economics add on for exam

With respect to a firm's long-run decision to exit/enter a market, A firm should exit the market if total revenue is calculated to be less than total costs; TR < TC A firm should enter the market if total revenue is calculated to be more than total costs; TR > TC A firm should enter the market if average variable costs is calculated to be more than marginal costs; AVC > MC A and B A and C

A and B

Which of the following is not true? Monopoly is a market structure in which one firm makes up the entire market. A natural monopoly arises when a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms. This is because economies of scale apply over the entire relevant range of output. There are many close substitutes for a monopolist's product. Barriers to entry into the market prevent competition

There are many close substitutes for a monopolist's product.

Which of the following is true? To determine the Price that a monopolist would charge, first find where MR and MC curves intersect, then find the quantity associated with this intersection, then find where this quantity intersects the demand curve. This will provide the price the monopolist will charge. To determine the Price that a monopolist would charge, first find where MC curve and Price intersect, then find the quantity associated with this intersection, then find where this quantity intersects the demand curve. This will provide the price the monopolist will charge. To determine the Price that a monopolist would charge, first find where Total Revenue and the Average Total Cost curves intersect, then find the quantity associated with this intersection, then find where this quantity intersects the demand curve. This will provide the price the monopolist will charge. None of the above are true.

To determine the Price that a monopolist would charge, first find where MR and MC curves intersect, then find the quantity associated with this intersection, then find where this quantity intersects the demand curve. This will provide the price the monopolist will charge.

The goal of a firm is to maximize profits (and not maximize revenue). A firm maximizes profit when: average revenue equals average cost marginal revenue equals total cost marginal revenue equals price marginal revenue equals marginal cost

marginal revenue equals marginal cost

The difference between a monopolist and a competitive firm is: A monopolist is a price taker while a competitive firm is a price maker. A monopolist is one of many companies while a competitive firm is the sole producer. A monopolist faces a downward sloping demand curve while a competitive firm faces a horizontal demand curve. None of the above.

A monopolist faces a downward sloping demand curve while a competitive firm faces a horizontal demand curve.

Compared to the social optimum, a monopolist chooses A quantity that is too low and a price that is too high A quantity that is too high and a price that is too low A quantity and a price that are both too high A quantity and a price that are both too low

A quantity that is too low and a price that is too high

When all or a portion of a natural monopoly no longer needs to be regulated as a natural monopoly, the government usually opens the market up to competition. Examples of this would be: Package delivery service Electricity generation Airlines A and B B and C A, B and C

A, B and C

Competitive forces work to break down a monopoly by Lobbying to change a law protecting a monopoly such as the Public Utilities Regulatory Policies Act of 1978 Developing a generally similar product without violating a patent such, as Beta versus VHS video recording Developing a substitute such as consumer-owned rooftop solar power in lieu of utility-owned coal power plants Developing new technologies that can compete with natural monopolies such as the recent introduction of streaming technology used by Netflix, Hulu, YouTube, and others. All of the above

All of the above

Which of the following are true? Lazy monopolists are firms that do not push for efficiency, but merely enjoy the position they are already in Lazy monopolists are not profit maximizers Lazy monopolists have monopoly positions, but they don't make large monopoly profits All of the above

All of the above

For a market to be perfectly competitive, certain conditions must be met. Which of the following are conditions for a perfectly competitive market: Both buyers and sellers are price makers There are no barriers to entry Firms' products are identical A and B and C A and B but not C B and C but not A

B and C but not A

A monopolist can have losses. This is because: If demand for the monopolist's product drops sufficiently low, it can fall below ATC. The cost for the monopolist to make the product could push ATC above demand. Both A and B Neither A or B

Both A and B

At long run equilibrium, economic profits are zero. This is because: Profits create incentives for new firms to enter which causes market supply to increase which causes the price to fall until zero profits are made. The existence of losses will cause firms to leave the industry which causes market supply to decrease which causes the price to increase until losses are zero. Both A and B Neither A or B

Both A and B

When a monopolist changes from charging a single price to perfect price discrimination, it reduces The quantity produced The firm's profit Consumer surplus Total surplus

Consumer surplus

When a monopolist price discriminates, it charges different prices to different individuals or groups of individuals. Consumers with less elastic demands are charged ______ prices, and consumers with more elastic demands are charged ______ prices. Lower, higher Lower, lower Higher, higher Higher, lower

Higher, lower

If MR > MC, a firm can increase profit by ___________ output. If MR < MC, a firm can increase profit by ____________ its output. Increasing, decreasing Decreasing, increasing Decreasing, decreasing Increasing, increasing

Increasing, decreasing

If MR > MC, the monopolist can increase profit by _________ its output. If MR < MC, the monopolist can increase profit by __________ its output. Decreasing, decreasing Decreasing, increasing Increasing, decreasing Increasing, increasing

Increasing, decreasing

Bob's lawn mowing service is a profit maximizing competitive firm. Bob mows lawns for $27 each (that's the market price). His total cost each day is $280 of which $30 is fixed costs. He mows ten lawns a day. What is Bob's short run decision regarding shutdown and what is his long run decision regarding exit? Keep mowing in the short run but exit the market in the long term Shut down in the short run and exit the market in the long run Shut down in the short term but return to mowing in the long run Keep mowing both in the short run and in the long run

Keep mowing in the short run but exit the market in the long term

If a profit-maximizing, competitive firm is producing a quantity at which marginal cost is between average variable cost and average total cost, it will Keep producing in the short run but exit the market in the long term Shut down in the short term but return to production in the long run Shut down in the short run and exit the market in the long run Keep producing both in the short run and in the long run

Keep producing in the short run but exit the market in the long term

To celebrate your "ace-ing" the last Econ exam, you go out to a posh restaurant and order a ginourmous five pound lobster dinner for $120. After eating half of the lobster, you realize that you are quite full and will not get any benefit from eating any more (i.e., MB is zero and the slope of your MB curve is about to become negative). There are no doggy bags at this restaurant and you are not going to be so gauche (ill mannered) as to steal one of the nice crisply-starched cloth napkins to wrap up the leftovers -- thus you will not be able to take home leftovers. Your dining companion, who already finished their meal, is full, and does not want to eat any more (i.e., their MB is also zero and the slope of their MB curve is about to become negative), recommends that you finish your lobster dinner because "you already paid for it". Based on sound economics logic, what should you do? Finish it because "you already paid for it" (i.e., a sunk cost). Leave it because "you already paid for it" (i.e., a sunk cost). Leave it and only pay for the half that you ate (but leave a tip based on the full amount) Start a food fight with the leftovers because "you already paid for it"

Leave it because "you already paid for it" (i.e., a sunk cost).

A competitive firm maximizes profit by choosing the quantity at which Average total cost is at its minimum Marginal cost equals the price Average total cost equals the price Marginal cost equals average total cost

Marginal cost equals the price

A competitive firm's short run supply curve is its _____ cost curve above its ______ cost curve. Average total, marginal Average variable, marginal Marginal, average total Marginal, average variable

Marginal, average variable

Which of the following is true? Monopoly output is higher and price is higher than perfect competition Monopoly output is lower and price is higher than perfect competition Monopoly output is higher and price is lower than perfect competition Monopoly output is lower and price is lower than perfect competition

Monopoly output is lower and price is higher than perfect competition

A company that makes a product can attempt to create a monopoly in the market for replacement parts by using a technical barrier to entry. Which of the following is not a technical barrier to entry: One of a kind thread counts on bolts One of a kind ink cartridge shapes Open source software One of a kind installation tools

Open source software

In the long run equilibrium of a competitive market with identical firms, what is the relationship between price P, marginal cost MC, and average total cost ATC? P = MC and P = ATC P > MC and P > ATC P > MC and P = ATC P = MC and P > ATC

P = MC and P = ATC

For a profit maximizing monopolist that charges the same price to all consumers, what is the relationship between price P, marginal revenue MR, and marginal cost MC? P = MR and MR = MC P > MR and MR = MC P = MR and MR > MC P > MR and MR>= MC

P > MR and MR = MC

In the short run, more of the market adjustments to changes in demand are due to changes in _________ , while in the in the long run, more of the market adjustment is done by changes in the _________ of firms in the market. Price, quantity Supply, quantity Price, technology Consumer expectations, technology

Price, quantity

Compared to a monopolist that does not practice perfect price discrimination, perfect price discrimination by a monopolist _______ profit, _______ total surplus, and _______ consumer surplus. Raises, raises, lowers Raises, lowers, lowers Raises, raises, raises Lowers, raises, lowers

Raises, raises, lowers

Which of the following is not barrier to entry? Natural Ability Natural Monopolies Government-Created Monopolies Sales taxes paid by a monopolist

Sales taxes paid by a monopolist

Because the marginal cost curve tells us how much of a good a firm will supply at a given price, the marginal cost curve is the firm's ______ curve. Demand curve Supply curve Average total cost curve Average variable cost curve

Supply curve

With pure competition, a firm: Chooses its price to maximize profits Sets its price to undercut other firms selling similar products Takes its price as given by the market Picks the price that yields the largest market share

Takes its price as given by the market

Which of the following is true? Any change that moves a market out of equilibrium will cause an expansion or contraction of the market until a new equilibrium occurs when price equals retail price. On its own, the "invisible guiding hand" does its magic -- since everyone gave their explicit orders to the market to achieve a new equilibrium at P = MC. The highly desired, efficient economic outcomes of Productive Efficiency, Allocative Efficiency, and Maximized Surplus arise out of, and from, the self-interest, profit motivation. None of the above are true.

The highly desired, efficient economic outcomes of Productive Efficiency, Allocative Efficiency, and Maximized Surplus arise out of, and from, the self-interest, profit motivation.

Which of the following is true? The monopolist maximizes profit when Marginal Revenue equals Marginal Cost. The monopolist maximizes profit when Marginal Revenue equals Price. The monopoly maximizes profit when Marginal Cost equals Price. None of the above are true.

The monopolist maximizes profit when Marginal Revenue equals Marginal Cost.

True or False: Economic efficiency is achieved in the long run under pure competition because 1) there is Productive Efficiency since production occurs where price is equal to minimum average total costs, 2) there is Allocative Efficiency since production occurs where price is equal to marginal costs, and 3) there is Maximized Surplus (aka Welfare, Satisfaction)since the sum of consumer surplus and producer surplus are maximized at equilibrium

True

True or False: In the long run, a power plant (or any business, or any division of a business) will permanently shut down when its projection of future revenues are below its projection of average total cost.

True

True or False: In the short run, a power plant will be dispatched (turned on to generate electricity) when the market price is above its average variable cost.

True

True or False: The concept of Creative Destruction is a powerful economic concept because it can explain many of the dynamics of industrial change: the transition of an industry from a competitive to a monopolistic market, and back again.

True

True or False: Unlike planned economies, purely competitive markets will automatically adjust ("Dynamic Adjustments") to changes in Consumer tastes, Resource supplies, and Technology. Therefore, binge watching several episodes of "Diners, Drive-ins, and Dives" left you with a hankerin' for pork BBQ (which means that your demand curve for pork BBQ shifted out), which incrementally shifts out the market demand curve for pork BBQ, thus incrementally affecting the price of pork BBQ. And since pork BBQ and cole slaw are complements, it also incrementally affects the price of cole slaw.

True

Without barriers to entry, new entrants would compete away the monopoly profits. Which of the following is not a common barrier to entry: Unnatural Barriers Legal Barriers Technological Barriers Strategic Barriers

Unnatural Barriers

What can we say about a regulated monopoly? Regulated natural monopolies are given the exclusive right to operate in the industry. For example, a natural gas company will be given the exclusive or franchise right to operate within a community. Regulated monopolies are allowed to charge a fair price, which includes all costs plus a normal return on capital investment. This fair price is determined by regulatory hearings called rate cases. When regulated monopolies are allowed to pass on all cost increases, they have little or no incentive to hold down costs and X-inefficiency develops. This is why the cost of an airline ticket in 1960 was much higher than the price of an airline ticket in 2015. We can say all of the above

We can say all of the above

Which of the following is true? With a monopoly, there is both a welfare loss and a transfer of surplus from the monopolist to the consumer. With a monopoly, there is either a welfare loss or a transfer of surplus from the consumer to the monopolist. With a monopoly, there is neither a welfare loss nor a transfer of surplus. With a monopoly, there is both a welfare loss and a transfer of surplus from the consumer to the monopolist.

With a monopoly, there is both a welfare loss and a transfer of surplus from the consumer to the monopolist.