Econ Final

A characteristic of a purely competitive labor market would be:

"wage-taker" behavior by workers.

In a purely competitive industry, each firm:

Can easily enter or exit the industry

In the short run, the monopolistically competitive firm will experience:

economic profits or losses, but in the long run only a normal profit.

A monopoly is most likely to emerge and be sustained when:

economies of scale are large relative to market demand.

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

equal to MR, MC, and minimum ATC.

Economic profits are calculated by subtracting:

explicit and implicit costs from total revenue.

To the economist, total cost includes:

explicit and implicit costs, including a normal profit.

Other things being the same, if the demand for labor is inelastic:

increases in wage rates will result in greater payrolls.

If a monopolistically competitive industry is in long-run equilibrium, a firm in that industry might be able to increase its economic profits by:

increasing the demand for its product.

When a firm produces less output, it can reduce:

its variable costs but not its fixed costs.

An example of derived demand is the demand for:

machines by a business

If average total cost is declining, then:

marginal cost must be less than average total cost.

A feature of monopolistic competition is:

nonprice competition.

Allocative and productive efficiency are achieved under the market structure of:

pure competition.

There is no control over price by firms in:

pure competition.

The law of diminishing returns describes the:

relationship between resource inputs and product outputs in the short run

Any activity designed to transfer income or wealth to a particular individual or firm at society's expense is called:

rent-seeking.

Other things being equal, a firm in a cartel will most likely cheat on a price-fixing agreement by:

secretly lowering price and increasing sales to a few customers.

Suppose some firms exit a monopolistic competition industry. We would expect the demand curve of a firm already in the industry to:

shift to the right.

Some firms in the technology sector have achieved economies of scale because costs have been reduced by:

simultaneous consumption.

Which phrase would be most characteristic of pure monopoly?

single seller

An increase in the demand for computers leads to an increase in demand for computer programmers. This situation arises because:

the demand for programmers is a derived demand.

When diseconomies of scale occur:

the long-run average total cost curve rises.

Which is a likely characteristic of a differentiated oligopolistic market?

Price and output decisions of firms are interdependent.

X-inefficiency is said to occur when a firm's:

average costs of producing any output are greater than the minimum possible average costs.

If output is set at the kink of the kinked-demand model, then there:

are several prices at which marginal revenue equals marginal cost.

The law of diminishing returns results in:

a total product curve that eventually increases at a decreasing rate.

According to proponents of human capital theory, education:

increases a worker's productivity.

The steel and automobile industries would be examples of which market model?

Oligopoly

At an equilibrium level of output in a pure monopoly:

P > MC and P > minimum ATC.

In long-run equilibrium in a monopolistically competitive industry:

P > minimum ATC.

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

P equals MC.

Which is an example of a change in the price of another resource that increases labor demand?

A decrease in the price of wood decreases the cost of furniture, thus increasing the demand for furniture workers.

Which is a major criticism of a monopoly as a source of allocative inefficiency?

A monopolist fails to expand output to the level where the consumers' valuation of an additional unit is just equal to the monopolist's opportunity cost.

Which cannot be a characteristic of an oligopolistic industry?

A perfectly elastic firm demand curve

Other things equal, in which of the following cases would economic profit be the greatest?

An unregulated monopolist who is able to engage in price discrimination.

Which of the following best expresses the law of diminishing returns?

As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra output will decline.

If you operated a small bakery, which of the following would be a variable cost in the short run?

Baking supplies (flour, salt, etc.)

Which of the following industries would see firms reach their minimum efficient scale at relatively low levels of output?

Hair salons.

Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?

Depreciation charges on company-owned equipment

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output is $3.00 and the market price is $2.50. What should the firm do?

Increase output if the minimum possible average variable cost is $2.00.

The best example of a craft union would be the:

International Brotherhood of Electrical Workers.

The cornerstone of antitrust legislation is the:

Sherman Act

The legislation that prohibited "every contract, combination, ...or conspiracy" that limits competition is the:

Sherman Act.

Which is true of a price discriminating pure monopolist?

The average price will be higher than in the nondiscriminating case.

Which is an example of a differentiated oligopoly?

The beer industry

Critics of the minimum wage contend that imposing a wage higher than the equilibrium wage in a competitive industry would:

The demand for labor would most likely become more elastic as a result of:

Minimum efficient scale occurs at the smallest level of output at which a firm can minimize long-run average costs.

True

The best example of an industrial union is the:

United Auto Workers.

For most producing firms:

average total costs decline as output is carried to a certain level, and then begin to rise.

Refer to the above diagram. The profit-maximizing level of output for this firm:

cannot be determined from the information given.

The reason that unskilled construction workers typically receive higher wages than retail sales clerks is best explained by:

compensating differences.

Average fixed cost:

declines continually as output increases.

The kinked-demand curve is based upon the assumption that an oligopolist's rivals will:

follow a price cut, but ignore a price increase.

Derived demand is the demand:

for a resource to produce a product.

If an oligopolist's demand curve has a "kink" in it, then:

over some interval, a change in the oligopolist's marginal cost will not cause a change in the oligopolist's profit-maximizing price.

When total product is increasing at a decreasing rate, marginal product is:

positive and decreasing.

An economy is producing at the least-cost rate of production when:

price and the minimum average cost are equal.

The demand for labor will most likely increase when the price of a:

substitute input decreases, provided the output effect is greater than the substitution effect.

Assume the market for ball bearings is purely competitive. Currently, each of the firms in this market is making a positive level of economic profits. In the long run, we can expect the market:

supply to increase.

If the price of a good increases, then in the market for labor that is used to make this product:

the marginal revenue product (MRP) of labor will increase.

Marginal revenue product is the increase in:

total revenue from the use of an additional unit of a resource.

Which statement is correct?

Pure monopolists do not always realize economic profits.

Which does not necessarily apply to a pure monopoly?

The firm must earn economic profits.

In a typical graph for a purely competitive firm, the intersection of the total cost and total revenue curves would be:

a break-even point.

The long-run supply curve would be downsloping in:

a decreasing-cost industry.

The long-run supply curve would be upsloping in:

an increasing-cost industry.

An expenditure on education and training that improves the skills and therefore the productivity of workers is:

an investment in human capital.

Laws and government actions designed to prevent monopoly and promote competition are the focus of:

antitrust policy

A profit-maximizing firm in the short run will expand output:

as long as marginal revenue is greater than marginal cost.

Monopolists are said to be allocatively inefficient because:

at the profit-maximizing output, the marginal benefit to society from increasing output is greater than the marginal cost to society.

A nondiscriminating pure monopolist is generally viewed as:

both productively and allocatively inefficient.

Refer to the above diagram. At output level Q :

marginal product is falling.

Monopolistic competition is characterized by firms:

producing differentiated products.

The production of agricultural products such as wheat or corn would best be described by which market model?

Pure competition

Under which market model are the conditions of entry into the market easiest?

Pure competition

A major characteristic of monopolistic competition is:

a relatively large number of firms selling the product

In the long run:

all costs are variable costs

Marginal product is:

the increase in total output attributable to the employment of one more worker.

One defining characteristic of pure monopoly is that:

the monopolist produces a product with no close substitutes.

In firm X, labor costs are 85 percent of production costs, while in firm Y labor costs are 40 percent of production costs. A 20 percent increase in wages would increase production costs by:

17 percent in firm X and 8 percent in firm Y.

Why is the demand for labor referred to as a "derived" demand?

It is based on the demand for the output labor produces.

Which industry would be considered to be monopolistically competitive?

Locally owned restaurants in large cities

Which is true with respect to the demand data confronting a monopolist?

Marginal revenue is less than price.

Which is true for a purely competitive firm in short-run equilibrium?

The firm's marginal revenue is equal to its marginal cost.

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

They are all barriers to entry.

Diseconomies of scale mean that:

a firm's long-run average total cost curve is rising.

In a corporation, the interests of the owners, who seek to maximize profits, may differ from the interests of the managers, who seek prestige and high income. This divergence would be considered:

a principal-agent problem.

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 1000 units is $2.50. The minimum possible average variable cost is $2.00. The market price of the product is $2.50. To maximize profit or minimize losses, the firm should:

continue producing 1000 units.

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

decrease the price it charges for its product.

Exclusive unionism has the economic effect of:

decreasing the supply of labor.

In pure competition, price is determined where the industry:

demand and supply curves intersect.

As the firm in the above diagram expands from plant size #3 to plant size #5, it experiences:

diseconomies of scale.

If a factor of production has many close substitutes, we would expect that its price elasticity of demand would be:

greater than one.

A cartel is formed among the major firms in an industry that maximizes joint profits of the firms. Each firm:

has the incentive to cheat by cutting its price.

Of the 10 fastest-growing occupations in percentage terms, it is estimated for 2016-2026 that five of the top ten will be related to:

health care.

Supporters of the minimum wage contend that:

helps workers earn living wage

A firm should always continue to operate at a loss in the short run if:

it can cover its variable costs and some of its fixed costs.

If a firm increases all of its inputs by 10 percent and its output increases by 10 percent, then:

it is encountering constant returns to scale.

When compared with the purely competitive industry with identical costs of production, a monopolist will produce:

less output and charge a higher price.

Price discrimination is more common in service industries because:

low-price buyers will find it virtually impossible to resell the products of such industries to high-price buyers.

The issue of the separation of ownership and control is concerned with the fact that:

major decisions in large corporations are generally made by professional managers rather than the owners of the corporation.

A monopolistically competitive firm is operating at a short-run level of output where price is $21, average total cost is $15, marginal cost is $13, and marginal revenue is $13. In the short run this firm should:

make no change in the level of output.

The individual firm's short-run supply curve is the part of its:

marginal cost curve lying above its average variable cost curve.

Pure competition produces a socially optimal allocation of resources in the long run because:

marginal cost equals price.

If the wage rate in a purely competitive labor market decreases, it will cause the:

marginal resource cost for a single competitive firm in the industry to decrease.

Equilibrium price differentials for productive resources:

may be caused by differences in the quality of those resources.

In an oligopolistic market there is likely to be:

neither allocative nor productive efficiency.

If monopolistically competitive firms in an industry are making an economic profit, then:

new firms will enter the industry and product demand will decrease for the existing firms.

The major reason that presidents of major corporations receive an average salary of over $1 million a year and truck drivers receive an average salary of about $55,000 a year can best be explained by:

noncompeting labor groups.

In the kinked-demand model of noncollusive oligopoly, if one firm increases its price, the most likely reaction of the other firms will be to:

not change their prices

Suppose a powerful labor union negotiates a wage for its members above the equilibrium wage rate in a previously nonunionized market. A likely result of this is that:

not everyone who wants to work at the new wage will be able to find jobs.

The demand for a resource will increase if the:

price of the output the firm is producing increases.

If a monopolized industry should become purely competitive without any change in cost conditions:

price will decrease and quantity produced will increase.

A monopolistically competitive firm in the short run is producing where price is $3.00 and marginal cost is $1.50. To maximize profits:

the firm should produce the level of output where marginal revenue equals marginal cost.

In general, in the short run, the supply curve of a purely competitive firm is:

the rising portion of the marginal cost curve above the AVC curve.

the demand curve confronting a nondiscriminating pure monopolist is:

the same as the industry's demand curve.

If the price of labor falls relative to the price of capital, and as a result the quantity of capital employed decreases, it can be concluded that:

the substitution effect is greater than the output effect.