal to zero.
F
t or f: Wage discrimination means minority workers are paid unequal wages.
F
t or f: regardless of the demand for its product, a monopolist will be able to earn positive economic profits.
F
t or f: A monopolistic competitive firm in the long run sets price equal to the minimum point on the long run average cost curve.
F
t or f: A perfectly competitive market is characterized by highly advertised goods.
F
t or f: Critics of an equal distribution of income argue that the effect would be to raise the incentive to be productive.
F
t or f: If marginal revenue exceeds marginal cost in the short-run, total revenue for the perfectly competitive firm is greater than total cost.
F
t or f: In the short run, the monopolistic competitive firm will charge a price equal to marginal cost.
F
t or f: In order from the most to the least competitive market structure is the perfectly competitive, monopolistically competitive, monopolist and then the oligopolistic market structure.
F
is a requirement that a family's income not exceed a certain level to be eligible for public assistance.
Means test
Government payments in the form of goods and services, rather than cash, including such government programs as food stamps, Medicaid, and housing are called .
In-kind transfers
A graph of the actual cumulative distribution of income compared to a perfectly equal cumulative distribution of income is called the
Lorenz Curve
The is the level of income below which a person or a family is considered as being poor.
Poverty line
t or f : A perfectly competitive market is characterized by the free entry and exit of firms.
T
t or f: A cartel is an agreement among firms to divide output of a product among members.
T
t or f: A major cartel problem is that member firms cheat by attempting to steal customers from one another.
T
t or f: A monopolist is a price searcher because it has the ability to select the price along its demand curve of its product.
T
t or f: A perfectly competitive firm shuts down in the short-run when the market price is less than the average variable cost.
T
t or f: An argument in favor of price discrimination is that this pricing strategy permits some consumers who otherwise would be excluded from a market to buy a good or service.
T
t or f: In a monopolistic competitive industry, short-run economic profit encourages entry of new firms until there are no economic profits in the long-run.
T
t or f: In an oligopoly, the outcome is uncertain because price and output decisions depend on the response of rivals.
T
t or f: In long-run equilibrium, a perfectly competitive firm's short-run marginal cost curve crosses the long-run average cost curve at the lowest point on the long-run average cost curve.
T
t or f: In order for a monopolist to earn a pure economic profit in short run equilibrium, price must exceed average total cost.
T
t or f: In the long run, a competitive firm will earn zero economic profit.
T
t or f: In the long run, marginal cost must equal marginal revenue for a monopolistic competitive firm, but not at the minimum point of the long-run average cost curve.
T
t or f: The Lorenz curve is best used to measure the distribution of income.
T
t or f: The government defines poverty as an income level less than three times the cost of a minimal diet.
T
t or f: The short-run supply curve and short-run marginal cost curve for a perfectly competitive firm coincide when the market price is greater than average variable cost.
T
t or f: When determining whether a family's income is below the official poverty line, non-cash benefits from the government, such as food, housing and medical benefits, are not included.
T
t or f: When faced with an economic loss, a competitive firm will exit the industry in the long run.
T
t or f: A perfectly competitive firm will shut down in the short-run when marginal revenue equals marginal cost at a price less than minimum average variable cost.
T
t or f: Costs in a natural monopoly are lower because there is only one producer.
T
Product Differentiation
The process of creating real or apparent differences between goods and services is called
Game Theory
The strategic moves and countermoves of rival firms can be explained using
In long-run equilibrium, the typical perfectly competitive firm will: a. earn zero economic profit. b. change plant size in the long run. c. change output in the short run. d. do any of the above.
a. Earn zero economic profit
Assume costs are identical for the two firms in Exhibit 2. If both firms were allowed to form a cartel and agree on their prices, equilibrium would be established by: a. Exxon charging the high price and Texaco charging the high price. b. Exxon charging the high price and Texaco charging the low price. c. Exxon charging the low price and Texaco charging the low price. d. Exxon charging the low price and Texaco charging the low price.
a. Exxon charging the high price and Texaco charging the high price
Which of the following is a characteristic of an oligopoly? a. Mutual interdependence in pricing decisions. b. Independent pricing decisions. c. Lack of control over prices. d. All of the answers above are correct.
a. Mutual interdependence in pricing decisions
Which of the following is a difference between a monopolist and a firm in perfect competition? a. The marginal revenue curve is downward sloping. b. Marginal revenue equals price. c. Economic profits are zero in the long run. d. The marginal revenue curve lies above the demand curve.
a. The marginal revenue curve is downward-sloping.
One of the necessary conditions for price discrimination to occur is that: a. buyers in different markets have different elasticities of demand. b. the demand curve is upward sloping. c. buyers must be allowed to resell the good at a higher price elsewhere. d. All of the answers above are necessary for price discrimination to occur.
a. buyers in different markets have different elasticities of demand
Assume that a firm's marginal revenue just barely exceeds marginal cost. Under these conditions the firm should: a. expand output. b. contract output. c. maintain output. d. There is insufficient information to answer the question.
a. expand output
A price-discriminating monopoly charges the lowest price to the group that: a. has the most elastic demand. b. purchases the largest quantity. c. engages in the most arbitrage. d. is least responsive to price changes.
a. has the most elastic demand
A monopolistically competitive market is characterized by: a. many small sellers selling a differentiated product. b. a single seller of a product that has few suitable substitutes. c. very strong barriers to entry. d. mutual interdependence in pricing decisions.
a. many small sellers selling a differentiated product.
. A game theory strategy for oligopolists to avoid a low-price outcome is ___________. a. tit-for-tat b. price leadership c. second best d. win-win
a. tit-for-tat
As represented in Exhibit 1, the maximum long-run economic profit earned by this monopolistic competitive firm is: a. zero. b. $10 per week. c. $4,000 per week. d. $40,000 per week.
a. zero
Price Discrimination
allows the monopolist to increase profits by charging buyers' different prices rather than a single price. There are three necessary conditions for this condition to exist: (1) the demand curve must be downward sloping, (2) buyers in different markets must have different demand curves, and (3) the buyer must be able to prevent arbitrage which is reselling the product at a higher price than the purchase price.
A Natural Monopoly
arises because of the existence of economies of scale in which the LRAC falls as production increases. As a result, smaller firms leave the industry, new firms fear competing with the monopolist, and the result is that a monopoly emerges naturally.
As shown in Exhibit 1, the firm will produce in the short run if the price is at least equal to: a. $10 per unit (point A). b. $15 per unit (point B). c. $20 per unit (point C). d. $40 per unit (point D).
b. $15 per unit (point B).
. At a price of $5, 24 units of the good would be sold; at a price of $7, 25 units of output would be sold. The marginal revenue of the 25th unit of output is: a. $14. b. $55. c. $6. d. $168. e. $175.
b. $55
As shown in Exhibit 1, 20 percent of families earned a cumulative share of about percent of income. a. 5. b. 10. c. 30. d. 50.
b. 10
In Exhibit 1, the profit maximizing or loss minimizing output for the monopolist is: a. 200 units per day. b. 300 units per day. c. 400 units per day. d. 500 units per day. e. 600 units per day.
b. 300 units per day
Assume a monopolist charges a price corresponding to the intersection of the marginal cost and marginal revenue curves. If this price is between its average variable cost and average total cost curves, the firm will: a. earn an economic profit. b. assume demand will increase in the future. c. shut down. d. All of the answers above are correct.
b. assume deamand will increase in the future
For a monopolist to practice effective price discrimination, one necessary condition is: a. identical price elasticity among groups of buyers. b. differences in the price elasticity of demand among groups of buyers. c. that the product is a homogeneous market. d. None of the answers above are correct.
b. differences in the price elasticity of demand Amon group of buyers
The poverty line: a. separates those on welfare from those not on welfare. b. equals three times an economy food budget. c. equals the median income level. d. All of the answers above are correct.
b. equals three times an economy food budget
At the point at which the marginal revenue equals zero for a monopolist facing a straight-line demand curve, the total revenue is: a. minimum. b. maximum. c. rising. d. equal to zero.
b. maximum.
In Exhibit 1, at the profit maximizing or loss minimizing output, the monopolist's total economic profit is: a. positive. b. negative. c. zero. d. minimum.
b. negative
If a competitive firm is incurring economic losses, then it should: a. always shut down. b. shut down if losses are greater than total fixed costs. c. shut down if total fixed costs are greater than losses. d. raise its price.
b. shut down if losses are greater than total fixed costs.
. If the price of the firm's product in Exhibit 1 is $15 per unit, the firm should: a. shut down permanently. b. stay in operation for the time being even though it is making a pure economic loss. c. shut down temporarily. d. continue to operate because it is earning a positive economic profit
b. stay in operation for the time being even though it is making a pure economic loss.
In the short run, a perfectly competitive firm's most profitable level of output is where: a. marginal cost exceeds marginal revenue. b. total revenue is at a maximum. c. marginal cost equals marginal revenue. d. All of the answers above are correct.
c. . marginal cost equals marginal revenue.
As shown in Exhibit 1, 40 percent of families earned a cumulative share of about percent of income. a. 5. b. 15. c. 20. d. 50.
c. 20
Which of the following statements best describes the price, output, and profit conditions of monopoly? a. Price will equal marginal cost at the profit-maximizing level of output and profits will be positive in the long-run. b. Price will always equal average variable cost in the short-run and either profits or losses may result in the long run. c. In the long-run, positive economic profit will be earned. d. All of the answers above are correct.
c. In the long-run, positive economic profit will be earned.
Which of the following is true about an oligopoly equilibrium in comparison with equilibrium under similar circumstances but with perfect competition? a. Output is larger and price is lower than under perfect competition. b. Output is larger but price is higher than under perfect competition. c. Output is smaller and price is higher than under perfect competition. d. Output is smaller and price is lower than under perfect competition
c. Output is smaller and price is higher than under perfect competition.
Which of the following is true of a perfectly competitive firm? a. The firm is a price maker. b. If the firm wishes to maximize profits it will produce an output level in which total revenue equals total cost. c. The firm will not earn an economic profit in the long run. d. The firm's short-run supply curve is its MC curve below its AVC curve.
c. The firm will not earn an economic profit in the long run.
. As shown in Exhibit 1, the perfect equality line is drawn between points: a. W and Y along the curve. b. X and Z. c. W and Y along the straight line. d. W and X.
c. W and Y along the straight line
. Supporters of advertising claim that it: a. promotes the public interest. b. is a barrier to entry. c. allows new competitors a chance to gain market share. d. All of the answers above are correct.
c. allows new competitors a chance to gain market share.
A monopoly will price its product: a. where total revenue is maximized. b. where total costs are minimized. c. at that point on the market demand curve corresponding to an output level in which marginal revenue equals marginal cost. d. at that point on the market demand curve which intersects the marginal cost curve.
c. at that point on the market demands curve corresponding to an output level in which marginal revenue equals marginal cost.
Assume that an oligopolist has a kinked demand curve. Suppose that the marginal cost curve passes through the gap in the marginal revenue curve. This means price and output will be shown by a point: a. above the curve. b. below the curve. c. at the kink. d. on the upper part of the curve. e. on the lower part of the curve.
c. at the kink
. Between 1929 and 2014, as measured by the Lorenz curve, income inequality: a. increased sharply. b. remain unchanged. c. declined. d. increased.
c. declined
If all firms in a monopolistic competitive industry have demand and cost curves like those shown in Exhibit 1, we would expect that in the long run: a. a number of new firms will enter the industry. b. some firms will leave the industry. c. firms in the industry earn zero economic profits. d. all firms will leave the industry.
c. firms in the industry earn zero economic profits
Perfectly competitive markets are characterized by: a. a small number of very large producers. b. very strong barriers to entry and exit. c. firms selling a homgeneous product. d. All of the answers above are correct.
c. firms selling a homogeneous product
Under a negative income tax program. a. the poor would have no incentive to work. b. other welfare programs such as food stamps would become even larger. c. government bureaucracy could be decreased. d. people with incomes slightly above the break-even level could still receive cash payments.
c. government bureaucracy could be decreased.
Game theory is useful for analysis in _________________ and for describing pricing among firms that are _________________. a. monopoly; merging b. perfect competition; regulated c. oligopoly; interdependent d. monopolistic competition; independent
c. oligopoly: interdependent
Which of the following is a market structure of monopoly? a. Few firms operating as price takers. b. Single firm operating as a price taker. c. Single firm that is a price maker. d. All of the answers above are correct.
c. single firm that is a price maker
Market Place
consists of three market characteristics: (1) the number of sellers, (2) nature of the product, and (3) the ease or exit from the market.
In Exhibit 1, the monopolist would charge which of the following prices to maximize profit or minimize its loss? a. $20. b. $40. c. $60. d. $70. e. $100.
d. $70
In long-run equilibrium for a perfectly competitive firm, price equals which of the following? a. Economies of real cost. b. Maximum total revenue. c. Diseconomies of scale cost. d. Minimum point on the long-run average cost curve.
d. . Minimum point on the long-run average cost curve.
. Which of the following most closely represents the share of total U.S. income for the poorest 20 percent of all U.S. families? a. 47 percent. b. 23 percent. c. 10 percent. d. 4 percent.
d. 4 percent
In Exhibit 1, if the price of the firm's product is $20 per unit, the firm will produce: a. 20 units per day. b. 40 units per day. c. 60 units per day. d. 80 units per day.
d. 60 units per day
Which of the following is true of a perfectly competitive market? a. If economic profits are earned then the price will fall over time. b. In long-run equilibrium P = MR = SRMC = SRATC = LRAC. c. A constant-cost industry exists when the entry of new firms has no effect on their cost curves. d. All of the answers above are correct.
d. All of the answers above are correct.
Suppose costs are identical for the two firms in Exhibit 2. Each firm assumes without formal agreement that if it sets the high price its rival will not charge a lower price. Under these "tit-for-tat" conditions, equilibrium will be established by: a. Exxon charging the high price and Texaco charging the low price. b. Exxon charging the low price and Texaco charging the high price. c. Exxon charging the low price and Texaco charging the low price. d. Exxon charging the high price and Texaco charging the high price.
d. Exxon charging the high price and Texaco charging the high price
In a perfectly competitive industry, assume there is a permanent increase in demand for a product. The process of transition to a new long-run equilibrium will include: a. the exit of firms. b. temporarily lower production costs. c. Both answers a and b are correct. d. Neither answers a nor b is correct.
d. Neither answers a nor b is correct.
A monopolistic competitive firm is inefficient because the firm: a. earns positive economic profit in the long run. b. is producing at an output corresponding to the condition that marginal cost equals price. c. is not maximizing its profit. d. produces an output where average total cost is not minimum.
d. Produces an output where average total cost is not minimum
. A monopolistically competitive firm will: a. maximize profits by producing where MR = MC. b. not likely earn an economic profit in the long run. c. shut down if price is less than average variable cost. d. All of the answers above are correct.
d. all of the above answers are correct
. The Lorenz curve measures the: a. distribution of wealth. b. effectiveness of government transfer payments. c. extent to which family incomes are affected by welfare. d. All of the answers above are correct.
d. all of the above answers are correct
. Which of the following is true about advertising by a firm? a. It is not always successful in increasing demand for a firm's product. b. It can increase demand and make demand more inelastic. c. It may reduce per unit costs of production when economies of scale exist. d. All of the answers above are correct.
d. all of the answers above are correct
A cartel: a. is a group of firms formally agreeing to control the price and the output of a product. b. has as its primary goal to reap monopoly profits by replacing competition with cooperation. c. is illegal in the United States, but not in other nations. d. All of the answers above are correct.
d. all of the answers above are correct
A monopolized market is characterized by: a. sole seller of a product for which there are few suitable substitutes. b. very strong barriers to entry. c. a single firm facing the market demand curve. d. All of the answers above are correct.
d. all of the answers above are correct
An oligopoly: a. and monopolistically competitive market produce less and charge higher prices than if their markets were perfectly competitive. b. is characterized by mutual interdependence of pricing decisions. c. may be characterized by a kinked demand curve. d. All of the answers above are correct.
d. all of the answers above are correct
Which of the following is true for the monopolist? a. Marginal revenue is less than the price charged. b. Economic profit is possible in the long run. c. Profit maximizing or loss minimizing occurs when marginal revenue equals marginal cost. d. All of the answers above are correct.
d. all of the answers above are correct
is the act of buying a commodity in one market at a lower price and selling it in another market at a higher price. a. Buying short. b. Discounting. c. Tariffing. d. Arbitrage.
d. arbitrage
A monopolist earns an economic profit only when: a. average total cost equals price. b. marginal cost equals price. c. marginal revenue equals price. d. average total cost is less than price.
d. average total cost is LESS than price
Comparable worth is the principle that: a. men and women should be paid comparably. b. the wage rate equals the value of productivity. c. goods and services priced the same have about the same worth. d. employees who perform comparable jobs should be paid the same wage.
d. employees who perform comparable jobs should be paid the same wage
According to the statistics, the distribution of money income: a. has not changed greatly since 1929. b. changed significantly in favor of the top 5 percent since 1929. c. fluctuated widely since 1947. d. has not fluctuated greatly since 1947.
d. has not fluctuated greatly since 1947.
Which of the following is an outcome of advertising for a monopolistically competitive firm? a. Long-run average costs shift downward. b. The firm's demand curve becomes flatter and shifts inward. c. The firm's demand curve keeps the same slope and shifts inward. d. Long-run average costs shift upward.
d. long-run average costs shift upward
The profit maximizing, or loss minimizing, quantity of output for any firm to produce exists at that output level in which: a. total revenue is maximized. b. total cost is minimized. c. marginal cost is minimized. d. marginal revenue equals marginal cost.
d. marginal revenue equals marginal cost.
Which of the following is evidence that OPEC is an effective cartel? a. Output changes are dictated by changes in demand. b. Price changes are dictated by changes in demand. c. Members do not agree on output quotas. d. None of the answers above are correct.
d. none of the above answers are correct
. The official poverty line is defined as: a. two times the cost of minimal food requirement. b. one-third the average family income. c. one-half the average family income. d. None of the answers above are correct
d. none of the answers above are correct
Firm's Short Run Curve
for a perfectly competitive firm is a curve showing the relationship between the price of a product and the quantity supplied in the short run. The individual firm always produces along its marginal cost curve above its intersection with the average variable cost curve.
The theory of monopolistic competition predicts that in long-run equilibrium a monopolistically competitive firm will: a. produce the output level at which price equals long-run marginal cost. b. operate at minimum long-run average cost. c. overutilize its insufficient capacity. d. produce the output level at which price equals long-run average cost.
d. produce the output level at which price equals long-run average cost.
Critics of advertising argue that it: a. lowers price by increasing competition. b. results in more variety of products. c. establishes brand loyalty, which promotes competition. d. serves as a barrier to entry for new firms.
d. serves as a barrier to entry for new firms
. Under perfect competition, a firm is a price taker because: a. setting a price higher than the going price results in profits. b. each firm's product is perceived as different. c. each firm has a significant market share. d. setting a price higher than the going price results in zero sales.
d. setting a price higher than the going price results in zero sales.
. Suppose a monopolist's demand curve lies below its average variable cost curve. The firm will: a. stay in operation in the short run. b. earn an economic profit. c. earn an economic profit in the long run. d. shut down.
d. shut down
A kink in the demand curve facing an oligopolist is caused by: a. the belief that competitors will follow price increases but not match price decreases. b. excessive advertising. c. rapidly rising marginal revenues. d. the assumption that competitors will follow price reductions but not price increases.
d. the assumption that competitors will follow price reductions but not price increases.
An oligopoly is a market structure in which: a. one firm has 100 percent of a market. b. there are many small firms. c. there are many firms with no control over price. d. there are few firms selling either a homogeneous or differentiated product.
d. there are few firms selling either a homogeneous or differentiated product.
As shown in Exhibit 1, the price at which the firm earns zero economic profit in the short-run is: a. $10 per unit. b. $15 per unit. c. $40 per unit. d. more than $20 per unit. e. $20 per unit.
e. $20 per unit
The highest fifth of all families receive approximately percent of the distribution of annual money income among families. a. 5. b. 10. c. 25. d. 75. e. 50.
e. 50
. In a perfectly competitive industry, assume the short-run average total cost increases as the output of the industry expands. In the long run, the industry supply curve will:
e. have a positive slope
Which of the following is a characteristic of the monopolistic competition market structure? a. Many firms and a homogeneous product. b. Few firms and differentiated products. c. Few firms and similar products. d. Few firms and a homogeneous product. e. Many firms and differentiated products.
e. many firms and differentiated products
Which of the following might increase the supply curve of labor? a. Increasing licensing requirements. b. Increasing discrimination against females. c. Increasing discrimination against blacks. d. All of the answers above are correct. e. None of the answers above are correct
e. none of the answers above are correct
Under both perfect competition and monopoly, a firm: a. is a price taker. b. is a price maker. c. will shut down in the short-run if price falls short of average total cost. d. always earns a pure economic profit. e. sets marginal cost equal to marginal revenue.
e. sets marginal cost equal to marginal revenue.
A kinked demand curve
faces an oligopolistic that assumes rivals will match a price decrease, but ignores a price increase.
Industry's Long Run Supply Curve
is a curve that shows the quantities supplied by the industry at different prices after firms complete their entry and exit.
Cartel
is a formal agreement among firms to set prices and output quotas. The goal is to maximize profits, but firms have an incentive to cheat.
Oligopoly
is a market structure characterized by (1) few sellers, (2) a homogeneous or differentiated product, and (3) difficult entry.
Monopolistic Competition Characteristic
is a market structure characterized by (1) many small sellers, (2) a differentiated product, and (3) easy entry and exit.
Monopoly
is a single seller facing the entire industry demand curve. The reason for this type of market structure is that the firm sells a unique product and extremely high barriers to entry protect it from competition. These barriers to entry include: (1) ownership of an essential resource, (2) legal barriers, and (3) economies of scale.
Decreasing cost industry
is an industry in which the expansion of industry output by the entry of new firms decreases the firm's cost curves.
Mutual Interdependence
means an action by one firm may cause a reaction on the part of other firms.
Price leadership
occurs when a dominant firm in an industry raises or lowers its price, and other firms follow suit.
Perfect Competition
the firm is very small relative to the market as a whole, sells a homogeneous product, and firms in the industry are free to enter and exit.
