Man Econ Final
If the price in a perfectly competitive market is $40 per unit, then the marginal revenue for each firm in the market is equal to $40 per unit. A. False B. True
B
In the long run, neither a perfectly competitive firm nor a monopoly can earn an economic profit. A. True B. False
B
Increasing a firm's product raises its fixed cost, its variable cost, and its total cost. A. True B. False
B
Marginal cost (MC) is equal to ____. A. the change in the fixed cost (Upper DeltaΔFC) divided by the change in output (Upper DeltaΔQ) or Upper Delta FC divided by Upper Delta Upper QΔFC/ΔQ B. the change in the total cost (Upper DeltaΔTC) divided by the change in output (Upper DeltaΔQ) or Upper Delta TC divided by Upper Delta Upper QΔTC/ΔQ C. the total cost (TC) divided by output (Q) or TC divided by Upper QTC/Q D. None of the above answers are correct.
B
The only defining characteristic of a monopoly is that the market has only one seller. A. True B. False
B
The profit-maximization rule is to produce the quantity that ____ and then set the ____. A. makes the MR exceed the MC by as much as possible; highest price that allows the firm to sell the quantity produced B. sets MR equal to MC; highest price that allows the firm to sell the quantity produced C. allows the firm to set the highest price possible; highest price possible D. sets MR equal to MC; lowest price possible to sell as much as possible
B
change in total cost as output changes is called
marginal cost
average total cost
Total cost divided by total output is called
If a firm's total cost of production is equal to $90,000 and they have a fixed cost of $45,000, the company's variable costs are also $45,000. True False
True
In order for a monopolist to sell more of its product, it must lower price. True False
True
"A manager of any firm that is paying out more in costs than it is making in revenue should shut down operations at once." This advice is bad. Which of the following statements explains the reason for your argument? A. The firm should shut down only if it cannot cover its variable costs. B. The firm should shut down if it cannot cover its total costs. C. The firm should shut down if it cannot cover its marginal costs. D. The firm should remain open even if it cannot cover its variable costs.
A
A barrier to entry is any factor that makes it difficult for new firms to enter a market. A. True B. False
A
A deadweight loss is created when a perfectly competitive market becomes a monopoly. A. True B. False
A
A monopoly is definitely making an economic profit if its total revenue ____ its total cost, and a perfectly competitive firm is definitely making an economic profit if its total revenue ____ its total cost. A. exceeds; exceeds B. exceeds; equals C. equals; exceeds D. equals; equals
A
A monopoly produces 1,000 units and sets a price of $70 per unit. Its average total cost is $50 and its average variable cost is $40. The firm's economic profit equals ____. A. $20,000 B. $70,000 C. $50,000 D. $30,000
A
A natural monopoly's barrier to entry is A. its extreme economies of scale that allow it to have much lower average cost than would any new firm entering the market. B. the large sunk costs it has incurred by entering the market. C. the patent it is required to possess. D. its control over the natural resource necessary to produce its product.
A
At its current output level, Pretty Flowers Florist has average fixed costs equal to $4.40 and average variable costs equal to $2.20. What is Pretty Flowers Florist's average total cost at their current output level? A. $6.60 B. $6.00 C. $4.40 D. $2.20
A
A monopoly's demand curve is ____ as the market demand curve and is ____. A. the same; downward sloping B. the same; horizontal C. not the same; horizontal D. not the same; downward sloping
A
If the cost of a fixed input increases, the marginal cost does not change. A. True B. False
A
If the product produced by a firm has a close substitute, the firm is not a monopoly. A. True B. False
A
Similar to a perfectly competitive firm's marginal revenue curve, a monopoly's marginal revenue curve is horizontal and equal to the market price. A. False B. True
A
Whenever a perfectly competitive firm incurs an economic loss, it minimizes its loss by immediately closing. A. False B. True
A
Which cost does not change when output changes? A. Fixed cost B. Total cost C. Variable cost D. None of the above answers are correct because all costs change when output changes.
A
Your perfectly competitive firm produces 1 million units of output. Your price is $40 per unit and your average total cost is $30 per unit. Your economic profit equals A. $10 million. B. $40 million. C. $30 million. D. None of the answers are correct.
A
As a manager, you want to possess market power because ________. (Check all that apply.) A. it allows you to set the price of your product B. it enables monopolists to earn economic profits in the long run, unlike competitive firms C. it does not allow monopolists to earn short run profits, unlike competitive firms D. it allows you to set the price of the products of your competitors in the market
A and B
For a monopoly, Pgreater than>MR. For a perfectly competitive firm, Pequals=MR. What accounts for this difference? (Check all that apply.) A. A monopolist firm faces a downward sloping demand curve, so it must lower the price to sell an additional unit. B. A monopolist firm faces a downward sloping demand curve, so it can sell any amount of its product at the market price. C. A perfectly competitive firm faces a horizontal demand curve, so it must lower the price to sell an additional unit. D. A perfectly competitive firm faces a horizontal demand curve, so it can sell any amount of its product at the market price.
A and D
An increase in the cost of a fixed input shifts the ____ upward. i. average total cost curve ii. marginal cost curve A. Only ii is correct. B. Only i is correct. C. Both i and ii are correct. D. Neither i nor ii is correct.
B
Average fixed cost (AFC) equals average total cost (ATC) minus average variable cost (AVC), or AFC = ATCminus−AVC. A. False B. True
B
A firm's variable costs are always larger than its fixed costs. A. True B. False
B
For any quantity, a monopoly's price A. is equal to its marginal revenue. B. is greater than its marginal revenue. C. might be greater than, equal to, or less than its marginal revenue, depending on the particular quantity being produced. D. is less than its marginal revenue.
B
For any quantity, in the short run the average total cost (ATC) always exceeds the average variable cost (AVC). A. False B. True
B
Which of the following are characteristics of a monopoly market? i. The product has at least one close substitute. ii. There are at least a few sellers. iii. The market has insurmountable barriers to entry. A. i, ii, and iii are correct. B. Only iii is correct. C. Only i is correct. D. Only i and ii are correct.
B
A firm makes an economic profit whenever A. MR > MC. B. MR > MC. C. P > ATC. D. ATC > P.
C
A monopoly can make an economic profit in the long run because A. the managers of a monopoly determine what price it will charge and therefore can always set the price above the firm's average total cost. B. its marginal revenue curve is downward sloping. C. new firms cannot enter the market since there is an insurmountable barrier to entry. D. The premise of the question is wrong since a monopoly cannot make an economic profit in the long run.
C
All of the following are barriers to entry except which one? A. the presence of a natural monopoly in the market B. control of an essential raw material C. a deadweight loss D.patents
C
All of the following are characteristics of a monopoly market except which one? A. no close substitutes to the good produced in the market B. a single seller in the market C. the firm is a price−taker D. an insurmountable barrier to entry exists
C
An increase in the cost of a variable input shifts the ____ upward. i. average total cost curve ii. marginal cost curve A. Only ii is correct. B. Only i is correct. C. Both i and ii are correct. D. Neither i nor ii is correct.
C
Average total cost (ATC) equals i. total cost (TC) divided by output (Q) or StartFraction TC Over Upper Q EndFractionTCQ. ii. the sum of average fixed cost (AFC) and average variable cost (AVC) or AFC + AVC. A. Only i is correct. B. Only ii is correct. C. Both i and ii are correct. D. Neither i nor ii is correct.
C
If a perfectly competitive market becomes a monopoly, the total surplus in the market A. does not change. B. might increase, decrease, or not change depending on whether the profit-maximizing monopoly price is higher, lower, or the same as the competitive price. C. decreases. D. increases.
C
If a perfectly competitive firm's price is less than its average total cost, P < ATC, then the firm is A. making an economic profit. B. making zero economic profit. C. incurring an economic loss. D. None of the answers are correct because the relationship between a firm's price and its average total cost has nothing to do with the amount of the firm's profit or loss.
C
Labor is a variable input, so its cost is included in the firm's i. fixed costs. ii. variable costs. iii. total costs. A. Only ii is correct. B. Only iii is correct. C. Only ii and iii are correct. D. i, ii, and iii are correct.
C
The marginal cost curve goes through the minimum point of the i. average total cost curve. ii. average variable cost curve. iii. average fixed cost curve. A. Only ii is correct. B. Only i is correct. C.Both i and ii are correct. D. i, ii, and iii are correct.
C
To produce the profit-maximizing quantity, a monopoly's managers must produce the quantity that A. sets the marginal revenue (MR) equal to zero. B. has the lowest possible marginal cost (MC). C. sets the marginal revenue (MR) equal to the marginal cost (MC). D. has the largest difference between marginal revenue (MR) and marginal cost (MC).
C
Which average cost curve is not U-shaped? A. The average variable cost (AVC) curve B. The average total cost (ATC) curve C. The average fixed cost (AFC) curve D. None of the above answers are correct because all of the curves are U-shaped.
C
You are the owner of a medium-size business. Your total revenue is $40 million per year, your fixed costs are $20 million, and your variable costs are $30 million. As time passes, neither your revenue nor your total cost will change. You are ____, and to maximize profit (or minimize loss) you should ____. A. incurring an economic loss; immediately close B. making an economic profit; stay open C. incurring an economic loss; stay open for the short run D. incurring an economic loss; stay open for the long run
C
____ become(s) constantly smaller as output increases. A. Only the average variable cost (AVC) B. Only the average total cost (ATC) C. Only the average fixed cost (AFC) D. Both the average variable cost (AVC) and average total cost (ATC)
C
A monopoly can sell 100 units of output at a price of $40.00 per unit. To sell 101 units, the firm must lower its price to $39.00. The marginal revenue from the 101st unit is ____. A. $39.50 B. $39.00 C. $40.00 D. $−61.00
D
All of the following are true regarding a monopolist's marginal revenue except which one? A. It is downward sloping. B. It is equal to the change in total revenue resulting from a change in quantity sold. C. It is less than the price for all units produced. D. It is horizontal.
D
At its current output level, Pretty Flowers Florist has average fixed costs equal to $5.40 and average variable costs equal to $3.20. What is Pretty Flowers Florist's average total cost at their current output level? A. $5.40 B. $7.30 C. $3.20 D. $8.60
D
If a perfectly competitive firm is producing 200 units and, at the 200th unit, the difference between marginal revenue and marginal cost (MR minus− MC) is positive, which of the following is true? A. The firm should decrease production to maximize profit. B. The 200th unit costs more to produce than the firm earns in revenue. C. The firm is maximizing profit. D. The firm should increase production to maximize profit.
D
If a perfectly competitive market becomes a monopoly, the consumer surplus in the market A. might increase, decrease, or not change depending on whether the profit-maximizing monopoly quantity is larger, smaller, or the same as the competitive quantity. B. does not change. C. increases. D. decreases.
D
In the short run, when a firm produces no output, the firm's fixed cost is ____ and its total cost is ____. A. zero; not zero B. zero; zero C. not zero; zero D. not zero; not zero
D
Which of the following statements describes the relationship between marginal cost and total cost? A. Marginal cost is the ratio of total cost to output. B. Total cost is the difference between marginal cost and fixed cost. C. Total cost is the sum of marginal cost and variable cost. D. Marginal cost is the change in total cost from a change in output.
D
If a firm's fixed cost is $10,000 and the firm produces zero output, the firm's total cost to produce zero output is less than $10,000. True False
False
The vertical distance between the average variable cost and average total cost curves becomes greater as the quantity increases. True False
False
You are managing a perfectly competitive dairy farm, and sadly you have determined that your firm is incurring an economic loss. You do not foresee any future changes in your costs or the price of milk. You should keep the dairy farm open if ______, and you should close the farm if _____.
P > AVC, P < AVC
In a perfectly competitive market, the market demand curve is
downward sloping
A perfectly competitive firm's price is _________ its marginal revenue
equal to
demand curve faced by a firm is ___ at the equilibrium market price.
horizontal
At the equilibrium market price, the firm's demand curve is ______ and its marginal revenue curve is ________
horizontal, horizontal
