Econ ch13-16

If a firm uses labor to produce output, the firm's production function depicts the relationship between a. the number of workers and the quantity of output. b. marginal product and marginal cost. c. the maximum quantity that the firm can produce as it adds more capital to a fixed quantity of labor. d. fixed inputs and variable inputs in the short run.

a

A monopolistically competitive industry is characterized by a. many firms selling products that are similar but not identical. b. many firms selling identical products. c. a few firms selling products that are similar but not identical. d. a few firms selling highly different products.

a

A perfectly price-discriminating monopolist is able to a. maximize profit and produce a socially-optimal level of output. b. maximize profit, but not produce a socially-optimal level of output. c. produce a socially-optimal level of output, but not maximize profit. d. exercise illegal preferences regarding the race and/or gender of its employees.

a

Economists normally assume that the goal of a firm is to (i) earn profits as large as possible, even if it means reducing output. (ii) earn revenues as large as possible, even if it means reducing profits. (iii)minimize costs, regardless of profits. a.(i) only b.(i) and (ii) only c.(ii) and (iii) only d.(i), (ii), and (iii)

a

The short-run supply curve for a firm in a perfectly competitive market is a. horizontal. b. likely to slope downward. c. determined by forces external to the firm. d. the portion of its marginal cost curve that lies above its average variable cost.

D

Which of the following is a characteristic of a competitive market? a. There are many buyers but few sellers. b. Firms sell differentiated products. c. There are many barriers to entry. d. Buyers and sellers are price takers.

D

For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $11 and a marginal cost of $10. Itfollows that the a. production of the 100th unit of output increases the firm's profit by $1. b. production of the 100th unit of output increases the firm's average total cost by $1. c. firm's profit-maximizing level of output is less than 100 units. d. production of the 101st unit of output must increase the firm's profit by more than $1.

A

The entry of new firms into a competitive market will a. increase market supply and increase market price. b. increase market supply and decrease market price. c. decrease market supply and increase market price. d. decrease market supply and decrease market price.

B

Which of the following characteristics of competitive markets is necessary for firms to be price takers? (i) There are many sellers. (ii) Firms can freely enter or exit the market. (iii) Goods offered for sale are largely the same. a. (i) and (ii) only b. (i) and (iii) only c. (ii) only d. (i), (ii), and (iii)

B

1. A market is competitive if (i) firms have the flexibility to price their own product. (ii) each buyer is small compared to the market. (iii) each seller is small compared to the market. a. (i) and (ii) only b. (i) and (iii) only c. (ii) and (iii) only d. (i), (ii), and (iii)

C

In the long-run equilibrium of a market with free entry and exit, marginal firms are operating a. at the point where average variable cost equals marginal cost. b. at the minimum point on their marginal cost curves. c. at their efficient scale. d. where accounting profit is zero.

C

Suppose that a firm operating in perfectly competitive market sells 400 units of output at a price of $4 each. Which of the followingstatements is correct? (i) Marginal revenue equals $4. (ii) Average revenue equals $100. (iii) Total revenue equals $1,600. a. (i) only b. (iii) only c. (i) and (iii) only d. (i), (ii), and (iii)

C

If there is an increase in market demand in a perfectly competitive market, then in the short run a. there will be no change in the demand curves faced by individual firms in the market. b. the demand curves for firms will shift downward. c. the demand curves for firms will become more elastic. d. profits will rise.

D

Over what range of output is marginal revenue declining?

Marginal revenue is constant over the entire range of output.

If a profit-maximizing, competitive firm is producing a quantity at which marginal cost is between average variable cost and average total cost, it will a.keep producing in the short run but exit the market in the long run. b.shut down in the short run but return to production in the long run. c.shut down in the short run and exit the market in the long run. d.keep producing both in the short run and in the long run.

a

If there is an increase in market demand in a perfectly competitive market, then in the short run prices will a. rise. b. remain unchanged at the minimum of average total cost. c. fall. d. remain unchanged at the minimum of marginal cost.

a

Suppose a firm has a monopoly on the sale of a computer game and faces a downward-sloping demand curve. When selling the 50th game, the firm will always receive a. less marginal revenue on the 50th game than it received on the 49th game. b. more average revenue on the 50th game than it received on the 49th game. c. more total revenue on the 50 games than it received on the first 49 games. d. Both b and c are correct.

a

The firm's efficient scale is the quantity of output that minimizes a. average total cost. b. average fixed cost. c. average variable cost. d. marginal cost.

a

There are two types of markets in which firms face some competition yet are still able to have some control over the prices of theirproducts. Those two types of market are a. monopolistic competition and oligopoly. b. duopoly and triopoly. c. perfect competition and monopolistic competition. d. duopoly and imperfect competition.

a

Trevor's Tire Company produced and sold 500 tires. The average cost of production per tire was $50. Each tire sold for a price of$65. Trevor's Tire Company's total profits are a. $7,500. b. $25,000. c. $32,500. d. $67,500.

a

A monopolist produces a. more than the socially efficient quantity of output but at a higher price than in a competitive market. b. less than the socially efficient quantity of output but at a higher price than in a competitive market. c. the socially efficient quantity of output but at a higher price than in a competitive market. d. possibly more or possibly less than the socially efficient quantity of output, but definitely at a higher price than in a competitivemarket.

b

A natural monopoly occurs when a. the product is sold in its natural state, such as water or diamonds. b. there are economies of scale over the relevant range of output. c. the firm is characterized by a rising marginal cost curve. d. production requires the use of free natural resources, such as water or air.

b

In the long run, a. inputs that were fixed in the short run remain fixed. b. inputs that were fixed in the short run become variable. c. inputs that were variable in the short run become fixed. d. variable inputs are rarely used.

b

Katherine gives piano lessons for $20 per hour. She also grows flowers, which she arranges and sells at the local farmer's market.One day she spends 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can sell themfor $150 at the farmer's market. Katherine's accounting profits are a. $100, and her economic profits are $100. b. $100, and her economic profits are $0. c. $0, and her economic profits are $100. d. $0, and her economic profits are $-100.

b

Monopolies are socially inefficient because the price they charge is a. equal to marginal revenue. b. above marginal cost. c. equal to demand. d. above demand.

b

Monopolistically competitive markets differ from perfectly competitive markets due to (i) the number of sellers. (ii) the barriers to entry. (iii) the product differentiation among the sellers. a. (i) only b. (iii) only c. (i) and (iii) only d. (ii) and (iii) only

b

Pete owns a shoe-shine business. His accountant most likely includes which of the following costs on his financial statements? (i) shoe polish (ii) rent on the shoe stand (iii) wages Pete could earn delivering newspapers (iv) interest that Pete's money was earning before he spent his savings to set up the shoe shine business a. (i) only b. (i) and (ii) only c. (iii) and (iv) only d. (i), (ii), (iii), and (iv)

b

The competitive firm's short-run supply curve is that portion of the a. average total cost curve that lies above marginal cost. b. marginal cost curve that lies above average variable cost. c. marginal cost curve that lies above average total cost. d. average variable cost curve that lies above marginal cost.

b

The market demand curve for a monopolist is typically a. unit price elastic. b. downward sloping. c. horizontal. d. vertical.

b

The most likely explanation for economies of scale is a. coordination problems. b. specialization of labor. c. increasing marginal cost. d. decreasing marginal cost.

b

Whenever a perfectly competitive firm chooses to change its level of output, its marginal revenue a.increases if MR < ATC and decreases if MR > ATC. b.does not change. c.increases. d.decreases.

b

Which of the following industries is least likely to exhibit the characteristic of free entry? a. ethnic restaurants b. municipal water and sewer c. corn farming d. grocery stores

b

1. In a monopolistically competitive market, a. there are only a few sellers. b. each firm takes the price of its product as given. c. firms can enter or exit the market without restrictions. d. each firm produces a product that is essentially identical to the products of other firms in the market.

c

1. Monopolistic competition differs from perfect competition because in monopolistically competitive markets a. there are barriers to entry. b. all firms can eventually earn economic profits. c. each of the sellers offers a somewhat different product. d. strategic interactions between firms are important.

c

1. The amount of money that a firm receives from the sale of its output is called a. total gross profit. b. total net profit. c. total revenue. d. net revenue.

c

A monopolist will choose to increase output when a. market price increases. b. at all levels of output, marginal cost increases. c. at the present level of output, marginal revenue exceeds marginal cost. d. the demand curve shifts to the left.

c

A similarity between monopoly and monopolistic competition is that in both market structures a. strategic interactions among sellers are important. b. there are a small number of sellers. c. sellers are price makers rather than price takers. d. there are only a few buyers but many sellers.

c

An example of an opportunity cost that is also an implicit cost is a. a lease payment. b. the cost of raw materials. c. the value of the business owner's time. d. All of the above are correct.

c

Diminishing marginal product suggests that the marginal a. cost of an extra worker is unchanged. b. cost of an extra worker is less than the previous worker's marginal cost. c. product of an extra worker is less than the previous worker's marginal product. d. product of an extra worker is greater than the previous worker's marginal product.

c

Diseconomies of scale occur when a firm's a. marginal costs are constant as output increases. b. long-run average total costs are decreasing as output increases. c. long-run average total costs are increasing as output increases. d. marginal costs are equal to average total costs for all levels of output

c

For a firm to price discriminate, a. it must be a natural monopoly. b. it must be regulated by the government. c. it must have some market power. d. consumers must tell the firm what they are willing to pay for the product.

c

For a firm, marginal revenue minus marginal cost is equal to a. profit. b. average total cost. c. change in profit. d. change in average revenue.

c

Marginal cost tells us the a. value of all resources used in a production process. b. marginal increment to profitability when price is constant. c. amount by which total cost rises when output is increased by one unit. d. amount by which output rises when labor is increased by one unit.

c

Pretzel stands in New York City are a perfectly competitive industry in long-run equilibrium. One day, the city starts imposing a $100 per month tax on each stand. How does this policy affect the number of pretzels consumed in the short run and the long run? a. down in the short run, no change in the long run b. up in the short run, no change in the long run c. no change in the short run, down in the long run d. no change in the short run, up in the long run

c

Total cost is the a. amount a firm receives for the sale of its output. b. fixed cost less variable cost. c. market value of the inputs a firm uses in production. d. quantity of output minus the quantity of inputs used to make a good.

c

When firms have an incentive to exit a competitive market, their exit will a. lower the market price. b. necessarily raise the costs for the firms that remain in the market. c. raise the profits of the firms that remain in the market. d. shift the demand for the product to the left.

c

Which of the following is an example of public ownership of a monopoly? a. DeBeers b. Microsoft c. U.S. Postal Service d. AT&T

c

Which of the following represents the firm's long-run condition for exiting a market? a. exit if P < MC b. exit if P < FC c. exit if P < ATC d. exit if MR < MC

c

Which of the following statements is correct? a. Opportunity costs equal explicit minus implicit costs. b. Economists consider opportunity costs to be included in a firm's total revenues. c. Economists consider opportunity costs to be included in a firm's costs of production. d. All of the above are correct.

c

With perfect price discrimination the monopoly a. eliminates all price discrimination by charging each customer the same price. b. charges each customer an amount equal to the monopolist's marginal cost of production. c. eliminates deadweight loss. d. eliminates profits and increases consumer surplus.

c

1. Monopolistic competition is an inefficient market structure because a. price exceeds marginal cost. b. it has a deadweight loss, just as monopoly does. c. at the equilibrium, some consumers will value the good at more than the marginal cost of production. d. All of the above are correct.

d

A competitive firm's short-run supply curve is its ________ cost curve above its ________ cost curve. a. average total, marginal b. average variable, marginal c. marginal, average total d. marginal, average variable

d

Competitive firms differ from monopolies in which of the following ways? (i) Competitive firms do not have to worry about the price effect lowering their total revenue. (ii) Marginal revenue for a competitive firm equals price, while marginal revenue for a monopoly is less than the price it isable to charge. (iii) Monopolies must lower their price in order to sell more of their product, while competitive firms do not. a. (i) and (ii) only b. (ii) and (iii) only c. (i) and (iii) only d. (i), (ii), and (iii)

d

In the long run a company that produces and sells candy bars incurs total costs of $1,200 when output is 2,400 candy bars and$1,400 when output is 2,900 candy bars. The candy bar company exhibits a. diseconomies of scale because total cost is rising as output rises. b. diseconomies of scale because average total cost is rising as output rises. c. economies of scale because total cost is rising as output rises. d. economies of scale because average total cost is falling as output rises.

d

In the long run, a profit-maximizing firm will choose to exit a market when a. average fixed cost is falling. b. variable costs exceed sunk costs. c. marginal cost exceeds marginal revenue at the current level of production. d. total revenue is less than total cost.

d

The marginal product of an input in the production process is the increase in a. total revenue obtained from an additional unit of that input. b. profit obtained from an additional unit of that input. c. total revenue obtained from an additional unit of that input. d. quantity of output obtained from an additional unit of that input.

d

When a profit-maximizing firm in a monopolistically competitive market is producing the long-run equilibrium quantity, a. its average revenue will equal its marginal cost. b. its marginal revenue will exceed its marginal cost. c. it will be earning positive economic profits. d. its demand curve will be tangent to its average total cost curve.

d

Which of the following conditions is characteristic of a monopolistically competitive firm in short-run equilibrium? a. P > ATC b. P = ATC c. P < ATC d. Any of the above could be correct.

d

Which of the following is an example of a barrier to entry? a. Matthew offers free samples of his latest flavored coffee drink to entice customers to buy a cup. b. Mark charges a lower price to students than to faculty for his tattoo services. c. Luke charges a higher hourly price to business students than to liberal arts students for his economics tutoring. d. John obtained a copyright for the song he wrote and recorded.

d

Which of the following is an example of an implicit cost? a. salaries paid to owners who work for the firm b. interest on money borrowed to finance equipment purchases c. cash payments for raw materials d. foregone rent on office space owned and used by the firm

d