MICRO FINAL EXAM PRACTICE chapters included in Quiz 2 (9, 10, 11, 12, 13, 14), and the materials covered thereafter (21, 15, 16, 17, 20, 26)

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Refer to the data for a (non price-discriminating) monopolist. At its profit-maximizing output, this firm's total costs will be Total Output, PriceMarginal, Revenue, Average Total Cost, Marginal Cost 1 $100 $100 $100.00 $30 2 90 80 63.00 26 3 80 60 52.67 32 4 70 40 49.50 40 5 60 20 49.60 50 6 50 0 50.00 52 7 40 -20 52.29 66 8 30 -40 55.75 80 9 20 -60 60.67 100 10 10 -80 67.60 130

$198.

Ouput Total Cost 0 $10 1 20 2 30 3 40 4 50 5 60 6 70 Refer to the provided table. The average variable cost of producing 3 units of output is

$10.

Refer to the provided table. The total fixed cost of production is

$10.

Harry owns a barbershop and charges $6 per haircut. By hiring one barber at $10 per hour, the shop can provide 24 haircuts per eight-hour day. By hiring a second barber at the same wage rate, the shop can now provide a total of 42 haircuts per day. The marginal revenue product (MRP) of the second barber is

$108.

A firm can hire six workers at a wage rate of $8 per hour but must pay $9 per hour to all of its employees to attract a seventh worker. The marginal wage cost (MRC) of the seventh worker is

$15

The accompanying table gives cost data for a firm that is selling in a purely competitive market. We can infer that, at zero output, this firm's total fixed, total variable, and total costs are

$150, zero, and $150, respectively.

Answer the question on the basis of the following cost data. OUTPUT . TOTAL COST 0 . $24 1 . 33 2 . 41 3 . 48 4 . 54 5 . 61 6 . 69 The average total cost of producing 3 units of output is

$16.

The accompanying table applies to a purely competitive industry composed of 100 identical firms. If each of the 100 firms in the industry is maximizing its profit and earning only a normal profit (i.e. zero economic profit), each must have a total cost of Quantity Demanded, Price, Quantity Supplied 400,000 $5 800,000 500,000 4 700,000 600,000 3 600,000 700,000 2 500,000 800,000 1 400,000

$18,000

Refer to the diagram. At output level Q, total fixed cost is

BCDE

The above graph shows the demand and the cost curves for a firm operating in a perfectly competitive market. According to the accompanying diagram, at the profit-maximizing output, the firm will realize

an economic profit of ABGH.

It is possible for a firm to continue to operate even at a loss in the short run

as long as it can cover its variable costs

Which of the following is the best example of oligopoly?

automobile manufacturing

If a technological advance increases a firm's labor productivity, we would expect its

average total cost curve to fall

If a regulatory commission wants to provide a natural monopoly with a fair return on its investment, it should establish a price that is equal to

average total cost.

Game theory can be used to demonstrate that oligopoly firms

can increase their profits through collusion.

A perfectly elastic demand curve for a perfectly competitive producer implies that the firm

can sell as much output as it chooses at the existing price.

Critics of industrial regulation say that such regulation

contributes to X-inefficiency.

An industry is expected to expand if firms in the industry are earning positive

economic profits.

If production is occurring where marginal cost of production exceeds the price of the product, the purely competitive firm will

fail to maximize profit and resources will be overallocated to the product.

Which of the following is most likely to be a variable cost?

fuel and power payments

Refer to the diagrams. In diagram (B) the profit-maximizing quantity is (plus another graph that of px and qx with a demand line and s=mc line)

g, and the profit-maximizing price is d.

Refer to the diagram. Equilibrium output is

The long-run trend of real wages in the U.S.

has been upward.

A patent gives a firm the power to charge a price that

is higher than marginal cost.

The ability of personalized pricing by online retailers to price discriminate

is limited by buyers' willingness and ability to easily search out lower prices at other online sites.

In the provided diagram, the profit-maximizing output

is n.

The "eurozone"

is the subset of the European Union (EU) that uses a common currency.

A monopolistically competitive industry combines elements of both competition and monopoly. The competition element of the business results from

low entry barriers to entry of new firms in the industry

The main purpose of industrial regulation is to

lower price to average total cost such that the firm earns a fair return.

Other things equal, the monopsonistic employer will pay a

lower wage rate and hire fewer workers than will a purely competitive employer.

The Sherman Act of 1890 was designed to

make monopoly and acts that restrain trade illegal.

Allocative efficiency occurs when the

marginal cost of production of a good equals the marginal benefit to society.

The first, second, and third workers employed by a firm add 24, 18, and 9 units to total product, respectively. Therefore, we can conclude that

marginal product of the third worker is 9.

A profit-maximizing firm will always find it profitable to hire workers up to the point at which their

marginal resource cost (MRC) is equal to their marginal revenue product (MRP).

Profit-maximizing firms (e.g. in a perfectly competitive industry) will determine the profit-maximizing (or loss-minimizing) output by equating

marginal revenue and marginal cost.

A natural-resource abundant country will be expected to export a land-intensive commodity such as

meat

The practice of price discrimination is associated with pure monopoly because

monopolists have considerable ability to control output and price.

Local electric or gas utility companies mostly operate in which market structure?

monopoly

Compared to the purely competitive industry, a pure monopoly firm

is able to use barriers to entry of new firms into the industry, and maintain positive economic profits in the long run.

The modern view of technological advance is that it

is an internal element of capitalism, occurring in response to profit incentives.

An industry having a four-firm concentration ratio of 85 percent

is an oligopoly.

The marginal revenue product (MRP) curve for labor

is downsloping and shows the relationship between wage rates and the quantity of labor demanded.

Assume that the market for soybeans is purely competitive, and currently, firms growing soybeans are earning positive economic profits. In the long run, we can expect

new firms to enter, causing the market price of soybeans to fall.

The diagram portrays

noncollusive oligopoly.

The demand schedule or curve confronted by a single purely competitive firm is

perfectly elastic.

Refer to the graph for a profit-maximizing monopolist. At equilibrium, the firm will be earning

positive profits.

Economic profit in the long run is

possible for a pure monopoly but not for a perfectly competitive firm.

Suppose that two firms in an industry with a Herfindahl index of 5,000 announce a merger. The U.S. Justice Department concludes the merger will boost the index to 5,500. The antitrust authorities will most likely

prevent the merger, contending that it violates the Clayton Act.

Which of the following does NOT necessarily violate antitrust laws?

price discrimination

When a purely competitive firm is in long-run equilibrium,

price equals marginal cost.

The profit-maximizing output of a pure monopoly is not socially optimal, because in equilibrium

price exceeds marginal cost.

Resources are efficiently allocated when production occurs where

price is equal to marginal cost.

Suppose that an industry is characterized by a few firms and price leadership. We would expect that

price would exceed both marginal cost and average total cost.

Which of the following is directly illegal under the Sherman Act?

price-fixing

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If product price is $45, the firm will

produce 5 units and make $15 economic profit.

A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should

produce because the resulting loss is less than its TFC.

The labor demand curve of a purely competitive producer

slopes downward because the marginal product of successive workers declines.

The more inelastic are demand and supply, the

smaller is the efficiency loss of an excise tax.

The prisoner's dilemma game reveals that

sometimes when individuals act independently in their own self-interest, everyone is worse off than if they had cooperated.

Which of the following is an example of a land-intensive commodity?

soybeans

Entry fees at national parks and monuments are an example of

the benefits-received principle of taxation.

The difference between the maximum price a consumer is willing to pay for a product and the actual price the consumer pays is

the consumer surplus.

The likelihood of a cartel being successful is greater when

the cost curves and demand faced by various participants are very similar.

Resource X (e.g. labor) has many close substitutes, whereas resource Y (e.g. land) has no close substitutes. Other things equal, we would expect

the demand for resource X to be more elastic than the demand for resource Y.

The demand for airline pilots results from the demand for air travel. This fact is an example of

the derived demand for labor.

The diagram portrays

the equilibrium position of a competitive firm in the long run.

The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the

profit-maximizing rule.

Assume that a restaurant is hiring labor in an amount such that the MRC of the last worker is $16 and her MRP is $12. On the basis of this information, we can say that

profits will be increased by hiring fewer workers.

Refer to the income tax schedule given in the table. The tax represented is Taxable Income Total Tax $1,000 $0 2,000 100 3,000 300 4,000 600 5,000 1,000 6,000 1,500

progressive.

The property tax may be regressive even though wealthy people own much more taxable property than do poor people. This possibility arises because

property taxes on rental property and business property are shifted.

Refer to the diagrams. Firm A is a

pure competitor, and Firm B is a pure monopoly.

The basic characteristic of the short run is that

the firm does not have sufficient time to change the size of its plant.

In which of these continuums of degrees of competition (lowest to highest) is oligopoly properly placed?

pure monopoly, oligopoly, monopolistic competition, pure competition

A constant-cost industry is one in which

resource prices (e.g. labor wage or raw materials cost) remain unchanged as output is increased.

Long-run competitive equilibrium

results in zero economic profits for all existing firms in the industry.

If a firm doubles its output in the long run and its unit costs of production decline, we can conclude that

the firm experiences economies of scale.

Refer to the above table that contains information on the number of workers hired by a firm, the amount of output produced by these workers, and the price at which these outputs are sold in the market. The data in the table reveal that Unit of Labor Total Product Product Price 0 0 $2.20 1 15 2.00 2 28 1.80 3 39 1.60 4 48 1.40 5 55 1.20 6 60 1.10

the firm is selling its product in an imperfectly competitive product market.

Refer to the diagram for a purely competitive producer. If product price is P4,

the firm will earn an economic profit.

If the four-firm concentration ratio for industry X is 80,

the four largest firms account for 80 percent of total sales in the industry

If an industry evolves from monopolistic competition to oligopoly, we would expect

the four-firm concentration ratio to increase.

Refer to the diagram. The MRC curve lies above the labor supply curve because

the higher wage needed to attract additional workers must also be paid to the workers already employed.

Marginal resource cost (MRC) is

the increase in total resource cost associated with the hire of one more unit of the resource.

An employer hiring workers in a competitive labor market should hire additional labor as long as

the marginal revenue product (MRP) of the worker exceeds the worker's wage rate.

The change in a firm's total revenue that results from hiring an additional worker is measured by

the marginal revenue product (MRP).

The tax rates embodied in the federal personal income tax are such that

the marginal tax rate is higher than the average tax rate, causing the average tax rate to rise as income rises.

In the Alcoa case of 1945, the courts held that

the mere possession of monopoly power is a violation of the antitrust laws.

Which of the following arguments contends that certain industries need to be protected in the interest of national security?

the military self-sufficiency argument

The efficiency loss of a tax is

the net value of sacrificed output caused by the tax.

Assume the price of capital falls relative to the price of labor and, as a result, the demand for labor increases. Therefore,

the output effect (due to lower relative price of capital) is greater than the substitution effect.

Creative destruction is

the process by which new firms and new products replace existing dominant firms and products.

The difference between the actual price that a producer receives and the minimum acceptable price a producer is willing to accept is

the producer surplus.

In a merket economy, the term productive efficiency refers to

the production of a good at the lowest average total cost.

The average tax rate is

the ratio of total taxes paid to total taxable income.

All firms have to incur production costs because of

the resources that they use for production.

Suppose the MRP of a firm's 12th worker is $22 and the worker's marginal wage cost (MRC) is $16. We can say with certainty that the firm

will find it profitable to hire more workers.

A pure monopolist

will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output.

The labor demand curve of a firm

will shift to the left if the price of the product that the labor is producing falls.

Responsibility for enforcing the antitrust laws rests

with both the Department of Justice and the Federal Trade Commission.

The principal-agent problem arises in labor markets because

workers may provide less-than-expected work effort.

Refer to the given data for the units of labor hired by a firm and the wage rate paid to these workers. If there is neither a union nor a minimum wage, we can conclude that this firm Units of Labor Wage Rate MRC (of Labor) MRP (of Labor) 1 $8 $8 $12 2 8 8 $10 3 8 . 8 8 4 8 8 6 5 8 8 4

"purchases" labor in a purely competitive labor market.

A firm that hires labor in a purely competitive resource market is a

"wage taker."

Answer the question on the basis of the accompanying demand schedule faced by a monopoly firm. Price Quantity Demanded $7 1 6 2 5 3 4 4 3 5 The marginal revenue obtained from selling the fourth unit of output is

$1.

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were

$200,000 and its economic profits were $0

If total fixed cost is $200, total variable cost is $600, and total product is 4 units, then average total cost must be

$200.

Answer the question on the basis of the following cost data. OUTPUT . TOTAL COST 0 . $24 1 . 33 2 . 41 3 . 48 4 . 54 5 . 61 6 . 69 The total variable cost of producing 5 units is

$37

1. W < MRP; W < MRC 2. W = MRP; W < MRC 3. W = MRP; W = MRC 4. W > MRP; W > MRC Refer to the list where W denotes the labor wage rate. The outcome in a monopsony labor market is shown by

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all non labor resources are fixed. The marginal product of the sixth worker is

15 units of output.

The question is based on the following table, which provides information on the production of a product that requires one variable input. Input Total Product 0 0 1 5 2 20 3 32 4 42 5 50 6 55 7 58 8 58 9 56 With the addition of the second unit of input, the marginal product is

15 and the average product is 10.

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $68.10, it will produce

8 units at an economic profit of $130.72.

A decline in the demand for shoes will cause the demand for leather as input for shoe manufacturing to decline.

Which of the following statements best illustrates the concept of derived demand?

A decline in the demand for shoes will cause the demand for leather as input for shoe manufacturing to decline.

A merger between a maker of household detergents and a fast-food chain would be an example of

A merger between an automobile manufacturer and a maker of automobile tires is an example of a

Which of the following is correct?

A purely competitive firm is a "price taker," while a monopolist is a "price maker."

Suppose the Supreme Court rules that the ABC Corporation is in violation of the antitrust laws because it produces 70 percent of the output of its industry. This decision is consistent with the

Alcoa case.

The government was successful in gaining an antitrust conviction in the

Alcoa case.

What do wages paid to factory workers, interest paid on a bank loan, forgone interest, and the purchase of component parts have in common?

All are opportunity costs.

As it relates to the R&D decision, the interest-rate cost-of-funds curve

Which of the following is an example of "creative destruction"?

Automobile production causes the wagon industry to shut down.

For a purely competitive seller, price equals

all of these.

In the diagram, S is the before-tax supply curve and St is the supply curve after an excise tax is imposed. The total amount of the tax paid by producers is shown by area(s)

C only.

Which country has the largest share of total world exports?

China

If the firms in an oligopolistic industry can establish an effective cartel, the resulting output and price in the industry will approximate those of

a pure monopoly.

If the demand curve faced by a single profit-maximizing firm is downward-sloping, the firm cannot be

a purely competitive firm.

If the wage rate that a firm will have to pay its workers increases,

a purely competitive producer and an imperfectly competitive producer will both hire less labor.

Which of the following supports the contention that pure competitors have a weak incentive to engage in R&D?

Entry to purely competitive industries is easy, and thus profit from innovation is quickly competed away.

The antitrust laws are enforced by the

Federal Justice Department and the Federal Trade Commission.

Which of the following distinguishes the short run from the long run in pure competition?

Firms can enter and exit the market in the long run but not in the short run.

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a differentiated oligopoly firm in a highly concentrated industry?

Ford Motor Company

The table contains five tax schedules for an economy. All figures are in billions of dollars. Which of the schedule(s) represent(s) a regressive tax? I II III IV V Tax, Base (Income)/ Tax, Base(Income)/ Tax Base(Income)/ Tax Base(Income)/ Tax Base(Income) $30 $100 $10 $100 $5 $100 $30 $100 $10 $100 50 200 20 200 15 200 60 200 30 200 60 300 30 300 30 300 90 300 60 300 70 400 40 400 50 400 120 400 100 40

I only

If profits are maximized (or losses minimized), which of the following conditions is common to both unregulated monopoly and pure competition?

MR = MC

Which of the following is characteristic of a pure monopolist's demand curve?

It is the same as the market demand curve.

If the minimum wage is set too high, in some labor markets we can expect to see

a surplus of labor.

In the Microsoft antitrust case, the federal government said in essence that

Microsoft was a "bad monopoly."

Refer to the diagram for a purely competitive producer. The lowest price at which the firm should produce (as opposed to shutting down) is

P 2.

Which of the following conditions is true for a purely competitive firm in long-run equilibrium?

P = MC = minimum ATC.

In a merket economy, "allocative efficiency" is said to be achieved when the production of a good occurs where

P = MC.

If the industry depicted in the graph is purely monopolistic, the profit-maximizing price and quantity will be

P3 and Q3.

Which of the following is an important characteristic of a purely competitive seller's demand curve?

Price and marginal revenue are equal at all levels of output.

Which of the following is a feature of a purely competitive market?

Products are standardized or homogeneous.

Refer to the diagram. Assuming no labor union or relevant minimum wage, the firm represented will hire

Q 2 workers and pay a W 1 wage rate.

In the inverted-U theory of R&D,

R&D expenditures first rise as a percentage of firms' sales as industry concentration increases, but then fall as higher industry concentration occurs.

Movie producers A, B, and C secretly meet and agree to release their summer blockbuster films in sequence, rather than at the same time. The U.S. Justice Department learns of the agreement and files an antitrust suit. The federal government would most likely file charges under the

Sherman Act, Section 1.

Assume a firm closes down in the short run and produces no output. Under these conditions,

TFC and TC are positive, but TVC is zero.

Suppose that you own a toy store and want to buy 100 talking robots. Your supplier will sell you the robots only if you also agree to buy 200 dolls. This is an illegal practice called

a tying contract.

Which of the following statements about the European Union (EU) is true?

The EU has abolished most trade barriers among participating countries and has common tariffs applied to non-EU goods.

Which of the following is not a necessary characteristic of a purely competitive industry?

The industry or market demand is highly elastic.

One would expect that collusion among oligopolistic producers would be easiest to achieve in which of the following cases?

a very small number of firms producing a homogeneous product

Which of the following statements best describes the Internet market structure?

There are a few large firms, such as Google, Facebook, and Amazon, each dominating a particular sector but always trying to gain market share in another sector.

In the long run

all costs are variable costs

Which of the following is correct?

Vertical mergers are more likely to be acceptable under antitrust laws than are horizontal mergers.

Which of the following will be an example of implicit cost for a firm?

Wages from previous job forgone by the owner of the firm.

A high tariff on imported good X might reduce domestic employment in industry Y if

X is an input that is used domestically in producing Y.

A purely competitive seller is

a "price taker."

If you operated a small bakery, which of the following would be a variable cost in the short run?

baking supplies (flour, salt, etc.)

The economic incentive for price discrimination is based upon

differences among buyers' elasticities of demand.

Which of the following is an example of a labor-intensive commodity?

digital cameras

The reason that average total cost of production eventually increases as output increases for the typical firm is because of

diminishing marginal returns.

If the competitive firm depicted in this diagram produces output Q, it will

earn a normal profit.

The diagram above shows the short-run average total cost (ATC) curves associated with different plant size. As the firm in the diagram expands from plant size #1 to plant size #3, it experiences

economies of scale

The ability of Intel to spread product development and other "start-up" costs over a larger number of units of output results in

economies of scale.

Utility companies like electricity or water supply operate as natural monopolies because of

economies of scale.

Suppose the domestic price (no-international-trade price) of copper is $1.20 a pound in the United States while the world price is $1.00 a pound. Assuming no transportation costs, the United States will

import copper.

The diagram shows the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's economic profit (ATC curve in between 10-20 on the vert axis and 5-75 on horizontal [quantity])

is zero.

Tying agreements

obligate a purchaser of product X to also buy product Y from the same seller.

Pure monopolists may obtain economic profits in the long run because

of barriers to entry of new firms in the industry.

Which of the following is a barrier to entry of new firms in an industry?

patents and licenses

A firm will employ more of an input whose relative price has fallen and, conversely, will use less of an input whose relative price has risen. Thus, a fall in the price of capital will increase the relative price of labor and thereby reduce the demand for labor. This describes the

substitution effect.

The ability-to-pay principle of taxation

suggests that taxes should vary directly with people's income and wealth.

Refer to the graph for the labor market. The government decides to impose a wage tax as shown on the graph. The result is that (wage (5.40, 5.00, 4.90) x Quatity of labor)[slabor + tax, slabor, demand]

the wage received by laborers will fall to $4.90 and the labor cost to employers will rise to $5.40.

In a purely competitive industry,

there may be economic profits in the short run but not in the long run.

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all non-labor resources are fixed. Average product is at a maximum when

two workers are hired.

An important economic problem associated with pure monopoly is that, at the profit-maximizing outputs, resources are

underallocated because price exceeds marginal cost.

The retained earnings that corporations often use to finance R&D are also known as

undistributed profits.

A monopolistic firm has a sales schedule such that it can sell 10 prefabricated garages per week at $10,000 each, but if it restricts its output to 9 per week it can sell these at $11,000 each. The marginal revenue of the 10th unit of sales per week is

$1,000.

Suppose that a firm produces 200,000 units a year and sells them all for $10 each. The explicit costs of production are $1,500,000 and the implicit costs of production are $300,000. The firm earns an accounting profit of

$500,000 and an economic profit of $200,000.

The accompanying table gives cost data for a firm that is selling in a purely competitive market. At 3 units of output, total variable cost is ________ and total cost is ________.

$60; $210

The table gives demand and supply data for a competitive market. If government provides a per-unit subsidy of $2 to suppliers of this product, equilibrium price (paid by the buyers) and the equilibrium quantity will be Quantity Demanded Price Quantity Supplied 1,500 $10 3,500 2,000 9 3,000 2,500 8 2,500 3,000 7 2,000 3,500 6 1,500

$7 and 3,000.

Answer the question on the basis of the following cost data. OUTPUT . TOTAL COST 0 . $24 1 . 33 2 . 41 3 . 48 4 . 54 5 . 61 6 . 69 The marginal cost of producing the sixth unit of output is

The table gives demand and supply data for a competitive market. If government levies a per-unit excise tax of $1 on suppliers of this product, equilibrium price (paid by the buyers) and the equilibrium quantity will be Quantity Demanded Price Quantity Supplied 1,500 $10 3,500 2,000 9 3,000 2,500 8 2,500 3,000 7 2,000 3,500 6 1,500

$8.50 and 2,250.

Refer to the data. The firm's optimal amount of R&D spending is

$80 million.

Refer to the data for a (non price-discriminating) monopolist. At its profit-maximizing output, this firm's total profit will be Total Output, PriceMarginal, Revenue, Average Total Cost, Marginal Cost 1 $100 $100 $100.00 $30 2 90 80 63.00 26 3 80 60 52.67 32 4 70 40 49.50 40 5 60 20 49.60 50 6 50 0 50.00 52 7 40 -20 52.29 66 8 30 -40 55.75 80 9 20 -60 60.67 100 10 10 -80 67.60 130

$82.

Refer to the diagram. At the profit-maximizing level of output, total revenue will be

0 AJE.

Refer to the diagram. At output level Q, total variable cost is

0 BEQ

Refer to the diagram. At output level Q, the total cost is

0 BEQ + BCDE.

Refer to the diagram. At the profit-maximizing level of output, total cost will be

0 BHE.

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $15, it will produce

0 units at a loss of $150.

Refer to the personal income tax schedule given in the table. If your taxable income is $8,000, your average tax rate is Taxable Income Total Tax $0 $0 2,000 200 4,000 600 6,000 1,200 8,000 2,000 10,000 3,000

25 percent, and the marginal rate on additional income is 40 percent.

Answer the question on the basis of the accompanying demand schedule faced by a monopoly firm. Price Quantity Demanded $7 1 6 2 5 3 4 4 3 5 At the point where 3 units are being sold, the coefficient of price elasticity of demand

is greater than unity (one).

Minimum-wage legislation is less likely to have adverse effects on employment in the unskilled labor market when the

affected labor market is monopsonistic.

Differences in production efficiencies among nations in producing a particular good result from

all of these.

In the U.S. Steel case of 1920, the courts held that

although U.S. Steel possessed monopoly power, it had not violated the Sherman Act because it had not unreasonably used that power.

Which of the following industries is the best illustration of homogeneous oligopoly?

aluminum

Marginal resource cost (MRC) refers to the

amount by which a firm's total resource cost increases as the result of hiring one more unit of the resource.

Refer to the diagram. At the profit-maximizing level of output, the firm will realize

an economic profit of ABHJ.

Refer to the diagram, which relates to Firm A. Which of the following would shift A's average total cost curve from ATC 1 to ATC 2?

an improved production method that shifts A's total product curve upward

The increased-domestic-employment argument for tariff protection holds that

an increase in tariffs will increase net exports and stimulate domestic employment.

If two resources (e.g. labor and capital) are highly substitutable for one another,

an increase in the price of one will increase the demand for the other.

Refer to the graph. Which one of the following would cause a move from point b on short-run average total cost curve ATC 1 to point e on short-run average cost curve ATC 2?

an increase in the wage rate

The Organization of Petroleum Exporting Countries (OPEC) provides an example of

an international cartel.

The industry characterized by these data is Firm . Market Share(%) A 20 B 20 C 20 D 20 E 10 F 10

an oligopoly.

Refer to the diagram, which relates to Firm X. Which of the following would illustrate process innovation by X?

an upward shift in the total product curve from TP 2 to TP 1

As compared to a purely competitive labor market, in a nonunionized monopsonistic labor market, wages

and employment will both be lower.

An example of a horizontal merger is one between an airline and

another airline.

Fixed cost is

any cost that does not change when the firm changes its output.

The MR = MC rule

applies both to pure monopoly and pure competition.

The law of diminishing returns indicates that

as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.

To practice long-run price discrimination, a monopolist must

be able to separate buyers into different markets with different price elasticities.

The federal gasoline tax is assessed on a per-gallon basis, and the proceeds are used for highway maintenance and improvements. This tax is consistent with the

benefits-received principle of taxation.

Refer to the diagram for a purely competitive producer. The firm will produce at a loss at all prices

between P 2 and P 3.

Assume the demand for automobile tires is highly inelastic and that the supply is highly elastic. The burden of a $2 excise tax on each tire will be

borne primarily by buyers of tires.

Under pure competition, in the long run

both allocative efficiency and productive efficiency are achieved.

If for a firm P = minimum ATC = MC, then

both allocative efficiency and productive efficiency are being achieved.

Refer to the diagram. By producing at output level Q,

both productive and allocative efficiency are achieved.

Suppose that firms A and F in this table merged into a single firm. The four-firm concentration ratio and the Herfindahl index would Firm . Market Share(%) A 20 B 20 C 20 D 20 E 10 F 10

both rise.

Which is an example of a non-tariff barrier (NTB)?

box-by-box inspection requirements for imported fruit

A major criticism of industrial regulation is that

by allowing a fair return price, it gives natural monopolists little incentive to contain costs.

In a purely competitive industry, each firm

can easily enter or exit the industry.

A nation with abundant capital resources tends to be an exporter of

capital-intensive products.

Three major means of collusion by oligopolists are

cartels, informal understandings, and price leadership.

Marginal cost is the

change in total cost that results from producing one more unit of output.

If a monopolist engages in price discrimination, it will

charge a higher price where buyers' demand is price inelastic and a lower price where buyers' demand is price elastic.

If a monopoly firm engages in price discrimination, it will

charge a higher price where individual demand is price inelastic and a lower price where individual demand is price elastic.

Which of the following is an example of a capital-intensive commodity?

chemicals

Suppose you find that the price of your product is less than minimum AVC. You should

close down because, by producing, your losses will exceed your total fixed costs.

Countries engaged in international trade specialize in producing various goods and services based on

comparative advantage.

Antitrust authorities are least likely to take action against

conglomerate mergers.

If the entry or exit of firms does not affect the resource prices (e.g. labor costs) in an industry in the long run, we refer to it as a

constant-cost industry.

If the entry or exit of firms does not affect the resource prices in an industry, we refer to it as a

constant-cost industry.

In the United States, professional football players earn much higher incomes than professional soccer players. This occurs because

consumers have a greater demand for football games than for soccer games.

Suppose that Book-Cost Busters (BCB), without authorization, reproduced a best-selling novel and placed it for downloading on the BCB pay-for-use website. This action would violate the publisher's

Productive efficiency refers to

cost minimization, where P = minimum ATC.

The process by which new firms and new products replace existing dominant firms and products is called

creative destruction.

Suppose that a monopolist calculates that at its present output level, marginal revenue is $1.00 and marginal cost is $2.00. It could maximize profits or minimize losses by

decreasing output and increasing price.

If competing oligopolists completely ignore oligopolist X's price changes, then X's

demand curve will be more elastic than if the other oligopolists matched X's price changes.

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of supply of X is unitary (coefficient = 1). If the incidence of the tax is such that the producers of X pay $1.90 of the tax and the consumers pay $.10, we can conclude that the

demand for X is highly elastic.

The diagram above shows the short-run average total cost (ATC) curves associated with different plant size. As the firm in the diagram expands from plant size #3 to plant size #5, it experiences

diseconomies of scale

Technological advance improves productivity in a purely competitive industry. This change will result in a shift

down of the individual firm's MC curve, causing the market (industry) supply curve to shift to the right.

The mutual interdependence that characterizes oligopoly arises because

each firm in an oligopoly depends on its own pricing strategy and that of its rivals.

The mutual interdependence among firms that characterizes an oligopoly market arises because

each firm in an oligopoly industry depends on its own pricing strategy and that of its rivals

The marginal productivity theory of income distribution suggests that

each individual receives income based on his or her contribution to total output (i.e. its marginal revenue product).

In order for mutually beneficial trade to occur between two otherwise isolated nations that are not trading with each other,

each nation must be able to produce at least one good relatively cheaper than the other.

A firm that is hiring labor in a purely competitive labor market and selling its product in a purely competitive product market will maximize its profit by hiring labor until

marginal revenue product equals marginal resource (labor) cost.

If one worker can pick $30 worth of grapes and two workers together can pick $50 worth of grapes, the

marginal revenue product of the second worker is $20.

In the long run, a pure monopolist will maximize profits by producing that output at which marginal cost is equal to

marginal revenue.

Suppose the Herfindahl indexes for industries A, B, and C are 1,200, 5,000, and 7,500 respectively. These data imply that

market power is greatest in industry C.

When a firm is maximizing profit, it will necessarily be

maximizing the difference between total revenue and total cost.

DASH Airlines is considering the addition of a flight from Red Cloud to David City. The total cost of the flight would be $1,100, of which $800 are fixed costs already incurred. Expected revenues from the flight are $600. DASH should

add this flight, because marginal revenue exceeds marginal costs and total revenue exceeds total variable cost.

Assume the Ajax Mining Company hires 80 percent of the nonunion labor force of Mother Lode, New Mexico. Also, suppose that this labor force is highly immobile. Economists would describe this employer as a(n)

monopsonist.

The economic term for a firm that is the sole buyer in a market is

monopsonist.

The most important gain from international trade for is

more goods than would be attainable through domestic production alone.

The substitution effect due to a change in the relative price of an input indicates that a profit-seeking firm will use

more of an input whose price has fallen and less of other inputs in producing a given output.

The actual incidence of payroll taxes, in the consensus view, is

more on the worker than on the employer.

Mutual interdependence among firms means that each oligopoly producer

must consider the reactions of its rivals when it determines its own pricing policy.

Which of the following is a unique feature of oligopoly?

mutual interdependence among firms in the industry

A market in which the entire demand for a good or service can be satisfied at the least cost by a single firm is a

natural monopoly.

Large minimum efficient scale of plant combined with limited market demand may lead to

natural monopoly.

We would expect a cartel to achieve

neither allocative efficiency nor productive efficiency.

At its profit-maximizing output, a pure nondiscriminating monopolist achieves

neither productive efficiency nor allocative efficiency.

Assume that the market for soybeans is purely competitive. Currently, firms growing soybeans are earning positive economic profits. In the long run, we can expect

new firms to enter, causing the market price of soybeans to fall.

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then

new firms will enter this market.

If a profit-seeking competitive firm is producing its profit-maximizing output and its total fixed costs fall by 25 percent, the firm should

not change its output.

The short-run average total cost curve is U-shaped because

of increasing and diminishing returns.

Pricing and output decisions of firms are more difficult to analyze in oligopoly than other market models because

of mutual interdependence of firms and the fact that oligopoly outcomes are less certain than in other market models.

Diseconomies of scale arise primarily because

of the difficulties involved in managing and coordinating a large business enterprise.

A purely competitive firm is precluded from making economic profits in the long run because

of unimpeded entry of new firms to the industry.

Innovations that lower production costs or create new products in perfectly competitive industries

often generate short-run economic profits that disappear in the long run.

Occupational licensing

often restricts occupational entry and raises the incomes of license holders.

In the US market, people often refer to the "Big Three" in autos and the "Big Four" in accounting.These terms suggest that these two industries are

oligopolies.

Which pair of market structures provides firms with the greatest ability to finance R&D out of retained earnings?

oligopolists and pure monopolists

The "rule of reason" indicated that

only contracts and combinations that unreasonably restrain trade violate the antitrust laws.

A vertical merger involves a combining of one or more firms

operating at different stages of the production process in a particular industry.

In pure competition, if the market price of the product is higher than the minimum average cost of the firms, then

other firms will enter the industry and the industry supply will increase.

The Clayton Act of 1914

outlawed price discrimination, tying contracts, acquisition of stocks of competing corporations, and interlocking directorates that lessen competition.

Over the long run, real earnings per worker can increase only at about the same rate as the economy's rate of growth of

output per worker i.e. productivity of workers.

For the firm, the major goal of profit sharing plans (e.g. stock options) is to

overcome the principal-agent problem in the labor market by better aligning the workers' interests with those of the firm.

Refer to the diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. If the economy is opened to free trade, the price and quantity sold of this product would be

Pc and z.

Suppose the only three existing manufacturers of video game players signed a written contract by which each agreed to charge the same price for products and to distribute their products only in the geographical area assigned them in the contract. This best describes

a cartel

Suppose that Marlen Fisher has legal protection against anyone producing and selling a fishing lure identical to his unique-action "MarFish" lure, whatever the competitor might name the lure. This legal protection is most likely to be a

patent.

A monopsonistic employer in an unorganized (nonunion) labor market will

pay a wage rate less than labor's margiinal revenue product (MRP).

According to Dallas Federal Reserve economist W. Michael Cox, taken to its extreme, the logic of "buying American" implies that

people should only consume what they can produce themselves.

Elasticity of resource demand (e.g. labor) is measured by the

percentage change in resource quantity demanded divided by the percentage change in resource price (wage rate).

The sales tax is a regressive tax because the

percentage of income paid as taxes falls as income rises.

An income tax is progressive if the

percentage of income paid as taxes increases as income increases.

The three most important sources of federal tax revenue in order of descending importance are

personal income, payroll, and corporate income taxes.

With respect to the pure monopolist's demand curve, it can be said that

price exceeds marginal revenue at all outputs greater than 1.

Because the monopolist's demand curve is downsloping,

price must be lowered to sell more output.

a cartel.

Interlocking directorates refers to a situation where

a director of one firm is also a board member of a competing firm.

Oligopolistic industries are characterized by

a few dominant firms and substantial entry barriers to new firms in the industry.

The term oligopoly indicates

a few firms producing either a differentiated or a homogeneous product.

If there are significant economies of scale in an industry, then

a firm that is large may be able to produce at a lower unit cost than can a small firm.

Price-fixing is considered to be a per se violation of the antitrust laws because

a guilty verdict need only show that there was a conspiracy to fix prices, not that it succeeded.

Which of the following findings would be the most likely to lead the U.S. Justice Department to block a corporate merger under terms of the Clayton Act?

a high premerger Herfindahl index in the industry and a large boost in the index because of the merger

Confronted with the same unit (average) cost data, a monopolistic producer will charge

a higher price and produce a smaller output than a competitive firm.

Which of the following is most likely to increase the Herfindahl index of a particular industry?

a horizontal merger between two of the industry's largest firms

If the diagram were relevant to an individual firm, we could conclude that the firm is

a monopsonist in hiring labor.

A breakdown in price leadership leading to successive rounds of price cuts is known as

a price war.

Which of the following best reflects the ability-to-pay philosophy of taxation?

a progressive income tax

Pure monopoly market refers to

a single firm producing a product for which there are no close substitutes.

Suppose Slow Ketchup requires that, as a condition of purchase, all restaurants using its product must buy and make available its new sales product. This arrangement is an example of

a tying contract.

Adam Smith recognized the benefits from trade based on ________, and David Ricardo recognized the benefits from trade based on ________.

absolute advantage; comparative advantage

Suppose firm X implements a new method for extracting copper from copper-bearing ore. This is an example of

process innovation.

The Ajax Manufacturing Company is selling in a purely competitive market. Its output is 100 units, which sell at $4 each. At this level of output, total cost is $600, total fixed cost is $100, and marginal cost is $4. The firm should

produce zero units of output.

Differentiated oligopoly exists where a small number of firms are

producing goods that differ in terms of quality and design.

Homogeneous oligopoly exists where a small number of firms are

producing virtually identical products.

A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from

product differentiation

Kodak introduced to the marketplace a digital camera that uses no film but takes photos that can be shown on personal computers. This is an example of

product innovation.

Allocative efficiency refers to

production at a level where P = MC.

A firm might choose to pay its employees a wage higher than that which would clear the market because

the higher wage raises the opportunity cost of shirking, and thereby address principal-agent problem in the labor market.

A price discriminating pure monopolist will attempt to charge each buyer (or group of buyers)

the maximum price each would be willing to pay.

The term productive efficiency refers to

the production of a good at the lowest average total cost.

The term allocative efficiency refers to

the production of the product mix most desired by consumers.

Human capital is best defined as

the productive skills and knowledge that workers acquire from education and training.

Suppose the market for corn is a purely competitive, constant-cost industry that is in long-run equilibrium. Now assume that an increase in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price will be

the same as the initial equilibrium price, but the new industry output will be greater than the original output.

Oligopolistic firms engage in collusion to

earn greater profits.

Price discrimination refers to

the selling of a given product to different customers at different prices that is not warranted due to differences in production costs.

If a firm's revenues just cover all its implicit costs, then

economic profit is zero, i.e. the firm makes a normal profit

The primary force encouraging the entry of new firms into a purely competitive industry is

economic profits earned by firms already in the industry.

Refer to the diagram for a purely competitive producer. If product price is P 3,

economic profits will be zero.

In the provided diagram, at the profit-maximizing output, total profit is

efbc

In pure competition, the demand for the product of a single firm is perfectly

elastic because many other firms produce the same product.

The market supply curve for labor hired by firms is upward sloping because

employers as a group must pay higher wage rates to obtain more workers.

Eliminating patents would tend to

encourage innovation in products made up of many different technologies but discourage innovation of easy-to-copy products requiring large R&D costs to create.

If the demand for a product is perfectly inelastic, the incidence of an excise tax will be

entirely on the buyer.

Long-run adjustments in purely competitive markets primarily take the form of

entry or exit of firms in the market.

The marginal tax rate is

equal to the change in taxes/change in taxable income.

Refer to the diagrams. Diagram (A) represents (plus another graph that of px and qx with a demand line and s=mc line)

equilibrium price and quantity in a purely competitive industry.

The benefits-received principle of taxation is most evident in

excise taxes on gasoline.

Consumers who clip and redeem discount coupons

exhibit a higher price elasticity of demand for a given product than consumers who do not clip and redeem coupons.

A profit-maximizing firm will

expand employment of workers if marginal revenue product (MRP) of an additional worker exceeds marginal resource cost of the worker.

In deciding on an optimal amount and type of research and development, firms should adhere to the rule: Expand R&D until

expected rate of return equals the interest rate.

To the economist, total cost includes

explicit and implicit costs

Cash expenditures a firm incurs to pay for resources are called

explicit costs

Suppose the domestic price (no-international-trade price) of wheat is $3.50 a bushel in the United States while the world price is $4.00 a bushel. Assuming no transportation costs, the United States will

export wheat.

In recent years, the United States has

exported more services abroad than it has imported.

A purely monopoly producer (firm)

faces a downsloping market demand curve since it is the only seller in the market.

X-inefficiency refers to a situation in which a firm

fails to achieve the minimum average total costs attainable at each level of output.

If enforcement of antitrust laws caused the two largest firms in this table to be divided in half, with each half having equal market share, the industry's four-firm concentration ratio would ________ and its Herfindahl index would ________. Firm Market Share (%) A 40 B 30 C 20 D 5 E 5

fall; fall

A firm that experiences economies of scale over its range of production will have a

falling long-run average cost curve.

In economics, the term "public sector" refers to the

federal, state, and local government.

The general rule for hiring any input (say, labor) in the profit-maximizing amount is marginal resource cost (MRC) = marginal revenue product (MRP). This rule takes the special form W = MRP (where W is the wage rate) only when the

firm hires all its workers in a purely competitive labor market.

The idea of efficiency wages is that

firms might get greater work effort by paying above-equilibrium wage rates.

Refer to the graph. A decrease in fixed costs is shown by

the shift of the short-run average total cost curve from ATC 2 to ATC 1

Fixed costs are associated with

the short run only

In monopsony,

the wage rate paid by the employer varies directly with the number of workers employed.

Creative destruction is not automatic because

there are major obstacles to the entry of new innovative firms into concentrated industries.

Economic analysis of tariffs reveals that

they increase domestic production of the good on which an import tariff has been imposed.

The question is based on the following table, which provides information on the production of a product that requires one variable input. Input Total Product 0 0 1 5 2 20 3 32 4 42 5 50 6 55 7 58 8 58 9 56 Diminishing marginal returns sets in with the addition of the

third unit of input.

Answer the question on the basis of the following output data for a firm. Assume that the amounts of all nonlabor resources are fixed

third worker

Economists use the term imperfect competition to describe

those markets that are not purely competitive.

The MR = MC rule applies

to firms in all types of industries in both the short run and in the long run.

The main purpose of the antitrust laws is

to prevent the monopolization of industries.

Suppose that, when producing 10 units of output, a firm's AVC is $22, its AFC is $5, and its MC is $30. This firm's

total cost is $270

Firms seek to maximize

total economic profit.

Taxable income is

total income less deductions and exemptions.

A firm reaches a break-even point (normal profit position) where

total revenue and total cost are equal.

A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its

total variable costs.

Suppose that Marlen Fisher has legal protection against anyone producing and selling a fishing lure specifically named "MarFish." This legal protection is most likely to be a

trademark.

Refer to the diagrams, which pertain to a purely competitive firm producing output q and the industry in which it operates. In the long run we should expect

firms to leave the industry, market supply to fall, and product price to rise.

The short run is characterized by

fixed plant capacity.

Patents are most likely to infringe on innovation

for products that incorporate many different technologies into a single product.

In the 1911 Standard Oil case, the U.S. Supreme Court found Standard Oil

guilty of monopolizing the petroleum industry.

Refer to the diagrams. The firm (two wage rate x employment diagrams on $5x5 employment and one with $5 x 500 employment)

has a constant marginal resource cost of $5.

A natural monopoly exists when

unit costs are minimized by having one firm produce an industry's entire output.

Paying an above-equilibrium wage rate might reduce unit labor costs by

increasing the opportunity cost to workers of being fired for shirking.

Cartels are difficult to maintain in the long run because

individual members may find it profitable to cheat on agreements.

Government regulation of firms' prices or "rates" in selected industries (e.g. electricity) is the focus of

industrial regulation.

If a 10 percent wage increase in a particular labor market results in a 5 percent decline in employment in that market, labor demand is

inelastic.

Entrepreneurs in purely competitive industries

innovate to lower operating costs and generate short-run economic profits.

A decreasing-cost industry is one in which

input prices (e.g. labor wages or raw material costs) fall or technology improves as the industry expands.

One of the functions of the Federal Trade Commission is to

investigate instances of faulty and misleading advertising.

The diagram shows the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's total cost (ATC curve in between 10-20 on the vert axis and 5-75 on horizontal [quantity])

is $400.

The diagram shows the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's total revenue (ATC curve in between 10-20 on the vert axis and 5-75 on horizontal [quantity])

is $400.

As a general rule, oligopoly exists when the four-firm concentration ratio

is 40 percent or more.

is 5 tons of beans.

Refer to the diagrams. The firm (two wage rate x employment diagrams on $5x5 employment and one with $5 x 500 employment)

is a "wage taker."

Price-fixing

is a per se violation of the antitrust laws.

In 2000, Microsoft was fined $2.7 billion for

using anticompetitive means to promote its Internet Explorer web browser.

In 2015, Google was indicted by European Union antitrust officials for

using its 90 percent share of the Internet search market to favor its own price-comparison service.

Refer to the diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. With free trade, that is, assuming no tariff, the outputs produced by domestic and foreign producers, respectively, would be

v and vz.

In exchange for a share of ZYX's profits if it succeeds, Firm ABC provides development funds to newly formed ZYX, which is developing an innovative product. ABC funds are called ________, while ZYX is known as a(n) ________.

venture capital; start-up

In the past, Japan has agreed to set an upper limit on the total amount of cars exported to the United States. This is an example of a(n)

voluntary export restriction.

We say that the demand for labor is a derived demand because

we demand the product that labor helps to produce rather than labor service per se.

incidence of a tax pertains to

who actually bears the burden of a tax.

The kinked-demand curve model of oligopoly is useful in explaining

why oligopoly firms do not change their prices frequently.

Economies and diseconomies of scale explain

why the firm's long-run average total cost curve is U-shaped.

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue

will also be $5.

If the market demand for the product increases, in the short run a purely competitive firm

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

The productivity and real wages of workers in industrially advanced economies have risen historically partly because

workers have been able to use larger quantities of capital equipment.

Suppose that a firm sells its products for a price of $25. When the firm produces 100 units of output, its ATC=$15, AVC=$5, and AFC=$10. The profit/loss incurred by the firm is

$1,000

If total fixed cost is $200, total variable cost is $600, and total output produced is 4 units, then average total cost must be

$200.

A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired, 32 when two workers are hired, 37 when three are hired, and 40 when four are hired. The farmer's product sells for $3 per unit, and the wage rate is $13 per worker. The marginal revenue product (MRP) of the second worker is

$24.

Refer to the given data for the units of labor hired by a firm and the wage rate paid to these workers. At the profit-maximizing level of employment, this firm's total labor cost will be Units of Labor Wage Rate MRC (of Labor) MRP (of Labor) 1 $8 $8 $12 2 8 8 $10 3 8 . 8 8 4 8 8 6 5 8 8 4

$24.

Refer to the provided table. The marginal cost of producing the sixth unit of output is

$25.

Refer to the data for a (non price-discriminating) monopolist. At its profit-maximizing output, this firm's total revenue will be 1 $100 $100 $100.00 $30 2 90 80 63.00 26 3 80 60 52.67 32 4 70 40 49.50 40 5 60 20 49.60 50 6 50 0 50.00 52 7 40 -20 52.29 66 8 30 -40 55.75 80 9 20 -60 60.67 100 10 10 -80 67.60 130

$280.

The graph illustrates the market for a product on which an excise tax has been imposed by government. How much of the excise tax per unit is paid by the buyers?

The accompanying table applies to a purely competitive industry composed of 100 identical firms. For each of the 100 firms in this industry, marginal revenue and total revenue will be Quantity Demanded, Price, Quantity Supplied 400,000 $5 800,000 500,000 4 700,000 600,000 3 600,000 700,000 2 500,000 800,000 1 400,000

$3 and $18,000, respectively.

Domestic Market For Steel, Alpha Qs P Qd 60 $5 . 10 40 . 4 20 30 . 3 30 20 2 40 10 1 50 Domestic Market For Steel, Beta Qs . P . Qd 80 . $5 . 20 70 4 30 60 3 40 50 . 2 . 50 40 . 1 60 The accompanying tables show data for the hypothetical nations of Alpha and Beta. Qs is domestic quantity supplied, and Qd is domestic quantity demanded. The domestic equilibrium prices of steel in Alpha and Beta are

$3 and $2, respectively.

$3.

Suppose that Joe sells pork in a purely competitive market. The market price of pork is $3 per pound. Joe's marginal revenue from selling the 12th pound of pork will be exactly

$3.

The accompanying table applies to a purely competitive industry composed of 100 identical firms. If each of the 100 firms in the industry is maximizing its profit and earning only a normal profit, each must have an average total cost of Quantity Demanded, Price, Quantity Supplied 400,000 $5 800,000 500,000 4 700,000 600,000 3 600,000 700,000 2 500,000 800,000 1 400,000

$3.

The accompanying table applies to a purely competitive industry composed of 100 identical firms. The equilibrium price in this purely competitive market is Quantity Demanded, Price, Quantity Supplied 400,000 $5 800,000 500,000 4 700,000 600,000 3 600,000 700,000 2 500,000 800,000 1 400,000

$3.

Refer to the given data. If the market wage rate for every additional worker hired is $8 and the firm hires its profit-maximizing number of workers, the firm's total wage bill (payment) will be Quantity of Labor Total Product Total Revenue 1 4 $16 2 8 32 3 11 44 4 13 52 5 14 56

$32.

Assume labor is the only variable input and that an additional input of labor increases total output from 72 to 80 units. If the product sells for $6 per unit in a purely competitive market, the MRP of this additional worker is

$48.

Assume that in the short run a firm is producing 100 units of output, has average total costs of $200, and has average variable costs of $150. The firm's total fixed costs are

$5,000.

Refer to the data in the accompanying table. If the firm's minimum average variable cost is $10, the firm's profit-maximizing level of output would be Output Marginal Revenue Marginal Cost 0 -- -- 1 $16 $10 2 16 9 3 16 13 4 16 17 5 16 21

Refer to the given data for the units of labor hired by a firm and the wage rate paid to these workers. In maximizing its profit, this firm will employ Units of Labor Wage Rate MRC (of Labor) MRP (of Labor) 1 $8 $8 $12 2 8 8 $10 3 8 . 8 8 4 8 8 6 5 8 8 4

3 units of labor.

Refer to the above table that contains information on the number of workers hired by a firm, the amount of output produced by these workers, and the price at which these outputs are sold in the market. If the firm is hiring workers under purely competitive conditions at a wage rate of $22, it will employ Employment Total Product Product Price 0 0 $3 1 12 3 2 22 3 3 30 3 4 36 3 5 40 3 6 42 3

3 workers.

1. W < MRP; W < MRC 2. W = MRP; W < MRC 3. W = MRP; W = MRC 4. W > MRP; W > MRC Refer to the list where W denotes the labor wage rate. The outcome in a purely competitive labor market is shown by

Assume that in year 1 you pay an average tax rate of 20 percent on a taxable income of $20,000. In year 2, you pay an average tax rate of 25 percent on a taxable income of $30,000. Assuming no change in tax rates, the marginal tax rate on your additional $10,000 of income between year 1 and year 2 is

35 percent.

Answer the question on the basis of the accompanying production possibilities tables for two countries, Alpha and Beta. Alpha's production possibilities A . B . C . D . E Pork (Tons) . 4 . 3 2 . 1 . 0 Beans (Tons) 0 5 10 15 20 Beta's production possibilities A . B . C . D . E Pork (Tons) 8 6 4 2 . 0 Beans (Tons) 0 6 12 18 24 Which of the following would be feasible terms for trade between Alpha and Beta?

4 tons of beans for 1 ton of pork

Answer the question on the basis of the accompanying production possibilities tables for two countries, Alpha and Beta. Alpha's production possibilities A . B . C . D . E Pork (Tons) . 4 . 3 2 . 1 . 0 Beans (Tons) 0 5 10 15 20 Beta's production possibilities A . B . C . D . E Pork (Tons) 8 6 4 2 . 0 Beans (Tons) 0 6 12 18 24 Assume that before specialization and trade, Alpha produced combination C and Beta produced combination B. If these two nations now specialize completely based on comparative advantage, the total gains from specialization and trade will be

4 tons of beans.

Refer to the data for a (non price-discriminating) monopolist. This firm will maximize its profit by producing Total Output, PriceMarginal, Revenue, Average Total Cost, Marginal Cost 1 $100 $100 $100.00 $30 2 90 80 63.00 26 3 80 60 52.67 32 4 70 40 49.50 40 5 60 20 49.60 50 6 50 0 50.00 52 7 40 -20 52.29 66 8 30 -40 55.75 80 9 20 -60 60.67 100 10 10 -80 67.60 130

4 units.

Refer to the income tax schedule given in the table. If your taxable income increases from $4,000 to $5,000, you will encounter a marginal tax rate of Taxable Income Total Tax $1,000 $0 2,000 100 3,000 300 4,000 600 5,000 1,000 6,000 1,500

40 percent.

Refer to the above table that contains information on the number of workers hired by a firm, the amount of output produced by these workers, and the price at which these outputs are sold in the market. If the firm is hiring workers under purely competitive conditions at a wage rate of $10, it will employ Employment Total Product Product Price 0 0 $3 1 12 3 2 22 3 3 30 3 4 36 3 5 40 3 6 42 3

5 workers.

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $35, it will produce

6 units at a loss of $90.

The accompanying table applies to a purely competitive industry composed of 100 identical firms. At the equilibrium price, each of the 100 firms in this industry will produce Quantity Demanded, Price, Quantity Supplied 400,000 $5 800,000 500,000 4 700,000 600,000 3 600,000 700,000 2 500,000 800,000 1 400,000

6,000 units of output.

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $87, it will produce

9 units at an economic profit of $281.97.

In the diagram, S is the before-tax supply curve and St is the supply curve after an excise tax is imposed. The total tax payment to government is shown by area(s)

A + B + C.

In the diagram, S is the before-tax supply curve and St is the supply curve after an excise tax is imposed. The total amount of the tax paid by consumers is shown by areas

A + B.

If the nominal wages of carpenters rose by 5 percent in 2013 and the price level increased by 3 percent, then the real wages of carpenters

increased by 2 percent.

Advertising can enhance economic efficiency when it

increases consumer awareness of substitute products.

Which of the following is a reason why individual firms under pure competition would not find it gainful to advertise their product?

All firms produce a standardized and homogeneous product.

Assume that by devoting all of its resources to the production of X, nation Alpha can produce 40 units of X, while by devoting all of its resources to Y, Alpha can produce 60 units of Y. Comparable figures for nation Beta are 60 units of X and 40 units of Y. We can conclude that

Alpha should specialize in Y and Beta in X.

Answer the question on the basis of the accompanying production possibilities tables for two countries, Alpha and Beta. Alpha's production possibilities A . B . C . D . E Pork (Tons) . 4 . 3 2 . 1 . 0 Beans (Tons) 0 5 10 15 20 Beta's production possibilities A . B . C . D . E Pork (Tons) 8 6 4 2 . 0 Beans (Tons) 0 6 12 18 24 If these two nations specialize on the basis of comparative advantage,

Alpha will produce beans, and Beta will produce pork.

Alpha will want to export 50 units of steel.

Alpha will want to import 20 units of steel.

Refer to the diagram. If this labor market is purely competitive, the wage rate and level of employment respectively will be

B and G.

Advertising can reduce economic efficiency when it

increases entry barriers to entry of new firms in the industry, and leads to greater market power for incumbent firms.

Refer to the diagram. Assume that an inclusive labor union is formed to bargain with the monopsonistic employer of the question. To what level can this union increase the wage rate without causing the number of jobs to decline below that which the monopsonist employer would otherwise have provided?

The legislation that prohibits the acquisition of assets of another company if the transaction would significantly reduce competition, thereby closing a loophole in the Clayton Act, is the

Celler-Kefauver Act.

Tying contracts are illegal under the

Clayton Act of 1914.

Assume the Environmental Protection Agency imposes an excise tax on polluting firms. In which of the following situations would we expect the additional costs to be borne most heavily by consumers?

Demand is highly inelastic and supply is highly elastic.

In which of the following cases was the firm found not guilty of violating the Sherman Act?

DuPont cellophane case

In the diagram, S is the before-tax supply curve and St is the supply curve after an excise tax is imposed. The efficiency loss (or deadweight loss) of the tax is shown by areas

E + F.

Refer to the diagram. To maximize profits or minimize losses, this firm should produce

E units and charge price A.

The above graph shows the demand and the cost curves for a firm operating in a perfectly competitive market. According to the accompanying diagram, to maximize profit or minimize losses, this firm will produce

E units at price A.

The accompanying tables give production possibilities data for Gamma and Sigma. All data are in tons. Gamma's production possibilities A . B . C . D . E Tea . 120 . 90 . 60 30 . 0 Pots . 0 . 30 . 60 . 90 120 Sigma's production possibilities ABCDE Tea 40 30 20 10 0 Pots . 0 30 60 . 90 . 120 On the basis of this information,

Gamma should export tea to Sigma, and Sigma should export pots to Gamma.

Answer the question using the accompanying cost ratios for two products, fish (F) and chicken (C), in countries Singsong and Harmony. Assume that production occurs under conditions of constant costs and that these are the only two nations in the world. Singsong: 1 unit of fish costs 2 units of chicken Harmony: 1 unit of fish costs 4 units of chicken If these two nations specialize based on comparative advantage,

Harmony will produce chicken and Singsong will catch fish.

The table contains five tax schedules for an economy. All figures are in billions of dollars. Which of the schedule(s) represent(s) a proportional tax? I II III IV V Tax, Base (Income)/ Tax, Base(Income)/ Tax Base(Income)/ Tax Base(Income)/ Tax Base(Income) $30 $100 $10 $100 $5 $100 $30 $100 $10 $100 50 200 20 200 15 200 60 200 30 200 60 300 30 300 30 300 90 300 60 300 70 400 40 400 50 400 120 400 100 40

II and IV

The table contains five tax schedules for an economy. All figures are in billions of dollars. Which of the schedule(s) represent(s) a progressive tax? I II III IV V Tax, Base (Income)/ Tax, Base(Income)/ Tax Base(Income)/ Tax Base(Income)/ Tax Base(Income) $30 $100 $10 $100 $5 $100 $30 $100 $10 $100 50 200 20 200 15 200 60 200 30 200 60 300 30 300 30 300 90 300 60 300 70 400 40 400 50 400 120 400 100 40

III and V

Which of the following is true concerning purely competitive industries?

In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.

Which of the following supports the contention that pure competitors have a strong incentive to engage in R&D?

Pure competitors cannot risk being complacent about innovation because a new product, production technique, or distribution method could undermine their normal profit and drive them out of the market.

In which of the following cases did the final court decision result in a breakup of the firm into competing businesses?

Standard Oil case

The tax that is most difficult to shift to others would be

What do economies of scale, the ownership of essential raw materials, and patents have in common?

They are all barriers to entry of new firms in an industry.

Major Internet-related firms such as Google, Apple, Amazon, Microsoft, and Facebook each have an area of the market that they dominate. Which of the following is true about their interaction in the market?

They compete fiercely, as each looks for ways to increase profits by expanding into rivals' markets.

The organization created to oversee the provisions of multilateral trade agreements, resolve disputes under the international trade rules, and meet periodically to consider further trade liberalization is called the

World Trade Organization (WTO).

Which of the following is NOT an entry barrier to new firms in a merket?

X-inefficiency

Using income as the tax base, which of the following best illustrates a regressive tax?

a 7 percent general sales tax

Overall, economists believe that deregulation of industries formerly subjected to industrial regulation (e.g. airlines)

has produced large net benefits for consumers and society.

NAFTA

has reduced most trade barriers between Canada, Mexico, and the United States.

Real wages in the United States until the early 2000-s

have increased at about the same rate as increases in output per worker.

Refer to the diagrams. The price will be ________ and the quantity will be ________ with the industry structure represented by diagram (B) compared to the one represented in (A). (plus another graph that of px and qx with a demand line and s=mc line)

higher; lower

hire the second barber because he will add $28 to profits.

The antitrust laws are based on the

idea that competition leads to greater economic efficiency than does a monopoly.

A constant-cost industry is one in which

if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth.

Suppose that two firms in an industry that has a Herfindahl index of 1,000 announce a merger. The U.S. Justice Department concludes the merger will boost the index to 1,050. The antitrust authorities will most likely

ignore this merger because of the relatively small size of, and increase in, the Herfindahl index.

Country A limits other nation's exports to Country A to 1,000 tons of coal annually. This is an example of a(n)

import quota.

Suppose the United States sets a limit on the number of tons of sugar that can be imported each year. This is an example of a(n)

import quota.

An excise tax on an imported good that is not produced domestically is called a

import tariff.

In 2015, the United States

imported more goods than it exported.

Increases in the productivity of labor result partly from

improvements in technology.

The MR = MC rule applies

in both the short run and the long run.

To economists, the main difference between the short run and the long run is that

in the long run all resources are variable, while in the short run at least one resource is fixed.

In the United States cartels are

in violation of the antitrust laws.

An industry is comprised of six firms (A, B, C, D, E, F). Firms A, B, C, and D each sells 20% of the industry output, while firms E and E each has 10% market share. If all the firms in the industry merged into a single firm, then the Herfindahl index will

increase from 1800 to 10,000

Marginal revenue product (MRP) of labor refers to the

increase in total revenue resulting from hiring one more unit of labor.

Construction workers frequently sponsor political lobbying in support of greater public spending on highways and public buildings. One reason for this is to

increase the demand for construction workers.

Other things equal, patents

increase the expected rate of return on an R&D expenditure.

If a purely competitive constant-cost industry is realizing economic profits, we can expect industry supply to

increase, output to increase, price to decrease, and profits to decrease.

Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation

is making an economic profit of $40.

Refer to the diagram. In equilibrium the firm

is making an economic profit of bd per unit (of output produced).

The marginal revenue product (MRP) curve for labor for a firm

is the firm's labor demand curve.

As it relates to international trade, dumping

is the practice of selling goods in a foreign market at less than cost.

The minimum efficient scale of a firm

is the smallest level of output at which long-run average total cost is minimized.

is ½ fish.

If a firm increases all of its inputs by 10 percent and its output increases by 10 percent, then

it is encountering constant returns to scale

According to some supporters of the minimum wage, it has very small or even nonexistent negative employment effects because

it reduces turnover among minimum-wage workers, prompts employers to use them more efficiently, and thus raises their average productivity.

The demand curve of an oligopolist can be viewed to have different levels of elasticity (describbed by a kinked-demand curve). This is based on the assumption that

its competitors will follow its price cut but ignore a price increase.

If a firm decides to produce no output in the short run, its costs will be

its fixed costs

If a firm is hiring a certain type of labor inputs under purely competitive conditions,

its labor supply and marginal labor (resource) cost curves will coincide and be perfectly elastic.

Suppose that a union successfully negotiated a 10 percent wage increase and the quantity of labor demanded decreased by 10 percent. Given a fixed labor demand curve, we can conclude that

labor demand is unit-elastic.

Assume the price of capital doubles and, as a result, firms make no change in the relative quantities of capital and labor they currently employ. This implies that

labor is not readily substitutable for capital.

The view that the antitrust laws should be enforced relatively leniently because of the tendency for monopoly power to erode over time is known as the

laissez-faire perspective on antitrust.

If production technology to manufacture a certain product dictates that labor and capital must be used in fixed proportions (e.g. 2 workers for 1 machine), an increase in the price of capital will cause a firm to use

less labor as a consequence of the output effect.

Round Things, Inc.'s production process exhibits economies of scale. Currently their long-run average cost is $12/unit. If Round Things doubles its use of all inputs, its new long-run average total cost will be

less than $12/unit.

A natural monopoly occurs when

long-run average costs decline continuously through the range of demand.

In a monopsonistic labor market, the employer will maximize profits by employing workers up to that point at which

marginal revenue product (MRP) equals marginal resource (labor) cost (MRC).

If a purely competitive firm is producing where product price exceeds marginal cost of production, then

the firm will fail to maximize profit and resources will be underallocated to the product.

An industry comprising a very large number of sellers producing a standardized product is known as

pure competition.

The terms of trade reflect the

ratio at which nations will exchange two goods with each other.

The rapid spread of ATMs

reduced the demand for bank tellers initially, but eventually tellers took on tasks that ATMs are not suited to handle.

A tax that takes a larger proportion of income from low-income groups than from high-income groups is a

regressive tax.

If each taxpayer paid the same lump-sum amount regardless of income level, the tax system would be

regressive.

The principle of comparative advantage indicates that mutually beneficial international trade can take place only when

relative costs of production differ between nations.

Assume that the owners of the only gambling casino in Wisconsin spend large sums of money lobbying state government officials to protect their gambling monopoly. Economists refer to these expenditures as

rent-seeking.

The fact that monopoly and monopsony exist in resource markets means that

resource price of an input does not always measure contributions to output, and hence not equal to the marginal revenue product (MRP) of the input.

Long-run competitive equilibrium

results in zero economic profits.

Compensating differences in wages

reward workers differently based on differences in the desirability of jobs.

If firms E and Fin this table merged into a single firm, the Herfindahl index would Firm . Market Share(%) A 20 B 20 C 20 D 20 E 10 F 10

rise, but the four-firm concentration ratio would remain unchanged.

Long-run real wages in the United States have

risen because growth in the demand for labor has exceeded growth in the supply of labor.

Refer to the diagram. This firm's demand and marginal revenue curves are based on the assumption that

rivals will ignore a price increase but match a price decrease.

Taxes on commodities or on purchases are known as

sales and excise taxes.

The main difference between sales and excise taxes is that

sales taxes apply to a wide range of products, while excise taxes apply only to a select group of products.

A patent is the legal right granted to a firm that allows it to

sell its new product exclusively for a given number of years.

Suppose a technological improvement increases the productivity of a firm's capital and, simultaneously, its workers' union negotiates a wage increase. We can predict that

the firm will use relatively more capital and relatively less labor.

Sales and excise taxes are levied on retailers, but retailers add these taxes to the prices of their products. This illustrates the

shifting of taxes to consumers.

A craft union (e.g. the association of lawyers) attempts to increase wage rates by

shifting the market labor supply curve to the left.

"Offshoring" refers to

shifting work overseas that was previously done domestically.

Refer to the diagram, which shows the domestic demand and supply curves for a specific standardized product in a particular nation. If the world price for this product is $0.50, this nation will experience a domestic (y axis: price, .50, 1.00, $1.60. x axis: quantity; 120, 200, 290)(supply and demand lines)

shortage of 160 units, which it will meet with 160 units of imports.

Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm

should continue producing in the short run but leave the industry in the long run if the situation persists.

A competitive employer is using labor in such an amount that labor's marginal revenue product (MRP) is $10 and its wage rate is $8. This firm

should hire more labor because this will increase profits.

Assume that an appliance manufacturer is employing variable resources X and Y in such amounts that the marginal revenue product (MRPs) of the last units of X and Y employed are $100 and $60, respectively. Resource X can be hired at $50 per unit and resource Y at $20 per unit. The firm

should hire more of both X and Y.

Marginal costs of production for a producer may be very small due to its product's ability to satisfy a large number of consumers at the same time (as for Microsoft with its Windows Opearting System). This characteristic of a product is called

simultaneous consumption.

Past costs that are not affected by new decisions are known as

sunk costs

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1). If the incidence of the tax is such that consumers pay $1.80 of the tax and the producers pay $.20, we can conclude that the

supply of X is highly elastic.

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1). If the incidence of the tax is such that the producers of X pay $1.75 of the tax and the consumers pay $.25, we can conclude that the

supply of X is highly inelastic.

Refer to the diagram, which shows the domestic demand and supply curves for a specific standardized product in a particular nation. If the world price for this product is $1.60, this nation will experience a domestic

surplus of 160 units, which it will export.

A progressive tax is such that

tax rates are higher the greater one's income.

If enforcement of antitrust laws cause a pure monopoly firm to be divided into two separate firms each having equal market share, then

the Herfindahl index would drop and the industry will evolve from monopoly to oligopoly

Which one of the following acts declared "every contract, combination . . . or conspiracy, in restraint of trade or commerce among the several states . . . to be illegal"?

the Sherman Act of 1890

The long run is characterized by

the ability of the firm to change all its resources, viz. plant size.

Marginal product of a worker is

the amount an additional worker adds to the firm's total output.

The long run is a period of time, or a time frame, in which

the amount of all resources can be varied.

Refer to the diagram. The vertical distance between ATC and AVC reflects

the average fixed cost at each level of output.

Refer to the diagram for a purely competitive producer. The firm's short-run supply curve is

the bcd segment and above on the MC curve.

Suppose that Joe sells pork in a purely competitive market. The market price of pork is $3 per pound. Joe's marginal revenue from selling the 12th pound of pork would be

The accompanying table applies to a purely competitive industry composed of 100 identical firms. If each of the 100 firms in the industry is maximizing its profit, each must have a marginal cost of Quantity Demanded, Price, Quantity Supplied 400,000 $5 800,000 500,000 4 700,000 600,000 3 600,000 700,000 2 500,000 800,000 1 400,000

$3.

Refer to the data for a (non price-discriminating) monopolist. At its profit-maximizing output, this firm's price will exceed its marginal cost by ________ and its average total cost by ________.

$30; $20.50

Answer the question on the basis of the following cost data. OUTPUT . TOTAL COST 0 . $24 1 . 33 2 . 41 3 . 48 4 . 54 5 . 61 6 . 69 The average fixed cost of producing 3 units of output is

Refer to the income tax schedule given in the table. If your taxable income is $4,000, your average tax rate will be Taxable Income Total Tax $1,000 $0 2,000 100 3,000 300 4,000 600 5,000 1,000 6,000 1,500

15 percent.

18 haircuts.

If you would have to pay $5,000 in taxes on a $25,000 taxable income and $7,000 on a $30,000 taxable income, then the marginal tax rate on the additional $5,000 of income is

40 percent, and the average tax rate is about 23 percent at the $30,000 income level.

Which of the following is true under conditions of pure competition?

No single firm can influence the market price by changing its production level.

Refer to the diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. With a per-unit tariff in the amount PcPt, price and total quantity sold will be

Pt and y.

Some economists are critical of the minimum wage because they believe that it

Which of the following supports the contention that monopolistic competitors have a strong incentive to engage in R&D?

The desire to differentiate products from competitors may motivate monopolistic competitors to engage in R&D.

The view that the antitrust laws need to be strongly enforced to prevent illegal business behaviors, monopolization of markets, and allocative inefficiency is known as the

active antitrust perspective.

Marginal revenue product of a worker measures the

amount by which the addition of one more worker increases a firm's total revenue.

In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if the market price of its product is below

average variable cost.

Marginal revenue is the

change in total revenue associated with the sale of one more unit of output.

Secret conspiracies to fix prices are examples of

covert collusion.

Refer to the diagram. Equilibrium price is

Average fixed cost

declines continually as output increases.

The basic issue in the DuPont cellophane case was

defining the relevant market.

Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of supply of X is unitary (coefficient = 1). If the incidence of the tax is such that the consumers of X pay $1.85 of the tax and the producers pay $0.15, we can conclude that the

demand for X is highly inelastic.

Which of the following is most likely to be an implicit cost for Company X?

forgone rent from the building owned and used by Company X

Refer to the given data. If this firm can hire as few or many workers as it wants at $8, it is Quantity of Labor Total Product Total Revenue 1 4 $16 2 8 32 3 11 44 4 13 52 5 14 56

hiring labor in a purely competitive labor market.

The prices of raw materials increase in a purely competitive industry. This change will result in a(n)increase (upward shift) in the marginal cost curve for firms in the industry.

increase (upward shift) in the marginal cost curve for firms in the industry.

Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry. This is called

limit pricing

Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry. This is called

limit pricing.

When the value of a product to each user, including existing users, increases due to an increase in the total number of users—as in the case of Facebook—we refer to this as

network effects.

Legal protections against competitors producing and selling a product identical to the one you invented are called ________; legal protections against competitors using your product's name are called ________.

patents; trademarks

Employers will hire more units of a resource (e.g. labor) if the

productivity of the resource increases.

Which of the following is most likely to be a fixed cost?

property insurance premiums

Excise taxes on imported goods that help shield domestic producers of the good are called

protective tariffs.

In which market model are the conditions of entry of new firms into the industry most difficult?

pure monopoly

If a monopoly is faced with competition from foreign multinational corporations or from potential new entrants, then it would probably

reduce price and raise output.

Refer to the diagram, which relates to Firm A. Which of the following would shift A's average total cost curve from ATC 1 to ATC 2?

replacement of old equipment with new, more productive equipment embodying technological advance.

As it relates to R&D, the expected-rate-of-return curve, r,

represents the marginal benefit element in the MB = MC decision framework.

Refer to the above table that contains information on the number of workers hired by a firm, the amount of output produced by these workers, and the price at which these outputs are sold in the market. This firm is Employment Total Product Product Price 0 0 $3 1 12 3 2 22 3 3 30 3 4 36 3 5 40 3 6 42 3

selling its product in a purely competitive market.

Assume that the market for corn is purely competitive, and currently, firms growing corn are suffering economic losses. In the long run, we can expect

some firms to exit, causing the market price of corn to rise.

Refer to the diagram, which relates to Firm X. Suppose X implements an innovative new production method that shifts its total product curve from TP 2 to TP 1. Other things equal,

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