ECON Test 3

Identify the most valuable name in the U.S., according to Forbes. A) Google B) Menard's C) McDonald's D) Walmart

A) Google

In the long run, A)all of the firm's costs are variable costs B)the firm is more profitable than it is in the short run C) all of the firm's costs are explicit costs: there are no implicit costs of production D) the firm's fixed costs are greater than its fixed costs in the short run

A) all of the firm's costs are variable costs

Both monopolistically competitive firms and perfectly competitive firms maximize profits A) by producing where marginal revenue is equal to marginal cost B) by producing where marginal revenue equals average revenue C) by producing where price equals average variable cost D) by producing where price equals average total cost

A) by producing where marginal revenue is equal to marginal cost

Which government agency publishes four-firm concentration ratios? A) the U.S. Bureau of the Census B) the Federal Reserve System C) the Economic Council D) the Treasury Department

A) the U.S. Bureau of the Census

A four-firm concentration ratio measures A) the extent to which industry sales are concentrated among the four largest firms in the firms in the industry B) the price elasticity of demand in an industry C) the number of firms in an industry D) the price elasticity of demand among the four largest firms in an industry

A) the extent to which industry sales are concentrated among the four largest firms in the firms in the industry

Profit is the difference between A) total revenue and total cost B) total revenue and variable cost C) marginal revenue and marginal cost D) total revenue and total explicit cost

A) total revenue and total cost

A monopolistically competitive market is described as one in which there are A) a few firms producing differentiated products B) a large number of firms selling similar, but not identical, products C) one large firm and many small firms producing identical products D) a few firms producing an identical product

B) a large number of firms selling similar, but not identical, products

Which of the following is not a characteristic of monopolistic competition? A) barriers to entry are low B) firms are price takers C) there are many buyers and sellers D) Firms sell similar, but not identical, products

B) firms are price takers

To be a natural monopoly a firm must A) be very large relative to the total market B) have economies of scale that are so large that it can supply the entire market at a lower cost than two or more firms C) have significant network externalities D) control a key resource input

B) have economies of scale that are so large that it can supply the entire market at a lower cost than two or more firms

A perfectly competitive firm faces a demand curve that is A) perfectly inelastic B) horizontal C) perpendicular to the quantity axis D)vertical

B) horizontal

A perfectly competitive firm has to charge the same price as every other firm in the market. Therefore the firm A) is not able to make a profit in the short run B) is a price taker C) faces a perfectly inelastic supply curve D) faces a perfectly inelastic demand curve

B) is a price taker

For a perfectly competitive firm, at profit maximization A) production must occur where average cost is minimized B) marginal revenue equals marginal cost C) market price exceeds marginal cost D) total revenue is maximized

B) marginal revenue equals marginal cost

Roughly, 75 percent of your dollar is spent in what market structure? A) perfect competition B) monopolistic competition C) oligopoly D) monopoly

B) monopolistic competition

When new firms are encouraged to enter a monopolistically competitive market A) the marginal curve facing an existing firm shifts downward B) some existing firms must be earning economic profits C) the demand curve facing an existing firm shifts to the right D) they do so because there is insufficient product differentiation

B) some existing firms must be earning economic profits

If the market price is $40 in a perfectly competitive market, the marginal revenue from selling the fifth unit is A) $8 B) $20 C) $40 D) $200

C) $40

Which of the following is the best example of a perfectly competitive firm? A) the Ford Motor Company B) the United Parcel Service (UPS) C) a corn farmer in Illinois D) a Taco Bell restaurant

C) a corn farmer in Illinois

A price maker is A) a consumer who participates in an auction where she announces her willingness to pay for a product B) a person who actively seeks out the best price for a product that he or she wishes to buy C) a firm that has some control over the price of the product it sells D) a firm that is able to sell any quantity at the highest possible price

C) a firm that has some control over the price of the product it sells

Diseconomies of scale occur when A) long-run average cost fall as a firm expands its plant size B) short-run average costs rise as a firm expands its plant size C) long-run average costs rise as a firm increases its output D) long-run labor costs rise as a firm increases its output

C) long-run average costs rise as a firm increases its output

The bottled water industry 35% is an example of which type of market structure? A) perfect competition B) pure competition C) monopolistic competition D) oligopoly

C) monopolistic competition

The gum industry at a 97 percent concentration ratio is defined as what type of market? A) perfect competition B) monopolistic competition C) oligopoly D) monopoly

C) oligopoly

Letters are used to represent the terms used to answer the question: price (P), quantity of output (Q), total cost (TC), and average total cost (ATC). Which of the following questions is equal to a firm's profit? A) (PxQ) - (PxATC) B) P-TC C) P-ATC D) (PxQ) -TC

D) (PxQ)-TC

An oligopoly is defined as a firm with a ____________ or more concentration ratio. A) 20 % B) 30 % C) 40 % D) 50%

D) 50 percent

An example of a government-imposed barrier to entry gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented. The entry barrier is know as A) an exclusive marketing agreement B) a tariff C) a copyright D) a patent

D) a patent

Diminishing marginal product of labor occurs when adding another unit of labor A)decreases output by an amount smaller than the output added by the previous unit of labor B) decreases output C) increases output by an amount larger than the output added by the previous unit of labor D) changes the output by an amount smaller than the output added by the previous unit of labor

D) changes the output by an amount smaller than the output added by the previous unit of labor

If a firm's long-run average total curve shows that it can produce 5,000 DVDs at an average cost of $2.00 and 15,000 DVDs at an average cost of $1.50 this is evidence of A) diseconomies of scale B)the law of supply C)diminishing returns D)economies of scale

D) economies of scale

If a perfectly competitive apple farm's marginal revenue exceeds the marginal cost of the last bushel of apples sold, what should the farm do to maximize its profit? A) determine what the total revenue and total cost of production are B) decrease output C) lower its price to sell more D) increase output

D) increase output

The demand curve of a monopolistically competitive firm A) is downward-sloping because it sells an identical product B) is horizontal because the firm must cut its price to sell more C) is perfectly elastic D) is downward-sloping because it must cut its price to sell more

D) is horizontal because the firm must cut its price to sell more

The marginal product of labor is defined as A) the additional labor required to produce one more unit of output B) the additional labor cost of producing one more unit of output C) the change in total revenue that results when an additional unit of labor is hired D) the change in output that a firm produces as a result of hiring one more worker

D) the change in output that a firm produces as a result of hiring one more worker