Economics Chapter 7-10 test review
A monopolistic competitor has the following information about cost and demand. What will the firm's profits equal in the short run? QuantityPrice ($)Total Revenue ($)Marginal Revenue ($)Total Cost ($)Marginal Cost ($)Average Cost($)02502530——2244823352.517.5423922145511.2562213219607.51082116817778.59.6310202001510011.5101219228131261310.514182521116519.511.791617272921022.513.13181628872602514.44201530053203016
0
In the US economy, nearly half of all the workers employed by private firms work at
18,000 large firms that employ more than 500 workers.
Which of the following would be classified as a differentiated product produced by a monopolistic competitor?
Channel No. 5
If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have reached its
allocative efficiency
Perfect competition displays _____________________ because the social benefits of additional production, as measured by the price that people are willing to pay, are in balance with the ____________ to society of that production.
allocative efficiency; marginal costs
The marginal revenue curve for a monopolist ____________________ the market demand curve.
always lies beneath
The fact that a consumer is not required to buy the goods that a given firm produces, as well as the fact that the consumer might want the goods a firm produces, but may choose to buy from other firms instead
are two stark realities any business firm must recognize.
If the price that a firm charges is higher than its ________________ cost of production for that quantity produced, then the firm will earn profits.
average
If the price that a firm charges is lower than its ____________ of production, the firm will suffer losses.
average cost
The long-term result of entry and exit in a perfectly competitive market is that all firms end up selling at the price level determined by the lowest point on the
average cost curve.
The _____________________ curve will always lie below the curve for average cost because average cost includes _____________ in the numerator of the calculation.
average variable cost; fixed costs
The desire of businesses to __________________________, so that they can raise the prices that they charge and earn higher profits, has been well-understood by economists for a long time.
avoid competing with each other
If a monopoly or a monopolistic competitor raises their prices, then
decline in quantity demanded will be larger for the monopolistic competitor.
If a perfectly competitive market involves many firms selling identical products, then, in the face of such competition,
each of these firms must act as a price-taker.
In a monopolistic competitive industry, firms can try to differentiate their products by
enhancing product's physical aspects and all of the above.
Which of the following is most unlikely to present a barrier to entry into a market?
deregulation
In economics, labor demand is synonymous with
derived demand.
Monopolistic competitors in the food industry will often include a recyclable symbol on packaging used for their product as a means to
differentiate their product.
In microeconomics, the term ___________________ is synonymous with decreasing returns of scale.
diseconomies of scale
In the competitive market for figure skate blades, manufacturers offer an array of products that are
distinctly different in a particular way.
If oligopolistic firms banded together with the intention of acting like a monopoly, it would likely result in their being able to
divide up the monopoly level of profit amongst themselves.
A successful advertising campaign may allow competing monopolists to
do all of the above.
For a monopolistic firm, the demand for its product is
completely inelastic
Economies of scale may arise from all but one of the following. Which one is it?
government economic subsidies protect firms from competition to avoid losses.
Which of the following can be thought of as an adjustment for the risks involved with respect to the cost of a firm acquiring financial capital?
imposition of hurdle rates of interest
A manufacturer would likely make an ___________ in a market following the long-run process of beginning and expanding production in response to ________________ .
entry; a sustained pattern of profits
The term "constant returns to scale" describes a situation where
expanding all inputs does not change the average cost of production.
How can parties who find themselves in a prisoner's dilemma situation avoid the undesired outcome and cooperate with each other?
find effective ways to penalize firms who do not cooperate
Which of the following is most likely to be a monopoly?
local electricity distributor
When a natural monopoly exists in a given industry, the per-unit costs of production will be
lowest when a single firm generates the entire output of the industry.
In microeconomics, the term _____________________ is synonymous with economies of scale.
increasing returns to scale
In economics, the term "shutdown point" refers to the point where the
marginal cost curve crosses the average variable cost curve.
If marginal cost is rising in a competitive firm's short-run production process and its average variable cost is falling as output is increased, then
marginal cost is below average variable cost.
As the name monopolistic competition implies, a firm's decisions in this setting will in certain ways resemble ______________ and in other ways resemble________________ .
monopoly; perfect competition
In the event that Only1Corp. obtains control of all the natural gas producers in the US, it would most likely
raise prices, cut production, and realize positive economic profits.
In monopolistic competition, the end result of entry and exist is that firms end up with a price that lies
on the downward-sloping portion of the average cost curve.
Perfect competition and monopoly stand at _____________ of the spectrum of competition.
opposite ends
The use of sharp, temporary price cuts as a form of _________________ would enable traditional US automakers to discourage new competition from smaller electric car manufacturers.
predatory pricing
If the quality differences of similar products are mostly imperceptible to the average consumer's eyes, which of the following will most likely play a major role in influencing the decisions of purchasers?
price of competing products
I'maGoldMiner has benefited from a record rise in gold prices in the global commodities market. While the price of its output is highly influenced by market speculation, if it wants to increase production to take advantage of the current profit-maximizing opportunity, the company
must accept market price for its physical capital inputs.
if it was possible for one company to gain ownership control all of the uranium processing plants in the US, then
that firm could set up barriers to entry to discourage competition.
Which of the following will present the least amount of concern to a firm that has a monopoly over a particular industry?
the competitive actions of other business firms
The shape of the perceived demand curve for a perfectly competitive firm reflects that firm's ability to
sell any quantity it wishes at the prevailing market price.
What role can advertising play with respect to differentiated products?
shapes consumers intangible preferences
In the _________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where _____________________ .
short run; losses are smallest
In the _________, the perfectly competitive firm will seek out ________________________ .
short run; the quantity of output where profits are highest
A monopolistically competitive firm may earn abnormally high profits in the
short term, but the process of entry will drive those profits to zero in the long run.
If a firm's revenues do not cover its average variable costs, then that firm has reached its _________________ .
shutdown point
What qualities would ideally suit a monopolistic firm with regard to barriers to entry?
sufficient strength to prevent or discourage potential competitors from entering the market
Which of the following should typically be ignored because spending has already been made and cannot be changed?
sunk costs
The perceived demand for a monopolistic competitor
takes competitors into account.
When entry occurs in a monopolistically competitive industry,
the perceived demand and marginal revenue curves for each firm will shift to the left.
Even when competitive firms are unable to calculate marginal revenue product directly, _________________________________________ will push wage rates toward the marginal revenue product of labor.
the pressures of competition in the labor market
When the demand for a good or service limits the quantity that can be sold to an output at which the firm experiences economies of scale,
the firm is a natural monopoly.
In the highly competitive setting in which oligopoly firms operate, which of the following are considered to be typical temptations each may face?
to cooperate to act as a single monopoly and all of the above
Which of the following denotes the typical shape of the monopolist's total cost curve?
total costs rise and grow steeper as output rises
Whatever the firm's quantity of production, _____________ must exceed total costs if it is to earn a profit.
total revenue
In the business world, a _________________ is recognized as a legally acceptable way for any business to keep knowledge of its particular methods of production from being known by competing firms.
trade secret
If a paper mill shuts down its operations for three months so that it produces nothing, its __________________ will be reduced to zero?
variable costs
If a monopolistic competitor raises its price, it _________ customers than a perfectly competitive firm, but ________________ customers compared to the number that a monopoly that raised its prices would.
will lose fewer; it will lose more
If oligopolists compete hard against each other,
zero profits result for all.
Refer to the diagram below. Based on the information illustrated in this graph, which of the following is an accurate statement?
MC is initially downward sloping in the region of increasing MR at low output levels
Refer to the diagram below. In this instance, at the range of output represented at point c,
profits will be maximized.
When a firm makes plans for investments in physical capital, it compares the _______________ on these investments with ______________________
projected rates of return; the cost of financial capital to the firm
___________ include all spending on labor, machinery, tools, and supplies purchased from other firms.
Total costs
When entry occurs in a monopolistically competitive industry,
a smaller quantity will be demanded at any given price.
In the framework of monopolistic competition, advertising works because it causes
a steeper perceived demand curve, as well as c above.
The ______________ of all firms can be broken down into some common underlying patterns.
cost structure
Copyright protection legislation provides protection for original works
during the author's life plus 70 years
A monopolistic competitor has the following information on cost and demand. What will the firm's profits equal in the long run? QuantityPrice ($)Total Revenue ($)Marginal Revenue ($)Total Cost ($)Marginal Cost ($)Average Cost($)02502530——2244823352.517.5423922145511.2562213219607.51082116817778.59.6310202001510011.5101219228131261310.514182521116519.511.791617272921022.513.13181628872602514.44201530053203016
$0
If a firm holds a pure monopoly in the market and is able to sell 4 units of output at $2.00 per unit and 5 units of output at $1.75 per unit, it will produce and sell the fifth unit if its marginal cost is
$0.75 or less
The table below shows a monopolist's demand curve and the cost information for the production of its good. What will their profits equal? QuantityPrice per UnitTotal Cost10$100$10020$80$40030$60$80040$40$1,40050$20$2,400
$1,200
A monopolistic competitor has the following information about cost and demand. If this industry was perfectly competitive, what price would the good sell for? QuantityPrice ($)Total Revenue ($)Marginal Revenue ($)Total Cost ($)Marginal Cost ($)Average Cost($)015015175——5147013180136101313011190219151218092073.413.8201122072253.611.2525102505250510309270329089.67358280133599.57407280-1385109.63456270-34651610.33505250-55652011.3
$10
Given the data provided in the table below, what will the marginal cost equal for production at quantity (Q) level 4? QPTCTRMRMCProfit0$5$9 1$5$10 2$5$12 3$5$15 4$5$19 5$5$24 6$5$30 7$5$45
$4.00
Given the data provided in the table below, what will the marginal revenue equal for production at quantity (Q) level 4? QPTCTRMRMCProfit0$5$9 1$5$10 2$5$12 3$5$15 4$5$19 5$5$24 6$5$30 7$5$45
$5.00
The following table shows the demand curve and cost information for a firm that is a monopoly. If they maximize their profits, what will their profits equal? PriceQuantityTC$300$500$2550$600$20100$1,350$15150$2,300$10200$3,400
$650
A monopolistic competitor has the following information about cost and demand. What will this firm's profits equal in the long run? QuantityPrice ($)Total Revenue ($)Marginal Revenue ($)Total Cost ($)Marginal Cost ($)Average Cost($)015015175——5147013180136101313011190219151218092073.413.8201122072253.611.2525102505250510309270329089.67358280133599.57407280-1385109.63456270-34651610.33505250-55652011.3
-$55
In the United States, a pharmaceutical company's exclusive patent rights last for
20 years.
The US government has registered ___________________ on behalf of business firms to protect a particularly distinct element each has selected for its ability to aid consumers to easily __________________ .
800,000 trademarks; identify the source of goods
The table below sets out cost information for the production of volley balls. Some values are missing. Which of the following statements is correct? QuantityVariable CostFixed CostTotal CostAverage Variable Cost ($ per unit)Marginal Cost ($ per unit)0030300-112 B12E225 CDF3A 7214G
A = 42, E = 12
_____________________ help to explain why every economy, as it develops, has an increasing proportion of its population living in urban areas.
Agglomeration factors
____________ tells a firm whether it can earn profits given the price in the market.
Average cost
_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price.
Total revenue
______________ include all of the costs of production that increase with the quantity produced.
Variable costs
Which of the following is a question economists have struggled to address with only partial success?
Whether a market-oriented economy produces the optimal amount of variety?
When P > MC in a monopolistically competitive market, that industry will most likely produce ______________________ than would be found in a perfectly competitive industry.
a lower quantity of a good and charge a higher price
Why are the underlying economic meanings of the perceived demand curves for a monopolist and monopolistic competitor different?
a monopolist faces the market demand curve and a monopolist competitor does not
Which of the following represents a difference in the process by which a monopolistic competitor and a monopolist make their respective decisions about quantity and price?
a monopolist need not fear entry and also selection b above
In order to reduce the harmful affects of recession and carbon emissions, the government provided tax incentives for manufacturing firm's to ___________________ that provide alternative, more efficient methods of combining inputs to produce output.
acquire energy efficient production technologies
Through the process of exit, monopolistically competitive firms remaining in the market
are no longer earning losses.
By 2007, US market deregulation has proven to be most toxic to the overall health of the US economy in the ________________________ .
banking sector
Occasionally, _________________ may lead to pure monopoly; in other market conditions, they may limit competition _________________ .
barriers to entry; to a few oligopoly firms
Oligopoly firms acting individually may seek to gain profits ___________________________ .
by expanding levels of output and cutting prices
The form of legal protection intended to prevent reproduction of original works is referred to as ______________ law.
copyright
Which of the following falls outside of the classification of business expenses that fall into the category of fixed costs?
costs incurred in the act of producing
The graph below illustrates the total cost function for GoodieCookie Co. The changing slope of the total cost curve reflects this company's
decreasing marginal costs.
The slope of the demand curve for a monopoly firm is
downward sloping
The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls.
economies of scale
In a perfectly competitive market, each firm produces at a quantity where price is set
equal to marginal cost, both in the short run and in the long run.
If a perfectly competitive firm raises its price, the quantity demanded of its product _____________.
falls to zero
The demand curve as perceived by a perfectly competitive firm is __________ .
flat
Which of the following would most likely create the setting for an oligopoly?
government grants Alex, Trent, and Alyse each a patent for their respective molybdenum based electric car batteries
A perfectly competitive industry is a ____________________
hypothetical extreme.
I'maSolarPanelCo. manufactures and distributes solar panels in the US market. Two years ago, it had 5 US competitors, but government stimulus in the industry has encouraged 7 new US competitors to enter the market. In these circumstances, I'maSolarPanelCo.'s price for its output
is dictated by the forces of demand and supply.
Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should
keep the business open in the short-run, but plan to go out of business in the long-run.
If the CEO of I'MaBigBank is playing prisoner's dilemma then, from his perspective, the gains to be had from cooperation are
larger than the rewards from pursuing self-interest.
If a monopolist increases quantity by one unit, but sells the increased output at a slightly lower price,
marginal revenue is affected by adding one additional unit sold at the new price.
The perceived demand curve for a group of competing oligopoly firms will appear kinked as a result of their commitment to
match price cuts, but not price increases.
Shopping malls typically lease retail space to a large number of clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call ________________________.
monopolistic competition
A __________________ exists when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curve.
natural monopoly
Deregulation occurs when a government eliminates or scales back rules relating to all but one of the following. Which one is it?
natural monopoly
What happens in a perfectly competitive industry when economic profit is greater than zero?
new firms may enter the industry and all of the above
In a monopolistically competitive market, the rule for maximizing profit is to set MR = MC, which means
price is higher than marginal revenue.
Why would labor be treated as a variable cost?
producing larger quantities of a good or service generally requires more workers
A monopolistically competitive industry does not display ____________________ in either the short-run, when firms are making _______________, nor in the long-run, when firms are earning ________________ .
productive and allocative efficiency; profits and losses; zero profits
Refer to the table below. If the firm produces 5 units that it sells for $39.00 each, what will its profits or losses equal? QuantityCost (in dollars)Fixed Costs (in dollars)Total Costs (in dollars)Average Total Costs (in dollars per unit)Average Variable Costs (in dollars per unit)Marginal Costs (in dollars per unit)004040- -- -- -114055155515235407517.537.520360401002033.3254904013022.532.53051254015525313561604020026.633.340
profits equal $40
The typical slope of the demand curve as perceived by a monopolistic competitor will
reflect that firm's ability raise its price without losing all of its customers.
Which of the following best identifies what the concept of differentiated products is closely related to?
the degree of product variety that is available.
If monopolistic competitors must expect a process of entry and exit like perfectly competitive firms,
they will be unable to earn higher-than-normal profits in the long run.
If each of two competing monopolists undertakes equal advertising efforts to attract consumers away from the other, the total result is
they will simply neutralize one another's efforts.
Why would a profit-seeking firm need to tailor its decisions about the quantity of labor inputs that it purchases?
to produce the profit-maximizing quantity of output at the lowest possible average cost
If I'maJuiceCo. establishes a bottling plant in Delaware, it will most likely
use production technologies that conserve on the number of workers.
The marginal cost curve is generally ______________, because diminishing marginal returns implies that additional units are ________________________.
upward-sloping; more costly to produce
If a comparison between average cost and price reveals whether a firm is earning profits, then a comparison between average variable cost and price reveals
whether the firm is earning profit if fixed costs are left out of the calculation.
Would raising the price for a product create a larger decline in quantity demanded for a monopolistic competitor's than it would for a monopoly?
yes; consumers will buy from competitors offering lower priced substitutes
