ECON101 Final (Ch. 7 onwards)

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were:

$200,000 and its economic profits were zero.

Assume that in the short run a firm is producing 100 units of output, has ATC of $200, and AVC of $150. The firm's TFC are:

$5,000. ((ATC-AVC)(Output))

The following are the respective numbers for the four-firm concentration and Herfindahl index in an industry. Which set of numbers would indicate that the industry was monopolistically competitive?

25 and 207.

An explicit cost is:

A money payment made for resources not owned by the firm itself.

The mutual interdependance that characterizes oligopoly arises because:

A small number of firms produce a large proportion of industry output.

Which of the following curves is not U-shaped?

AFC

In the short run, it is impossible to decrease the following cost by decreasing the output:

AFC.

A fixed cost is:

Any cost which a firm would incur even if output was zero.

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

As long as marginal revenue is greater than marginal cost.

Game theory can be used to demonstrate that oligopolists:

Can increase their profits through collusion.

When patents on new medications expire, the market for those drugs:

Change from being monopoly to being competitive.

Average fixed cost:

Declines continually as output increases.

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

Depreciation charges on company-owned equipment.

Which of the following is an example of market collusion?

Dividing the markets.

A pure monopolist's demand curve is:

Downsloping.

The region of demand in which the monopolist will choose a price-output combination will be:

Elastic because as price declines and output increases, total revenue will increase.

In pure competition, marginal revenue is:

Equal to product price.

Which of the following is most likely to be a variable cost?

Fuel and power payments.

The study of how people (or firms) behave in strategic situations is called:

Game theory.

Under pure monopoly, a profit-maximizing firm will produce:

In the elastic range of its demand curve.

If a firm decides to produce no output in the short run, its costs will be:

Its fixed costs.

In two firm oligopoly, if one firm increases its price, then the other firm can:

Keep its price constant and thus increase its market share.

The individual fir's short-run supply curve is that part of its:

Marginal-cost curve lying above its AVC curve.

When total product is increasing at an increasing rate, marginal product is:

Positive and increasing.

Which of the following represents non-collusive strategy?

Price matching.

Which of the following is most likely to be a fixed cost?

Property insurance premiums.

Farmer Jones is producing wheat, and must accept the market price of $6.00 per bushel. At this time, her ATC and her marginal costs both equal $8.00 per bushel. Her AVC are $5 per bushel. In choosing her optimal output, farmer Jones should:

Reduce output but continue production.

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 200 units is $6.00. The minimum possible AVC is $8. The market price of the product is $6. To maximize profit or minimize losses, the firm should:

Shut down.

If the TVC of 9 units of output is $90, and the TVC of 10 units of output is $120, then:

The average variable cost of 9 units is $10. (TVC/Output)

The basic characteristics of the short run is that:

The firm does not have sufficient time to change the size of its plant.

A purely competitive firm will be willing to produce at a loss in the short run provided:

The loss is no greater than its total fixed costs.

One defining characteristic of pure monopoly is:

The monopolist produces a product with no close substitutes.

In the standard model of pure competition, a profit-maximizing entrepreneur will shut down in the short run if:

Total revenue < total variable costs.