ECON Unit 2
Refer to the table below. This information reflects the demand curve and the average cost curve for a firm that is a natural monopoly. What will this firm's profits equal?
$2.50
The table below sets out the amount of capital needed for certain investment projects and the rate of return for each project. What is this firm's demand for physical capital if their hurdle rate is 5%?
$23 million
The following table shows a monopolist's demand curve and cost information for the production of its good. What quantity will it produce?
30
The typical pattern of costs for a monopoly can be analyzed by using: I) total cost II) fixed cost III) variable cost IV) marginal cost V) average cost VI) average variable cost
A. I, II, and III B. I, III and IV C. I, II, III, IV, and VI D. all of the above
The typical pattern of costs for a perfectly competitive firm can be analyzed by using: I) total cost II) fixed cost III) variable cost IV) marginal cost V) average cost VI) average variable cost
A. I, II, and III B. I, III and IV C. I, II, III, IV, and VI D. all of the above
_____________ and __________________ refer to the quantity and price at a point in time.
Productive; allocative efficiency
The US laws dealing with original works of authorship allow the US Copyright Office to enforce protection for all but one of the following. Which one is it?
ancient Bible texts
The fact that a consumer is not required to buy the goods that a given firm produces, as well as the fact that the consumer might want the goods a firm produces, but may choose to by from other firms instead
are two stark realities any business firm must recognize
If the price that a firm charges is lower than its ____________ of production, the firm will suffer losses.
average cost
The two primary factors determining monopoly market power are the firm's
demand curve and its cost structure
When J.K. Rowling exerts copyright ownership of her literary works, she creates a monopoly by restricting
entry into the market
Once I'MaPharmaCo. has received confirmation of the registration for its latest drug patent application, it will have created a monopoly for that product by restricting
entry into the market.
If the North American newsprint paper market has barriers to entry, then
entry will be blocked even if firms are earning high profits.
Which of the following is most unlikely to present a barrier to entry into a market?
deregulation
In economics, labor demand is synonymous with
derived demand
For a monopolistic firm, the demand for its product is
completely inelastic
Which of the following is most likely to be a monopoly?
local electricity distributor
In economics, the term "shutdown point" refers to the point where the
marginal cost curve crosses the average variable cost curve
I'maGoldMiner has benefited from a record rise in gold prices in the global commodities market. While the price of its output is highly influenced by market speculation, if it wants to increase production to take advantage of the current profit-maximizing opportunity, the company
must accept market price for its physical capital inputs.
In the event that Only1Corp. obtains control of all the natural gas producers in the US, it would most likely
raise prices, cut production, and realize positive economic profits.
Roughly speaking, patent law covers __________ and __________ law protects an author's original books.
original inventive creations; copyrigh
The Term ____________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product
price taker
The following figure shows the average cost curve, demand curve, and marginal revenue curve for a monopolist. After maximizing profits, what does the firm's revenue equal?
the area of rectangle BCFG
The following figure shows the average cost curve, demand curve, and marginal revenue curve for a monopolist. After maximizing profits, what do the firm's profit's equal?
the area of rectangle BDEG
In the _________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where _____________________
short run; losses are smallest
In the _________, the perfectly competitive firm will seek out ________________________
short run; the quantity of output where profits are highest
If a firm's revenues do not cover its average variable costs, then that firm has reached its _________________
shutdown point
What qualities would ideally suit a monopolistic firm with regard to barriers to entry?
sufficient strength to prevent or discourage potential competitors from entering the market
For a perfectly competitive firm, the marginal cost curve is identical to the firm's ________________ .
supply curve
When the demand for a good or service limits the quantity that can be sold to an output at which the firm experiences economies of scale,
the firm is a natural monopoly.
Refer to the diagram above. Which of the following explains the slope of the total revenue curve illustrated in this graph?
the slope of the total revenue curve is explained by both a and b above.
For a pure monopoly to exist,
there is a single seller in a particular industry
The following graph shows the demand curve for a good and the long run average cost curve for a typical firm in this market. If the government does not intervene in the market, then
there will only be 1 firm in this market, and they will produce where marginal revenue equals marginal cost
Refer to the diagram above. In this instance, at the range of output represented at point b,
total costs exceed total revenues.
Which of the following denotes the typical shape of the monopolist's total cost curve?
total costs rise and grow steeper as output rises
Given the data provided in the table below, what will the amount of profit be for production at quantity (Q) level 7?
-$10.00
Which one of the following is the most accurate description of a monopolist?
a sole producer of a product for which good substitutes are lacking in a market with high barriers to entry
Copyright protection legislation provides protection for original works
during the author's life plus 70 years
If a firm holds a pure monopoly in the market and is able to sell 4 units of output at $2.00 per unit and 5 units of output at $1.75 per unit, it will produce and sell the fifth unit if its marginal cost is
$0.75 or less
The table below shows a monopolist's demand curve and the cost information for the production of its good. What will their profits equal?
$1,200
The following table shows a monopolist's demand curve and cost information for the production of its good. What price will it charge?
$15
In order to produce 100 oatmeal cookies, GoodieCookieCo incurs an average total cost of $0.25 per cookie. The company's marginal cost is constant at $0.10 for all oatmeal cookies produced. The total cost to produce 50 oatmeal cookies is
$20
The following table shows a monopolist's demand curve and cost information for the production of its good. What price will it charge?
$25
If a firm holds a pure monopoly in the market and is able to sell 5 units of output at $4.00 per unit and 6 units of output at $3,90 per unit, it will produce and sell the sixth unit if its marginal cost is
$3.40 or less
Given the data provided in the table below, what will the marginal revenue equal for production at quantity (Q) level 4?
$5.00
Given the data provided in the table below, what will the fixed costs equal for production at quantity (Q) level 4?
$9.00
Given the data provided in the table below, the total revenue (TR) for production at quantity (Q) level 4 equals
. $20.00
The table below shows a monopolist's demand curve and cost information for the production of its good. What quantity will it produce?
1,000
Why are some producers forced to sell their products at the prevailing market price?
high degree of similarity to competitor's products
In the United States, a pharmaceutical company's exclusive patent rights last for
20 years.
Refer to the table below. If the information pertains to the demand curve and the long run average cost curve for an electric company that is a natural monopoly, then what quantity will be produced in this market?
200
Neil's Bakery is famous for its giant cinnamon buns. The bakery has fixed costs of $100. Neil must pay each worker a wage of $10.00 per hour and each works an 8 hour shift. He earns $2 for each cinnamon bun that is sold. The following table shows how many cinnamon buns he can sell, depending on the number of workers he hires. Refer to the table below. To maximize his profits in this competitive market, how many workers should he hire?
3 workers
Refer to the table below. The information pertains to the demand curve and the average cost curve for a natural monopoly firm. What will the price be in this market?
50
__________________ law implies ownership over an idea or concept or image
Intellectual property
Refer to the diagram above. At the point marked m,
TR is exactly equal to TC, so profits equal zero.
In a perfectly competitive market setting, which of the following would be a true statement?
Wage rates trend toward marginal revenue product levels.
A firm that holds a monopoly position in the market place is
a price maker
If monopolists are able to produce fewer goods and sell them at a higher price than they could under perfect competition, the result will be
abnormally high sustained profits.
By 2007, US market deregulation has proven to be most toxic to the overall health of the US economy in the ________________________ .
banking sector
The demand curve perceived by a perfectly competitive firm
is horizontal
Temperatures have persisted below freezing levels in Florida throughout the months of December and January. As a result, demand for electricity sharply increased and the price of electricity rose sharply. The price of coal also rose. In these circumstances, any resulting shifts in the supply curves for coal miners and electricity producers
can also be interpreted as shifts of their respective marginal cost curves.
Refer to the table below. In this instance, expansion of output
causes input prices to rise as demand for inputs increases.
The form of legal protection intended to prevent reproduction of original works is referred to as ______________ law.
copyright
Intellectual property law is a body of law that includes
copyright legislation, as well as all of the above
A perfectly competitive industry is a
hypothetical extreme
Economic profit can be derived from calculating total revenues minus all of the firm's costs,
including its opportunity costs
When a monopolist increases sales by one unit,
it loses some marginal revenue and all of the above.
___________ refers to the additional revenue gained from selling one more unit
marginal revenue
If a monopolist increases quantity by one unit, but sells the increased output at a slightly lower price,
marginal revenue is affected by adding one additional unit sold at the new price.
Refer to the table below. In this instance, confirmation that this firm is operating in a perfectly competitive market can readily be ascertained by the fact that its
marginal revenue is constant.Refer to the table below.
A __________________ exists when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curve.
natural monopoly
Deregulation occurs when a government eliminates or scales back rules relating to all but one of the following. Which one is it?
natural monopoly
What happens in a perfectly competitive industry when economic profit is greater than zero?
new firms may enter the industry and all of the above
Refer to the diagram above. In this instance, at the range of output represented at point c,
profits will be maximized.
A monopolist is able to maximize its profits by
producing output where MR = MC and charging a price along the demand curve.
The total revenue curve for a monopolist will
start low, rise, and then decline
The following figure shows the average cost curve, demand curve, and marginal revenue curve for a monopolist. After maximizing profits, what do the firm's costs equal?
the area of rectangle ABGH
The figure below shows the demand curve and the long run average cost curve for an electric company. This market is a natural monopoly because
the demand curve intersects the long run average cost curve at a point where the long run average cost curve is downward sloping
When a firm pursues a predatory pricing strategy, it does so
to maximize profits in the long run.
In order to produce 100 pairs of oven gloves, Marcia incurs an average total cost of $2.50 per pair. Marcia's marginal cost is constant at $10.00 for every pair of oven gloves produced. The total cost to produce 50 pairs of oven gloves is
$200.00
Given the data provided in the table below, what will the marginal cost equal for production at quantity (Q) level 4?
$4.00
The table below sets out the amount of capital needed for certain investment projects and the rate of return for each project. What is this firm's demand for physical capital if their hurdle rate is 8%?
$500,000
If accounting profits for a firm are 20% of output, and the opportunity cost of financial capital is 8% of output, then what do the firm's economic profits equal?
12% of output
The US government has registered ___________________ on behalf of business firms to protect a particularly distinct element each has selected for its ability to aid consumers to easily __________________ .
800,000 trademarks; identify the source of goods
Refer to the diagram above. Based on the information illustrated in this graph, which of the following is an accurate statement?
MC is initially downward sloping in the region of increasing MR at low output levels
An _________________ is calculated by subtracting the firm's costs from its total revenues, _______________________________
accounting profit; excluding opportunity cost
The marginal revenue curve for a monopolist ____________________ the market demand curve.
always lies beneath
If the price that a firm charges is higher than its ________________ cost of production for that quantity produced, then the firm will earn profits.
average
If the average product for six workers is fifteen and the marginal product of the seventh worker is eighteen, then
average product is rising.
Occasionally, _________________ may lead to pure monopoly; in other market conditions, they may limit competition _________________ .
barriers to entry; to a few oligopoly firms
It is said that in a perfectly competitive market, raising the price of a firm's product from the prevailing market price of $179.00 to $199.00, ________________
could likely result in a notable loss of sales to its competitors
When I'MaGoldMiner chooses what quantity of gold each of it/s mines will produce over the next 12 months, this quantity, along with the prices prevailing in the market for output and inputs, will
determine the company's total revenue, total costs, and its profits.
The slope of the demand curve for a monopoly firm is
downward sloping
A manufacturer would likely make an ________ in a market following the long- run process of beginning and expanding production in response to _________
entry; an incentive to add profits
If a competitive firm experiences a shift in costs of production that decreases marginal costs at all levels of output,
expanding output levels at any given price will be profitable.
Which of the following can be thought of as an adjustment for the risks involved with respect to the cost of a firm acquiring financial capital?
imposition of hurdle rates of interest
Refer to the diagram above. In this instance, the range of production possibilities at point d,
is a steeper slope reflecting a return to losses due to diminishing returns.
I'maSolarPanelCo. manufactures and distributes solar panels in the US market. Two years ago, it had 5 US competitors, but government stimulus in the industry has encouraged 7 new US competitors to enter the market. In these circumstances, I'maSolarPanelCo.'s price for its output
is dictated by the forces of demand and supply
Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should
keep the business open in the short-run, but plan to go out of business in the long-run.
A natural monopoly occurs when the quantity demanded is ________ the minimum quantity it takes to be at the bottom of the long-run average cost curve.
less than
In the ________, the perfectly competitive firm will react to profits by __________________________
long run; increasing its production
In the ________, the perfectly competitive firm will react to losses by __________________________
long run; reducing production or shutting down
When a natural monopoly exists in a given industry, the per-unit costs of production will be
lowest when a single firm generates the entire output of the industry.
If marginal cost is rising in a competitive firm's short-run production process and its average variable cost is falling as output is increased, then
marginal cost is below average variable cost
Under perfect competition, any profit-maximizing producer faces a market price equal to its
marginal costs
In economic terms, a practical approach to maximizing profits requires an examination of how changes in production affect ________________ and ________________ .
marginal revenue; marginal cost
The largest cattle rancher in a given region will be unable to have a __________ when sufficient numbers of smaller cattle ranchers provide sources of competition.
monopoly
When a firm uses retained profits to invest in more energy efficient equipment, an economist would calculate the _________________ of investing in physical capital.
opportunity cost
Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?
output will be too small and its price too high.
Government ______________ regulations specify that inventors will maintain exclusive legal rights to their respective inventions for ______________ .
patent; a limited time
Firms operating in a market situation that creates ___________________, sell their product in a market with other firms who produce identical or extremely similar products.
perfect competition
The use of sharp, temporary price cuts as a form of _________________ would enable traditional US automakers to discourage new competition from smaller electric car manufacturers.
predatory pricing
When a business adopts a strategy of reducing and/or discontinuing production in response to a sustained pattern of losses, it is
preparing to exit operations
If a perfectly competitive firm is a price taker, then
pressure from competing firms will force acceptance of the prevailing market price.
If the quality differences of similar products are mostly imperceptible to the average consumer's eyes, which of the following will most likely play a major role in influencing the decisions of purchasers?
price of competing products
Refer to the diagram above. Based on the information illustrated in this graph, which of the following is an accurate statement?
profits will be reduced by production in the zone where MC exceeds MR
When a firm makes plans for investments in physical capital, it compares the _______________ on these investments with ______________________ .
projected rates of return; the cost of financial capital to the firm
Idaho farmers can sell as large a quantity of their potato crop as they wish,
provided each is willing to accept the prevailing market price.
If a graph is used to compare total revenue and total cost of a perfectly competitive firm, then the horizontal axis of the graph will represent the _______________ and the vertical axis will represent ______________________ .
quantity produced; both total revenue and total costs, measured in dollars.
Refer to the diagram above. In this instance, the marginal revenue curve
reflects each of the above
If it was possible for one company to gain ownership control all of the uranium processing plants in the US, then
that firm could set up barriers to entry to discourage competition
In Sam's greenhouse operation, labor is the only short term variable input. After completing a cost analysis, if the marginal product of labor is the same for each unit of labor, this will imply that
the average product of labor is always equal to the marginal product of labor.
Which of the following will present the least amount of concern to a firm that has a monopoly over a particular industry?
the competitive actions of other business firms
Refer to the diagram above. In this instance, point e shown on the graph indicates
the point where profits will increase by reducing output
Even when competitive firms are unable to calculate marginal revenue product directly, _________________________________________ will push wage rates toward the marginal revenue product of labor.
the pressures of competition in the labor market
Why would a profit-seeking firm need to tailor its decisions about the quantity of labor inputs that it purchases?
to produce the profit-maximizing quantity of output at the lowest possible average cost
In the business world, a _________________ is recognized as a legally acceptable way for any business to keep knowledge of its particular methods of production from being known by competing firms.
trade secret
In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice?
what quantity to produce
