Econ 101 MiYoung OH

27. (Figure: A Profit-Maximizing Monopoly Firm) Look at the figure A Profit-Maximizing Monopoly Firm. This firm's profit per unit is A) $5. B) $12. C) $15. D) $20.

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28. Which of the following is TRUE? A) If price falls below average variable cost, the firm will shut down in the short run. B) Total revenue and marginal revenue are the same in perfect competition. C) Economic profit per unit is found by subtracting MC from price. D) Economic profit is always positive in the long run.

A) If price falls below average variable cost, the firm will shut down in the short run.

23. One of the major differences between a monopolist and a purely competitive firm is that the monopolist has a _____ demand curve, while the purely competitive firm has a _____ demand curve. A) downward-sloping; perfectly elastic B) perfectly inelastic; perfectly elastic C) downward-sloping; perfectly inelastic D) perfectly elastic; downward-sloping

A) downward-sloping; perfectly elastic

The large barriers to entry are a reason a monopoly: A) earns an economic profit in the long run. B) produces at the minimum average total cost in the long run. C) produces with no fixed costs in the long run. D) maximizes its profits by producing where P = MC.

A) earns an economic profit in the long run.

26. A monopolist responds to an increase in marginal cost by _____ price and _____ output. A) increasing; decreasing B) increasing; increasing C) decreasing; increasing D) decreasing; decreasing

A) increasing; decreasing

The larger the output, the more output over which fixed cost is distributed. Called the _____ effect, this leads to a ______ average _____ cost. A) spreading; lower; fixed B) spreading; higher; fixed C) diminishing returns; lower; variable D) diminishing returns; higher; variable

A) spreading; lower; fixed

31. (Figure: Cost Curves for Corn Producers) Look at the figure Cost Curves for Corn Producers. The market for corn is perfectly competitive. If the price of a bushel of corn is $4, in the short run the farmer will produce _____ bushels of corn and earn an economic _____ equal to _____. A) 0; loss; average fixed costs B) 0; loss; total fixed costs C) 3; loss; $30 per bushel D) 3; profit; $20 per bushel

B) 0; loss; total fixed costs

19. Which of the following is TRUE? A) Profit per unit is price minus MC. B) Total economic profit is per-unit profit times quantity. C) If price is less than ATC, the firm will break even in the short run. D) If price is less than marginal cost, the perfectly competitive firm should raise the price and increase output.

B) Total economic profit is per-unit profit times quantity.

48. In perfectly competitive long-run equilibrium: A) all firms make positive economic profits. B) all firms produce at the minimum point of their average total cost curves. C) the industry supply curve must be upward-sloping. D) all firms face the same price, but the value of marginal cost will vary directly with firm size.

B) all firms produce at the minimum point of their average total cost curves.

Marginal revenue: A) is the slope of the average revenue curve. B) equals the market price in perfect competition. C) is the change in quantity divided by the change in total revenue. D) is the price divided by the change in quantity

B) equals the market price in perfect competition.

A monopolist responds to an increase in demand by _____ price and _____ output. A) increasing; decreasing B) increasing; increasing C) decreasing; increasing D) decreasing; decreasing

B) increasing; increasing

The marginal product of labor is: A) the change in labor divided by the change in total product. B) the slope of the total product of labor curve. C) the change in average product divided by the change in the quantity of labor. D) the change in output that occurs when capital increases by one unit.

B) the slope of the total product of labor curve.

49. A perfectly competitive industry is said to be efficient because the: A) marginal cost of production of the last unit of output is minimized. B) product is standardized across firms in the industry. C) average total cost of production of the industry's output is minimized. D) market price of the good is equal to economic profit for all firms in the industry.

C) average total cost of production of the industry's output is minimized.

When marginal cost is BELOW average variable cost, average variable cost must be: A) at its minimum. B) at its maximum. C) falling. D) rising.

C) falling.

. A natural monopoly exists whenever a single firm: A) is owned and operated by the government. B) is investor owned but has been granted the exclusive right by the government to operate in a market. C) has economies of scale over the entire range of production that is relevant to its market. D) has gained control over a strategic input of an important production process.

C) has economies of scale over the entire range of production that is relevant to its market.

26. The short-run supply curve for a perfectly competitive firm is its: A) demand curve above its marginal revenue curve. B) marginal revenue curve to the right of its marginal cost curve. C) marginal cost curve above its average variable cost curve. D) average total cost curve below its marginal cost curve.

C) marginal cost curve above its average variable cost curve.

11. In contrast with perfect competition, a monopolist: A) produces more at a lower price. B) produces where MR > MC, and a perfectly competitively firm produces where P = MC. C) may have economic profits in the long run. D) earns zero economic profits in the long run.

C) may have economic profits in the long run.

Consider a perfectly competitive firm in the short run. Assume that it is sustaining economic losses but continues to produce at the profit-maximizing (loss-minimizing) output. Which statement is FALSE? A) Marginal cost is less than average total cost. B) Marginal cost is equal to marginal revenue. C) Price is equal to marginal cost. D) Marginal cost is less than average variable cost.

D) Marginal cost is less than average variable cost.

42. The long-run average total cost curve is tangent to an infinite number of short-run _____ cost curves. A) total B) marginal C) average variable D) average total

D) average total

The larger the output, the more variable input required to produce additional units. Called the _____ effect, this leads to a ______ average _____ cost. A) spreading; lower; fixed B) spreading; higher; fixed C) diminishing returns; lower; variable D) diminishing returns; higher; variable

D) diminishing returns; higher; variable

The break-even price for a perfectly competitive firm is equal to: A) the minimum value of average variable cost. B) the marginal revenue, provided that marginal revenue is equal to marginal cost. C) the average fixed cost at the given output level. D) the minimum value of average total cost.

D) the minimum value of average total cost.