Econ 201 Hellman Midterm 2 Oregon State University

As compared to a perfectly competitive firm, a monopolistically competitive firm will: A) have more control over price. B) have less control over price. C) face more barriers to entry. D) face many more competitors.

A

For a monopolistically competitive firm, the firm's demand curve is: A) downward sloping. B) horizontal. C) upward sloping. D) none of the above

A

In general, the quantity of output in an oligopoly market is: A) lower than in perfect competition. B) higher than in perfect competition. C) the same as in perfect competition. D) The answer depends on the shape of the average cost curve.

A

Marginal product is defined as the change in ________ resulting from a one-unit increase in ________. A) total product; input B) total product; output C) output; total product D) total cost; output

A

Marginal revenue is equal to price for a perfectly competitive firm because: A) the firm's demand curve is perfectly elastic. B) total revenue increases by less than the price of the good when an additional unit is sold. C) the firm's demand curve is perfectly inelastic. D) firms can increase price and still increase the quantity sold.

A

The demand curve that a monopolist faces is: A) the market demand curve. B) the same as the demand curve that faces a perfectly competitive firm. C) not affected by changes in the prices of other goods. D) generally flatter than the demand curve that faces a perfectly competitive firm.

A

When a second firm enters a monopolist's market, the initial demand curve facing the monopolist will: A) shift to the left. B) shift to the right. C) remain the same. D) none of the above

A

Which of the following is NOT a characteristic of a monopolistically competitive market? A) Firms hold patents on their products. B) The products that firms sell are slightly different. C) Firms have some control over price. D) There are no artificial barriers to entry.

A

________ is a cost that independent of the quantity produced by the firm. A) Fixed cost B) Economic cost C) Variable cost D) Average total cost

A

________ is a monopoly that exists in an industry where the large economies of scale acts as its barrier to entry. A) A natural monopoly B) A monopolistic competitor C) A regulated monopoly D) A price discriminator

A

The government allows firms to engage in price discrimination unless the practice: A) allows the firm to earn positive economic profits. B) reduces consumer surplus. C) drives rival firms out of business. D) increases prices to consumers.

C

When the firm increases output and the costs rise disproportionately faster, then the long-run average cost curve is ________ and the firm is experiencing ________. A) horizontal; constant returns to scale B) downward sloping; constant returns to scale C) upward sloping; diseconomies of scale D) downward sloping; economies of scale

C

Which of the following is NOT a characteristic of a perfectly competitive market? A) a large number of firms in a market B) selling a standardized product C) some minor barriers to entry D) an individual firm having no control over price

C

Which of the following is an example of predatory pricing? A) In order to buy Microsoft Windows, you must also purchase Internet Explorer. B) Bus rides are cheaper for senior citizens than for other people. C) Prices are set low enough to drive other firms out of a market. D) Prices are set low enough to prevent other firms from entering the market.

C

A low price guarantee on car stereos leads to: A) higher prices for consumers. B) instability in oligopoly. C) cheating on cartel agreements. D) competition among oligopolists.

A

A market served by two firms is called a(n): A) duopoly. B) double monopoly. C) oligopoly. D) monopolistic competition.

A

A benefit to consumers of monopolistically competitive markets is that: A) consumers only have to choose from one product. B) consumers have a variety of products from which to choose. C) goods are sold at the lowest possible average cost of production. D) price is equal to marginal cost in equilibrium.

B

Diminishing marginal returns implies that: A) marginal costs are decreasing. B) marginal costs are increasing. C) marginal costs are constant. D) marginal costs may be increasing or decreasing.

B

If a profit-maximizing firm in a perfectly competitive market is currently producing the output where (price - average variable cost) = average fixed cost, the firm is: A) making a positive economic profit. B) making a zero economic profit. C) suffering an economic loss. D) none of the above

B

In the short run: A) firms have the ability to enter or exit the industry. B) firms are able to alter some, but not all, of their factors of production. C) firms are unable to adjust their output choices. D) None of the above

B

Kevin's Golf-a-Rama sells golf balls in a perfectly competitive market. At its current level of golf ball production, Kevin has marginal costs equal to $1, and marginal cost is rising. If the market price of golf balls is $1, Kevin should: A) decrease the level of golf ball production as marginal cost is rising. B) continue producing the current level of production. C) increase the production of golf balls. D) shut down and produce no golf balls.

B

One difference between the short run and the long run is that perfectly competitive firms: A) always earn positive economic profit in the short run, but never in the long run. B) can earn positive, negative, or zero economic profit in the short run, but will earn zero economic profit in the long run. C) earn zero economic profit in the short run, but will earn positive economic profit in the long run. D) always earn more economic profit in the long run.

B

Which of the following is an example of a monopolistically competitive firm? A) Farmer Smith's corn farm B) St. Joseph Aspirin C) TCI Cablevision, a supplier of cable television services D) PacifiCorp, a distribution supplier of electricity in the Northwest U.S.

B

A firm's marginal cost curve above the minimum of the average variable cost curve is also: A) the firm's demand for production curve. B) the firm's producer surplus curve. C) the firm's short-run supply curve. D) the market supply curve.

C

Assuming perfect competition, Figure 8.2 presents a firm's marginal, average total, and average variable cost curves. Assuming a market price of $150, the firm's maximum profit is: A) 0, as price equals average total cost B) Unknown as the marginal revenue curve is not shown C) 4000 D) 30000

C

If a firm suffers an economic loss, its: A) price is less than its marginal cost. B) price is less than its marginal revenue. C) price is less than its average total cost. D) none of the above

C

If a firm that makes $100 profit per pair of shoes pays LeBron James $2,000,000 to endorse their basketball shoes, then to make the endorsement pay off they must sell at least: A) $1,000,000 more in shoes. B) $20,000 more in shoes. C) 20,000 more pairs of shoes. D) 200,000 more pairs of shoes.

C

Suppose that there are six firms in a market, with five each controlling 10% of the market, and the remaining firm controlling 50% of the market. The HHI would equal A) 100. B) 1000. C) 3000. D) 30000.

C

Oligopoly differs from monopoly and perfect competition in that: A) firms consider each others actions when choosing price and quantity. B) there are a few firms in the industry. C) firms act strategically. D) all of the above

D

The merit(s) of a patent system is(are): A) the patent system gives firms strong incentives to take the risk of substantial research and development costs. B) the patent system may precipitate the development of new products. C) granting monopoly power through a patent may be beneficial from society's perspective. D) all of the above.

D

What costs do accountants include that do not reflect a monetary payment but are treated as an expense or reduction in net value of the company? A) Big change in market price of goods not yet sold B) Depreciation C) Larger number of customers are expected to default in the future on payments to company D) All are examples

D

When the government eliminates artificial barriers to entry: A) more firms will enter the market. B) prices to consumers will likely decrease. C) competition in the market will increase. D) All of the above will occur.

D

Which of the following is a characteristic of a perfectly competitive market? A) a large number of firms in a market B) selling a standardized product C) no barriers to entry D) all of the above

D