Micro-economics Exam 2 Part B

economies of scale.

According to the text, the most important of the five factors which give rise to monopoly is: A) government licenses. B) exclusive control over important inputs. C) economies of scale. D) network economies. E) patents.

Extensive economies of scale in production

Natural monopolies result from: A) Pricing strategies B) Control over an essential natural resource C) Extensive economies of scale in production D) Patents and copyrights

Positive profits

Refer to the above graph for a profit-maximizing monopolist. At equilibrium, the firm will be earning: A) Negative profits B) Positive profits C) Zero profits D) Profits that cannot be determined from the given graph

0C

Refer to the above graph. To maximize profits, the firm should produce the quantity: A) 0B B) 0A C) 0C D) 0K

MC = MR.

A profit maximizing monopolist sets output where A) MC = MR. B) MC = demand. C) MC = P. D) it depends on the average costs in each case.

It can sell all it wants to at the market price

A purely competitive firm does not try to sell more of its product by lowering its price below the market price because: A) This would be considered unethical price chiseling B) Its demand curve is inelastic, so total revenue will decline C) It can sell all it wants to at the market price D) Its competitors would not permit it

Some firms to exit causing the market price of corn to rise

Assume that the market for corn is purely competitive. Currently, firms growing corn are suffering economic losses. In the long run, we can expect: A) New firms to enter causing the market price of corn to rise B) Some firms to exit causing the market price of corn to fall C) Some firms to exit causing the market price of corn to rise D) New firms to enter causing the market price of corn to fall

Zero economic profits

Consider the purely competitive firm pictured above. At its short-run equilibrium point, the firm is earning: A) Zero economic profits B) Zero accounting profits C) Zero normal profits D) We can say nothing about this firm's profit or loss situation

Will earn higher profits or experience smaller losses as a result of the change in the market

If the market demand for the product increases, in the short run a purely competitive firm: A) Will experience no change in costs as it steps up production in response to the change in the market B) Will not change its output quantity because there are so many firms that the individual firm will not be affected by the change C) Can employ more inputs and increase the size of its plant, to respond to the change in the market D) Will earn higher profits or experience smaller losses as a result of the change in the market

0A.

In the diagram below, the profit maximizing output level is: A) 0C. B) 0A. C) 0B. D) It is impossible to say.

4.

In the diagram below, the profit maximizing price level is: A) 4. B) 3. C) 1. D) 2.

q3.

In the long run, the typical firm in this market will produce a quantity equal to: A) Q1. B) q2. C) q3. D) q1.

a downward sloping demand curve.

Monopoly is characterized by A) a horizontal demand curve. B) a downward sloping demand curve. C) many close substitutes. D) no barriers to entry

The monopolist produces a product with no close substitutes

One defining characteristic of pure monopoly is that: A) The monopolist uses advertising B) The monopolist is a price taker C) The monopolist produces a product with no close substitutes D) There is relatively easy entry into the industry, but exit is difficult

Each seller supplies a negligible fraction of total market

Price is taken to be a "given" by an individual firm selling in a purely competitive market because: A) There are no good substitutes for the firm's product B) The firm's demand curve is downward-sloping C) Product differentiation is reinforced by extensive advertising D) Each seller supplies a negligible fraction of total market

0ADQ

Refer to the above graph for a monopolist in short-run equilibrium. This monopolist has total cost equal to area: A) 0CFQ B) CADF C) ADFC D) 0ADQ

0J

Refer to the above graph for a profit-maximizing monopolist. The firm will set its price at: A) 0K B) 0J C) 0G D) 0H

bcde

Refer to the above graph for a purely competitive firm operating at a loss in the short run. Which are in the graph represents the amount of economic loss for the firm? A) abef B) 0beg C) acdf D) bcde

ABGH

Refer to the above graph. At the profit-maximizing level of output, the firm earns profits given by th area: A) 0AHE B) BCFG C) ACFH D) ABGH

P3

Refer to the above graph. It shows short-run cost curves for a competitive firm. At what minimum price would the firm be willing to product some output in the short run? A) P1 B) P2 C) P3 D) P4

0

Refer to the above graph. It shows the cost curves for a competitive firm. If the market price falls to $0.55, the optimal output rate is: A) 15 B) 20 C) 0 D) More than 20, but less than 35

A

Refer to the above graph. Which point is definitely not on the competitive firm's short-run supply curve? A) A B) B C) C D) D

The firm is experiencing economic losses

Refer to the above graphs for a competitive market in the short run. Which of the following statements is true? A) The firm is experiencing economic losses B) The firm is making economic profits C) The firm will increase production D) The firm is breaking even

New firms will be attracted into the industry

Refer to the graphs above for a purely competitive market in the short run. The graphs suggest that in the long run, assuming no changes in the given information: A) More buyers will come to the market B) Buyers will leave the industry C) New firms will be attracted into the industry D) Some firms will exit from this industry

lies below the demand curve.

The marginal revenue curve of a single price monopolist A) lies above the demand curve. B) lies along the demand curve. C) lies below the demand curve. D) is a horizontal line.

Will earn zero economic profit in the long run

The representative firm in a purely competitive industry: A) Will always earn an economic profit in the long run B) Will always earn a profit in the short run C) Will earn zero economic profit in the long run D) May earn either an economic profit or a loss in the long run

Rapid low cost technological change in the industry

Which of the following is not a source of monopoly power? A) Exclusive control over inputs B) Patents C) Rapid low cost technological change in the industry D) Economies of scale