AGB 144

Refer to the above diagram. To maximize profits or minimize losses this firm should produce: A. E units and charge price C. B. E units and charge price A. C. M units and charge price N. D. L units and charge price LK.

B. E units and charge price A.

What do economies of scale, the ownership of essential raw materials, and patents have in common? A. They must all be present before price discrimination can be practiced. B. They are all barriers to entry. C. They all help explain why a monopolist's demand and marginal revenue curves coincide. D. They all help explain why the long-run average cost curve is U-shaped

B. They are all barriers to entry.

Which of the following is not a barrier to entry? A. patents B. X-inefficiency C. economies of scale D. ownership of essential resources

B. X-inefficiency

If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to: A. minimum average fixed cost. B. average total cost. C. marginal cost. D. marginal revenue.

B. average total cost

Refer to the above diagram for a pure monopolist. Monopoly price will be: A. e. B. c. C. b. D. a.

B. c

Economic profit in the long run is: A. possible for both a pure monopoly and a pure competitor. B. possible for a pure monopoly, but not for a pure competitor. C. impossible for both a pure monopolist and a pure competitor. D. only possible when barriers to entry are nonexistent.

B. possible for a pure monopoly, but not for a pure competitor.

Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's: A. price and output would be higher. B. price would be higher, but output would be lower. C. price and output would be lower. D. price and output would be the same.

B. price would be higher, but output would be lower.

Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm will realize an economic: A. loss of $320. B. profit of $480. C. profit of $280. D. profit of $600.

B. profit of $480.

In which of the following continuum of competition going from the most competition to the least amount of competition is monopolistically competitive markets correctly placed? A. purely competitive, oligopoly, monopolistically competitve, monopoly B. purely competitive, monopolistically competitve, oligopoly, monopoly C. monopoly, oligopoly, monopolistically competitve, purely competitive D. monopoly, monopolistically competitve, oligopoly, purely competitive

B. purely competitive, monopolistically competitve, oligopoly, monopoly

The demand for agricultural products is: A. relatively elastic with respect to price. B. relatively inelastic with respect to price. C. relatively elastic with respect to income. D. downsloping to the individual farmer but perfectly elastic to farmers as a group.

B. relatively inelastic with respect to price.

Which of the above diagrams correctly portray the demand (D) and marginal revenue (MR) curves of a monopoly? A. where demand and marginal revenue are equal and downward sloping B. where demand is greater than marginal revenue and both are downward sloping C. where demand and marginal revenue are equal and represented by a horizontal line D. where marginal revenue is greater than demand and both are downward sloping

B. where demand is greater than marginal revenue and both are downward sloping

An unregulated pure monopolist will maximize profits by producing that output at which: A. P = MC. B. P = ATC. C. MR = MC. D. MC = AC.

MR = MC

The primary gain from international trade is:

more goods than would be attainable through domestic production alone.

In a two-nation model, the equilibrium world price will occur where:

one nation's export supply curve intersects the other nation's import demand curve

Which of the following arguments for trade protection is based on the premise that a nation should have a wide enough range of domestic industries to be self-sufficient if necessary?

the diversification-for-stability argument

Tariffs:

may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs).

When a monopolistically competitive firm is in long-run equilibrium: A. P = MC = ATC. B. MR = MC and minimum ATC > P. C. MR > MC and P = minimum ATC. D. MR = MC and P < minimum ATC.

A. P = MC = ATC.

An extraordinarily small crop of farm products due to drought causes: A. a large increase in the price of farm products because the demand for farm products is price inelastic. B. only a slight increase in the price of farm products because the demand for farm products is income elastic. C. only a slight increase in the price of farm products because the demand for farm products is income inelastic. D. a large increase in the price of farm products because the demand for farm products is price elastic.

A. a large increase in the price of farm products because the demand for farm products is price inelastic.

Nonprice competition refers to: A. advertising, product promotion, and changes in the real or perceived characteristics of a product. B. price increases by a firm that are ignored by its rivals. C. competition between products of different industries, for example, competition between aluminum and steel in the manufacture of automobile parts. D. reductions in production costs that are not reflected in price reductions.

A. advertising, product promotion, and changes in the real or perceived characteristics of a product.

If a regulatory commission wants to establish a socially optimal price for a natural monopoly, it should select a price: A. at which the marginal cost curve intersects the demand curve. B. at which marginal revenue is zero. C. at which the average total cost curve intersects the demand curve. D. which corresponds with the equality of marginal cost and marginal revenue.

A. at which the marginal cost curve intersects the demand curve.

Other things equal, economists would prefer:

A. free trade to tariffs and tariffs to import quotas.

At its profit-maximizing output, a pure nondiscriminating monopolist achieves: A. neither productive efficiency nor allocative efficiency. B. both productive efficiency and allocative efficiency. C. productive efficiency but not allocative efficiency. D. allocative efficiency but not productive efficiency.

A. neither productive efficiency nor allocative efficiency.

Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. The profit-maximizing price for this firm will be: A. $19 B. $16. C. $13. D. $10.

B. $16

Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. The profit-maximizing output for this firm will be: A. 100. B. 160. C. 180. D. 210.

B. 160

Which of the following arguments is not generally made to justify farmsubsidies? A. The "family farm" is an American institution that should be protected and nurtured. B. Agribusiness firms need subsidies to achieve economies of scale. C. Farmers sell their output in purely competitive markets, but must buy inputs from imperfectly competitive firms. D. Farmers cannot fully insure themselves against the risks unusual to farming, such as floods, droughts, and pests.

B. Agribusiness firms need subsidies to achieve economies of scale.

What percent of their spending do U.S. consumers allocate to food purchases? A. 1 percent. B. 8 percent. C. 13 percent. D. 15 percent.

C. 13 percent

Which of the following is correct? A. Both purely competitive and monopolistic firms are "price takers." B. Both purely competitive and monopolistic firms are "price makers." C. A purely competitive firm is a ""price taker,"" while a monopolist is a "price maker." D. A purely competitive firm is a ""price maker,"" while a monopolist is a "price taker."

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

Which of the following statements is correct? A. Purely competitive firms, monopolistically competitive firms, and pure monopolies all earn zero economic profits in the long run. B. Purely competitive firms, monopolistically competitive firms, and pure monopolies all earn positive economic profits in the long run. C. In the long run purely competitive firms and monopolistically competitive firms earn zero economic profits, while pure monopolies may or may not earn economic profits. D. Monopolistically competitive firms earn zero economic profits in both the short run and the long run.

C. In the long run purely competitive firms and monopolistically competitive firms earn zero economic profits, while pure monopolies may or may not earn economic profits.

Pure monopoly refers to: A. any market in which the demand curve to the firm is downsloping. B. a standardized product being produced by many firms. C. a single firm producing a product for which there are no close substitutes. D. a large number of firms producing a differentiated product.

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

If the demand for an agricultural product is inelastic, a bumper crop will: A. raise price and decrease total revenues. B. raise price and increase total revenues. C. lower price and decrease total revenues. D. lower price and increase total revenues.

C. lower price and decrease total revenues.

The monopolistically competitive seller maximizes profit by producing at the point where: A. total revenue is at a maximum. B. average costs are at a minimum. C. marginal revenue equals marginal cost. D. price equals marginal revenue

C. marginal revenue equals marginal cost.

Pure monopolists may obtain economic profits in the long run because: A. of advertising. B. marginal revenue is constant as sales increase. C. of barriers to entry. D. of rising average fixed costs.

C. of barriers to entry.

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from: A. rising marginal costs. B. a perfectly elastic product demand curve. C. relatively easy entry. D. product differentiation and development.

C. relatively easy entry.

Which of the following best approximates a pure monopoly? A. the foreign exchange market B. the Kansas City wheat market C. the only bank in a small town D. the soft drink market

C. the only bank in a small town

Price discrimination refers to: A. selling a given product for different prices at two different points in time. B. any price above that which is equal to a minimum average total cost. C. the selling of a given product at different prices that do not reflect cost differences. D. the difference between the prices a purely competitive seller and a purely monopolistic seller would charge.

C. the selling of a given product at different prices that do not reflect cost differences.

Which of the above diagrams correctly portray the demand (D) and marginal revenue (MR) curves of a purely competitive seller? A. where demand and marginal revenue are equal and downward sloping B. where demand is greater than marginal revenue and both are downward sloping C. where demand and marginal revenue are equal and represented by a horizontal line D. where marginal revenue is greater than demand and both are downward sloping.

C. where demand and marginal revenue are equal and represented by a horizontal line

The MR = MC rule: A. applies only to pure competition. B. applies only to pure monopoly. C. does not apply to pure monopoly because price exceeds marginal revenue. D. applies both to pure monopoly and pure competition.

D. applies both to pure monopoly and pure competition.

Refer to the above diagram for a pure monopolist. Monopoly output will be: A. between f and g. B. h. C. g. D. f.

D. f

Monopolistic competition is characterized by a: A. few dominant firms and low entry barriers. B. large number of firms and substantial entry barriers. C. few dominant firms and substantial entry barriers. D. large number of firms and low entry barriers.

D. large number of firms and low entry barriers

Which of the following arguments for trade protection contends that new domestic industries need support to establish themselves and survive?

D. the infant-industry argument

A dilemma of regulation is that: A. the regulated price that achieves allocative efficiency is also likely to result in persistent economic profits. B. the regulated price that results in a ""fair return"" restricts output by more than would unregulated monopoly. C. regulated pricing always conflicts with the "due process" provision of the Constitution. D. the regulated price that achieves allocative efficiency is also likely to result in losses.

D. the regulated price that achieves allocative efficiency is also likely to result in losses.

Countries engaged in international trade specialize in production based on:

comparative advantage.

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

different endowments of fertile soil, different amounts of skilled labor, different levels of technological knowledge.

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

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