Econ Chapter 8,9,10

Monopoly Costs and Revenue Quantity Price Total Cost 1 $500 $400 2 $450 $650 3 $400 $950 4 $350 $1,300 5 $300 $1,700 In Table 24.1, using the profit maximization rule, a monopolist will produce a.5 units. b.4 units. c.3 units. d.1 unit.

3 units

Which of the following characterizes a competitive market? a.A downward-sloping demand curve for the firm. b.Some of the firms sell at a price above the market equilibrium price. c.A vertical demand curve facing each firm in the market. d.A downward-sloping demand curve for the market.

A downward-sloping demand curve for the market.

If economic profits are earned in a competitive market, then over time a.Normal profit will fall to zero as more firms enter. b.The market supply curve will shift to the left. c.Additional firms will enter the market. d.Equilibrium price will rise as more firms enter.

Additional firms will enter the market.

Markets that exhibit economies of scale over the entire range of market output a.Are perfectly competitive. b.Have downward-sloping short-run average total cost curves. c.Are natural monopolies. d.Have upward-sloping long-run average total cost curves.

Are natural monopolies

Refer to Figure 22.2 for a perfectly competitive firm. The profit-maximizing quantity of output is a.C. b.D. c.B. d.E.

D

When technology improves, the firm's marginal cost curve shifts a.Downward, and supply increases. b.Downward, and supply decreases. c.Upward, and supply decreases. d.Upward, and supply increases.

Downward, and supply increases.

Reductions in minimum average costs that come about through increases in the size of plants and equipment are called a.Barriers to entry. b.Economies of scale. c.Economies to monopoly power. d.Diseconomies of entry.

Economies of scale.

Refer to Figure 23.2 for a perfectly competitive firm. Given the current market price of $100, we expect to see a.Costs rise to absorb the profits earned by the firms in the industry. b.No change in the number of firms in this industry. c.Exit from this industry. d.Entry into this industry.

Entry into this industry.

Which of the following is an investment decision in a competitive market? a.The shutdown decision. b.The price to charge. c.Entry or exit. d.The rate of output to produce

Entry or exit.

If long-run economic losses are being experienced in a competitive market, a.Normal profit will fall to zero as firms enter. b.Equilibrium price will rise as firms exit. c.More firms will enter the market. d.The market supply curve will shift to the right.

Equilibrium price will rise as firms exit

If a firm can change market prices by altering its output, then it a.Faces a flat demand curve. b.Is a price taker. c.Has market power. d.Engages in marginal cost pricing

Has market power

The demand curve confronting a competitive firm is a.Horizontal, while market demand is downward-sloping. b.Downward-sloping, as is market demand. c.Downward-sloping, while market demand is flat. d.Horizontal, as is market demand.

Horizontal, while market demand is downward-sloping.

The decision to enter or exit an industry is known as the a.Output decision. b.Investment decision. c.Production decision. d.Profit maximization decision.

Investment decision.

For perfectly competitive firms, price a.And marginal revenue are not related. b.Is greater than marginal revenue. c.Is less than marginal revenue. d.Is equal to marginal revenue.

Is equal to marginal revenue

The perfectly competitive market structure includes all of the following except a.Large advertising budgets. b.Many firms. c.Low entry barriers. d.Identical products.

Large advertising budgets.

Economic profit is a.Greater than accounting profit by the amount of implicit cost. b.Less than accounting profit by the amount of implicit cost. c.Less than accounting profit by the amount of explicit cost. d.Greater than accounting profit by the amount of explicit cost.

Less than accounting profit by the amount of implicit cost.

A monopolist will find that its marginal revenue curve a. Lies above its demand curve and is flatter than its demand curve. b. Lies below its demand curve and is steeper than its demand curve. c. Lies below its demand curve and has the same slope as its demand curve. d. Is the same as its demand curve.

Lies below its demand curve and is steeper than its demand curve.

Which of the following rules is satisfied when a monopoly maximizes profits? a.MR> MC. b.Price = AVC. c.Price <MC. d.MR = MC.

MR = MC

In monopoly and perfect competition, a firm should expand production when a.Marginal revenue is above marginal cost. b.Price is above marginal cost. c.Price is below marginal cost. d.Marginal revenue is below marginal cost

Marginal revenue is above marginal cost.

Short-run profits are maximized at the rate of output where a.Total revenue is maximized. b.Marginal revenue is equal to marginal cost. c.Average total costs are minimized. d.Marginal revenue is zero.

Marginal revenue is equal to marginal cost.

For a perfectly competitive market, long-run equilibrium is characterized by all of the following but which one? a.P = maximum ATC. b.P = MC. c.P = minimum ATC. d.P = MR.

P = maximum ATC.

A perfectly competitive firm should expand output when a.P <ATC. b.P > ATC. c.P < MC. d.P >MC.

P >MC.

Which of the following is not a barrier to entry? a.Control of distribution outlets. b.Well-established brand loyalty. c.Patents. d.Perfect information

Perfect information.

A catfish farmer will shut down production when a.He is losing money. b.Price falls below AVC. c.The best he can do is break even. d.Total revenue falls below total costs.

Price falls below AVC.

The exit of firms from a market, ceteris paribus, a.Reduces the economic losses of remaining firms in the market. b.Increases the equilibrium output in the market. c.Shifts the market supply curve to the right. d.Shifts the market demand curve to the left.

Reduces the economic losses of remaining firms in the market.

The entry of firms into a market, ceteris paribus, a.Reduces the economic profit of each firm already in the market. b.Shifts the market supply curve to the left. c.Shifts the market demand curve to the left. d.Decreases the equilibrium output in the market.

Reduces the economic profit of each firm already in the market.

If a firm finds that its marginal cost is greater than its price, it a.Should increase production. b.Is maximizing its profit. c.Is maximizing its total revenue. d.Should reduce production.

Should reduce production

To determine the market supply, the quantities a.Demanded at each price by each demander and supplied at each price by each supplier are added together. b.Demanded at each price by each demander are subtracted from the quantities supplied at each price by each supplier. c.Supplied at each price by each supplier are added together. d.Demanded at each price by each demander are added together.

Supplied at each price by each supplier are added together.

Which of the following is a determinant of market supply but not the supply curve of an individual firm? a.The price of factor inputs. b.Expectations. c.The number of firms in the market. d.Technology.

The number of firms in the market

A monopoly can have a high degree of market power because of all but a.A downward-sloping demand curve for its product. b.Government-bestowed franchise rights. c.The presence of many close substitutes for its product. d.Control over key inputs.

The presence of many close substitutes for its product

Competitive firms cannot individually affect market price because a.The government exercises control over the market power of competitive firms. b.There is an infinite demand for their goods. c.Demand is perfectly inelastic for their goods. d.Their individual production is insignificant relative to the production of the industry.

Their individual production is insignificant relative to the production of the industry.

Perfectly competitive firms cannot individually affect market price because a.Demand is perfectly inelastic for their goods. b.There is an infinite demand for their goods. c.The government exercises control over the market power of competitive firms. d.There are many firms, none of which has a significant share of total output.

There are many firms, none of which has a significant share of total output.

The market supply curve in a perfectly competitive market is usually a.Horizontal. b.Upward-sloping. c.Vertical. d.Downward-sloping.

Upward-sloping

Which of the following is characteristic of a perfectly competitive market? a.Marginal revenue lower than price for each firm. b.Exit of small firms when profits are high for large firms. c.A small number of firms. d.Zero economic profit in the long run

Zero economic profit in the long run.

Monopoly Costs and Revenue Quantity Price Total Cost 1 $500 $400 2 $450 $650 3 $400 $950 4 $350 $1,300 5 $300 $1,700 In Table 24.1, using the profit maximization rule, a monopolist will charge a price of a.$400. b.$350. c.$500. d.$300.

$400.

Which of the following is likely to be a monopolist? a.An Indonesian restaurant in a large city. b.A drug firm that has a patent granting it the exclusive right to produce a drug. c.The Boeing Company, which is one of the largest producers of airplanes. d.A large firm like GM, which has a substantial portion of the car market.

A drug firm that has a patent granting it the exclusive right to produce a drug.

Which of the following is a common barrier to entry in a monopoly market? a.A vertical supply curve. b.A rising long-run average total cost curve. c.Economic profits greater than zero for the monopolist. d.A patent on a new product.

A patent on a new product

Adam is the owner/operator of a flower shop. Last year he earned $250,000 in total revenue. His explicit costs were $175,000 paid to his employees and suppliers (assume that this amount represents the total opportunity cost of these resources). During the year he received three offers to work for other flower shops with the highest offer being $75,000 per year. Which of the following is true about Adam's accounting and economic profit? a.Accounting profit = $75,000; economic profit = negative $100,000. b.Accounting profit = $0; economic profit = negative $75,000. c.Accounting profit = $175,000; economic profit = $75,000. d.Accounting profit = $75,000; economic profit = $0.

Accounting profit = $75,000; economic profit = $0

The marginal cost curve a.Is not affected by changes in the price of variable inputs. b.Slopes downward to the right as output increases. c.Is the long-run supply curve for a competitive firm at prices below the AVC curve. d.Is the short-run supply curve for a competitive firm at prices above the AVC curve.

Is the short-run supply curve for a competitive firm at prices above the AVC curve.

Which of the following is true for a monopolist? a.It faces many competitors. b.It faces a perfectly elastic demand curve. c.Its marginal revenue curve is equal to its demand curve. d.It must lower its price on all of its units in order to sell any additional units.

It must lower its price on all of its units in order to sell any additional units.

Market structure is determined by the a.Amount of compensation given to the CEOs. b.Number and relative size of the firms in an industry. c.Price charged for the good or service produced. d.Annual revenue, costs, and profits for an industry.

Number and relative size of the firms in an industry.

If a new sushi restaurant opens, then a.There will be a movement down along the market supply curve for sushi. b.The market supply curve for sushi will shift to the right. c.There will be a movement up along the market supply curve for sushi. d.The market supply curve for sushi will shift to the left.

The market supply curve for sushi will shift to the right