Economics Final
A common characteristic of oligopolies is: A. interdependence in pricing decisions. B. independent pricing decisions. C. low industry concentration. D. few or no plant-level economies of scale.
A
A natural monopoly exists when: A. unit costs are minimized by having one firm produce an industry's entire output. B. several formerly competing producers merge to become the only firm in an industry. C. short-run average total cost curves are tangent to long-run average total cost curves. D. minimum efficient scale is attained at a small level of output.
A
A profit-maximizing monopolist will continue expanding output as long as: A. marginal revenue exceeds marginal cost. B. marginal revenue is positive C. the cost of producing an additional unit exceeds the marginal revenue derived from the unit. D. economic profit is more than zero.
A
A profit-maximizing monopolist will continue expanding output as long as: A. marginal revenue exceeds marginal cost. B. marginal revenue is positive. C. the cost of producing an additional unit exceeds the marginal revenue derived from the unit. D. economic profit is more than zero.
A
A purely competitive firm can be identified by the fact that: A. Its average revenue equals marginal revenue B. There are other firms in the industry producing close substitutes C. It is making only normal profits in the short run D. It experiences diminishing marginal returns
A
A purely competitive firm does not try to sell more of its product by lowering its price below the market price because: A. It can sell all it wants to at the market price B. Its demand curve is inelastic, so total revenue will decline C. This would be considered unethical price chiseling D. Its competitors would not permit it
A
A purely competitive firm is producing at the point where its marginal cost equals the price of its product. If the firm increases its output, then total revenue will: A. Increase and profits will decrease B. Increase and profits will increase C. Decrease and profits will decrease D. Decrease and profits will increase
A
Assume a monopolist's marginal cost and marginal revenue curves intersect and the demand curve passes above its average total cost curve. The firm will: A. make an economic profit. B. stay in operation in the short run, but shut down in the long run. C. shut down in the short run. D. lower the price.
A
At the level of output where the marginal cost and marginal revenue curves intersect, a monopolist's demand curve passes above its average total cost curve. The firm will: A. be able to make a pure economic profit. B. stay in operation in the short-run, but shut down. C. shut down in the short-run. D. increase its price.
A
At zero units of output a firm's variable costs are zero. A. True B. False
A
Compared to the perfectly competitive outcome, monopolistically competitive markets will result in: A. a wider variety of products and higher prices. B. less product variety and higher prices. C. a wider variety of products and lower prices. D. less product variety and lower prices.
A
If a firm has substantial market power, it must be operating in an industry that would be classified as: A. a monopoly or oligopoly. B. perfectly competitive. C. monopolistically competitive. D. perfectly competitive or monopolistically competitive. E. perfectly competitive or a monopoly.
A
If marginal cost exceeds marginal revenue, a profit-maximizing monopolist will: A. restrict output to increase the price even higher. B. raise price and expand output to increase profit. C. lower price and expand output to increase profit. D. attempt to maintain this position because it is consistent with profit maximization.
A
In long-run equilibrium, output is expanded to the minimum long-run average total cost by: A. perfectly competitive firms but not by monopolistically competitive firms. B. monopolistically competitive firms but not by perfectly competitive firms. C. both monopolistically competitive firms and perfectly competitive firms. D. neither perfectly competitive firms nor monopolistically competitive firms.
A
In the short run: A. TVC will increase for a time at a diminishing rate, but then beyond some point will increase at an increasing rate. B. TVC will increase for a time at an increasing rate, but then beyond some point will increase at a diminishing rate. C. TVC will increase by the same absolute amount for each additional unit of output produced. D. one cannot generalize concerning the behavior of TVC as output increases.
A
Price is constant or "given" to the individual firm selling in a purely competitive market because: A. Each seller supplies a negligible fraction of total demand and supply B. The firm's demand curve is downsloping C. Product differentiation is reinforced by extensive advertising D. There are no good substitutes for the firm's product
A
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: A. marginal product of the third worker is 9 B. the third worker has to work with poorer quality tools and raw materials C. firm will not want to hire more than three workers D. first worker puts forth more effort than the second and third workers
A
The goal of any monopolist is to maximize: A. economic profits. B. normal profits. C. price. D. consumer welfare. E. output.
A
The kinked demand curve: A. applies when competitors match price decreases but not price increases. B. could apply to market demand in any market structure. C. applies when competitors match price increases but not price decreases. D. applies to the price leadership model. E. applies when competitors act independently.
A
The marginal revenue curve of a monopolistically competitive firm will always lie: A. below the firm's demand curve. B. parallel to the firm's demand curve. C. parallel to the firm's quantity axis. D. above the firm's demand curve.
A
The monopolist's demand curve is: A. identical to the market demand curve. B. identical to the marginal revenue curve. C. below the marginal revenue curve. D. a horizontal line at the market price. E. a U-shaped curve.
A
The theory of monopolistic competition predicts that in long-run equilibrium a monopolistically competitive firm will: A. produce at the level in which price equals long-run average cost. B. operate at minimum long-run average cost. C. overutilize its insufficient capacity. D. none of these.
A
To maximize its profit, a monopoly should choose a price where demand is: A. elastic. B. inelastic. C. unitary elastic. D. vertical.
A
To the economist, total cost includes: A. explicit and implicit costs, including a normal profit B. neither implicit nor explicit costs C. implicit, but not explicit, costs D. explicit, but not implicit, costs
A
Which characteristic would best be associated with pure competition? A. Price takers B. Nonprice competition C. Product differentiation D. Few sellers
A
Which idea is inconsistent with pure competition? A. Product differentiation B. Freedom of entry or exit for firms C. Short-run losses D. A large number of buyers and sellers
A
Which is not a required characteristic of a purely competitive industry? A. Industry demand is highly elastic B. Consumers have no reason to prefer one firm's product to another because products are homogeneous C. There are so many firms that none can influence market price D. Firms can enter or leave the industry
A
Which is true for a purely competitive firm in short-run equilibrium? A. The firm's marginal revenue is equal to its marginal cost B. The firm is making only normal profits C. The firm's marginal cost is greater than its marginal revenue D. A decrease in output would lead to a rise in profits
A
Which of the following is a characteristic of an oligopoly? A. Mutual interdependence in pricing decisions. B. Independent pricing decisions. C. Lack of control over prices. D. All of these are true.
A
Which of the following is a short-run adjustment? A. A local bakery hires two additional bakers B. Six new firms enter the plastics industry C. The number of farms in the United States declines by 5 percent D. BMW constructs a new assembly plant in South Carolina
A
Which of the following is most likely to be a variable cost? A. fuel and power payments B. interest on business loans C. rental payments on IBM equipment D. real estate taxes
A
Which of the following statements concerning the relationships between total product (TP), average product (AP), and marginal product (MP) is not correct? A. AP continues to rise so long as TP is rising. B. AP reaches a maximum before TP reaches a maximum. C. TP reaches a maximum when the MP of the variable input becomes zero. D. MP cuts AP at the maximum AP.
A
A kinked demand curve is perceived by the firm as being: A. more elastic to the right of the kink B. more inelastic to the right of the kink C. more inelastic to the left of the kink D. present when there is a monopoly E. bowed-in or bowed-out
B
A monopoly is: A. a seller of a highly advertised and differentiated product in a market with low barriers to entry in the long run. B. the only seller of a good for which there are no good substitutes in a market with high barriers to entry. C. the only buyer of a unique raw material. D. the producer of a product subsidized by the government.
B
A purely competitive firm does not try to sell more of its product by lowering its price below the market price because: A. Its competitors would not permit it B. It can sell all it wants at the market price C. This would be considered unethical price chiseling D. Its demand curve is inelastic, so total revenue will decline
B
A purely competitive firm will be willing to produce even at a loss in the short run, as long as: A. Price exceeds marginal costs B. The loss is smaller than its total fixed costs C. The loss is smaller than its total variable costs D. The loss is smaller than its marginal costs
B
An explicit cost is: A. omitted when accounting profits are calculated B. a money payment made for resources not owned by the firm itself C. an implicit cost to the resource owner who receives that payment D. always in excess of a resource's opportunity cost
B
An oligopolist operating with a kinked demand curve would expect rivals to match its price: A. increases. B. decreases. C. both a and b. D. neither a nor b.
B
At a price of $5, 24 units of the good would be sold; at a price of $7, 25 units of output would be sold. The marginal revenue of the 25th unit of output is: A. $14 B. $55 C. $6 D. $168 E. $175
B
At any point where a monopolist's marginal revenue is positive, the downward-sloping straight-line demand curve is: A. perfectly elastic. B. elastic, but not perfectly elastic. C. unit elastic. D. inelastic.
B
Both a perfectly competitive firm and a monopolist: A. always earn an economic profit. B. maximize profit by setting marginal cost equal to marginal revenue. C. maximize profit by setting marginal cost equal to average total cost. D. are price takers.
B
Economies of scale are indicated by: A. the rising segment of the average variable cost curve B. the declining segment of the long-run average total cost curve C. the difference between total revenue and total cost D. a rising marginal cost curve
B
Graphically, the marginal revenue curve of a monopolist: A. will sometimes lie below the demand curve of the monopolist. B. will always lie below the demand curve of the monopolist. C. is the same as the demand curve of the monopolist. D. will equal -1 when the elasticity of demand is unitary.
B
If a firm is a price taker, then the demand curve for the firm's product is: A. Unit elastic B. Perfectly elastic C. Perfectly inelastic D. Equal to the total revenue curve
B
If a technological advance increases a firm's labor productivity, we would expect its: A. average total cost curve to rise B. average total cost curve to fall C. total cost curve to rise D. average total cost curve to be unaffected
B
In a purely competitive industry, each firm: A. Engages in various forms of nonprice competition B. Can easily enter or exit the industry C. Produces a differentiated product D. Determines its own price
B
In the short run it is impossible for an expansion of output to increase: A. average total cost B. average fixed cost C. marginal cost D. average variable cost
B
In the short run, the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs: A. are $2.50 B. are $1,250 C. are $750 D. are $1,100
B
In the standard model of pure competition, a profit-maximizing entrepreneur will shut down in the short run if: A. Average cost is greater than average revenue B. Total revenue is less than total variable costs C. Marginal cost is greater than average revenue D. Average fixed cost is greater than average revenue
B
In which of the following market structures must the price and output decisions of an individual firm include the possible price and output reactions of the firm's rivals? A. Monopoly B. Oligopoly C. Perfect competition D. Cartel
B
Marginal cost is the: A. rate of change in total fixed cost that results from producing one more unit of output. B. change in total cost that results from producing one more unit of output. C. change in average variable cost that results from producing one more unit of output. D. change in average total cost that results from producing one more unit of output.
B
One key characteristic that is distinctive of an oligopoly market is that: A. the demand curve facing each firm is downward sloping, with a marginal revenue curve that lies below the firm's demand curve. B. the decisions of one seller often influences the price of products, the output, and the profits of rival firms. C. there is only one firm that produces a product for which there are no good substitutes. D. there are many sellers in the market and each is small relative to the total market.
B
Other things equal, if the wage rates paid to a firm's labor inputs were to rise, we would expect the: A. AFC, AVC, ATC, and MC curves all to rise B. AVC, ATC, and MC curves all to rise. C. AFC and ATC curves to fall D. MP curve to fall
B
Production costs to an economist: A. consist only of explicit costs B. reflect opportunity costs C. never reflect monetary outlays D. always reflect monetary outlays
B
The "kinked" oligopoly demand curve is a result of the assumption by an oligopolist that: A. price increases will be matched, but price reductions will not. B. price increases will not be matched, but price reductions will. C. both price increases and price reductions will be matched. D. neither price increases, nor price reductions will be matched.
B
The amount of calendar time associated with the long run: A. is less than that associated with the immediate market period. B. varies from industry to industry. C. is the same for all firms. D. is, by definition, any length of time greater than one year.
B
The basic characteristic of the short run is that: A. barriers to entry prevent new firms from entering the industry. B. the firm does not have sufficient time to change the size of its plant. C. the firm does not have sufficient time to cut its rate of output to zero. D. a firm does not have sufficient time to change the amounts of any of the resources it employs.
B
The conclusion arrived at from a kinked-demand oligopoly model is that: A. oligopoly firms cannot maximize their profits. B. oligopoly firms should keep prices at their current level. C. all oligopoly firms should raise prices. D. all oligopoly firms should lower prices. E. oligopoly market structure will lead to lower prices than more competitive industries.
B
The short-run average total cost curve is U-shaped because: A. average fixed costs decline continuously as output increases B. of increasing and diminishing returns C. of economies and diseconomies of scale D. minimum efficient scale is encountered
B
The vertical distance between a firm's ATC and AVC curves represents: A. AFC, which increases as output increases. B. AFC, which decreases as output increases. C. marginal costs, which decrease as output decreases. D. marginal costs, which increase as output increases.
B
There is only one gas station within hundreds of miles. The owner finds that when she charges $3 a gallon, she sells 199 gallons a day, and when she charges $2.99 a gallon, she sells 200 gallons a day. The marginal revenue of the 200th gallon of gas is: A. $.01 B. $1 C. $2.99 D. $3 E. $600
B
To economists, the main difference between the short run and the long run is that: A. the law of diminishing returns applies in the long run, but not in the short run B. in the long run all resources are variable, while in the short run at least one resource is fixed C. fixed costs are more important to decision making in the long run than they are in the short run D. in the short run all resources are fixed, while in the long run all resources are variable
B
What do wages paid to factory workers, interest paid on a bank loan, forgone interest, and the purchase of component parts have in common? A. None are either implicit or explicit costs. B. All are opportunity costs. C. All are implicit costs. D. All are explicit costs.
B
When marginal revenue is zero for a monopolist facing a downward-sloping straight-line demand curve, the price elasticity of demand is: A. greater than 1. B. equal to 1. C. less than 2. D. equal to 0.
B
Which barrier to entry results in the creation of a natural monopoly? A. Legal barriers like government franchises. B. Economies of scale. C. Ownership of a vital resource. D. Patents and copyrights.
B
Which of the following most closely approximates the conditions of a monopolistically competitive market? A. The market for Grade A eggs, which is characterized by a large number of firms producing a homogeneous product. B. The restaurant industry, which is characterized by firms producing a differentiated product in a market with low entry barriers. C. Local cable television service, where a licensed supplier competes with firms offering satellite service. D. The market for jumbo aircraft, where one major domestic firm competes with one major foreign firm.
B
Which of the following statements best describes firms under monopolistic competition? A. There is little price or quality competition. B. The firms compete, using quality, location, advertising, and price. C. Firms do not compete using advertising. D. There is little competition between firms.
B
A monopolist will operate in the short run if which of the following is above average variable cost? A. Marginal cost B. Marginal revenue C. Price D. All of these
C
A natural monopoly is a market where: A. a single firm has control over a vital natural resource. B. many smaller firms can produce the entire market output at the same per-unit cost as could one large firm. C. a single large firm can produce the entire market output at a lower per-unit cost than a group of smaller firms. D. many smaller firms can produce the entire market output at a lower per-unit cost than could one large firm.
C
As a result of a kinked demand curve, the price: A. fluctuates B. falls below the kink. C. settles at the kink. D. rises above the kink.
C
Assume a firm closes down in the short run and produces no output. Under these conditions: A. TVC is positive, but TFC and TC are zero. B. TFC is positive, but TVC and TC are zero. C. TFC and TC are positive, but TVC is zero. D. TFC, TVC, and TC will all be positive.
C
At the long-run equilibrium level of output, the monopolist's marginal cost will: A. exceed price. B. equal price. C. be less than price. D. be less than marginal revenue.
C
Average revenue is conceptually equivalent to the: A. Average cost of the product B. Marginal cost of the product C. Unit price of the product D. Marginal revenue of the product
C
How will the price and output of a monopolist compare with perfect competition? A. The output of the monopolist will be too large and the price too high. B. The output of the monopolist will be too large and the price too low. C. The output of the monopolist will be too small and the price too high. D. The output of the monopolist will be too small and the price too low.
C
If OPEC is an effective cartel, A. price changes are dictated by changes in demand. B. output changes are dictated by changes in demand. C. members agree on output quotas. D. all of these.
C
If an industry's long-run average total cost curve has an extended range of constant returns to scale, this implies that: A. technology precludes both economies and diseconomies of scale B. the industry will be a natural monopoly C. both relatively small and relatively large firms can be viable in the industry D. the industry will be comprised of a very large number of small firms
C
If marginal cost is: A. falling, then average total cost must also be falling B. rising, then average total cost must also be rising C. rising, then average total cost could be either falling or rising D. falling, then average total cost could be either falling or rising
C
If marginal costs increase, a monopolist will: A. decrease price and increase output. B. decrease both price and output. C. increase price and decrease output. D. increase both price and output. E. keep both price and output at the same level.
C
In pure competition, each extra unit of output that a firm sells will yield a marginal revenue that is: A. Equal to the average cost B. Greater than the price C. Equal to the price D. Less than the price
C
In the long run, a monopolistically competitive firm will set price: A. at the intersection of the marginal cost and demand curves. B. at the intersection of the average total cost and demand curves. C. higher than the competitive level, but lower than the monopoly price. D. higher than the marginal cost, but lower than average total cost.
C
Some economists argue that monopolistically competitive markets are inefficient because: A. the firms earn economic profits in the long run. B. the firms' marginal costs and marginal revenues are not always equal. C. firms do not produce the output rate that would minimize their average total cost. D. barriers to entry are high.
C
Supporters of advertising claim that it: A. makes demand for a firm's product more elastic. B. is a barrier to entry. C. promotes better quality products. D. all of these.
C
The Campus Crustacean Company receives $2 per box for its crawfish and is selling 1,600 boxes to maximize its profits. What is the profit per box of crawfish at this equilibrium level of output if the average variable cost is $1 per box and fixed costs are $1,200? A. $1.25 B. $1.00 C. $.25 D. $.50
C
The assumption(s) made to construct a kinked-demand oligopoly model is (are) that: A. all firms in the industry will ignore the price changes made by any one firm. B. any price decrease will be ignored, but price increases will be followed. C. all firms will follow a price decrease but will ignore any price increase. D. all price changes made by any firm will be followed by all of the other firms.
C
The demand curve faced by a purely competitive firm: A. Is identical to the market demand curve B. Yields constant total revenues even when price changes C. Is the same as its marginal revenue curve D. Has unitary elasticity
C
The law of diminishing returns describes the: A. relationship between total costs and total revenues B. profit-maximizing position of a firm C. relationship between resource inputs and product outputs in the short run D. relationship between resource inputs and product outputs in the long run
C
The monopolist faces: A. a perfectly inelastic demand curve. B. a perfectly elastic demand curve. C. the entire market demand curve. D. all of these.
C
The total revenue of a purely competitive firm from 8 units of output is $48. Based on this information, total revenue for 9 units of output must be: A. $52 B. $58 C. $54 D. $60
C
When diseconomies of scale occur: A. the long-run average total cost curve falls. B. marginal cost intersects average total cost. C. the long-run average total cost curve rises. D. average fixed costs will rise.
C
Which of the following firms best fits the definition of a monopoly? A. General Motors B. Exxon Mobile C. Local electric utility D. AT&T
C
Which of the following is true for a firm operating under perfect competition, monopolistic competition, and monopoly? A. Firms earn positive economic profits in the long run. B. Firms earn zero economic profits in the long run. C. Profits are maximized when marginal cost equals marginal revenue. D. Price equals marginal cost.
C
Which of the following is true for a monopolist? A. The firm has a perfectly elastic demand curve. B. The firm has a perfectly inelastic demand curve. C. The straight-line demand curve is above the marginal revenue curve. D. The marginal revenue curve is above the demand curve. E. All of these.
C
Which of the following is true for a pure monopolist? A. The firm has a perfectly elastic demand curve. B. The firm will always earn an economic profit. C. The demand curve is above the marginal revenue curve. D. None of these is true.
C
Which of the following is true under natural monopoly? A. The marginal cost curve will be above the average cost curve. B. The monopolist will set price equal to marginal cost and will earn economic profits. C. Economies of scale exist. D. Output is produced under conditions of constant cost.
C
A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 1,000 units is $2.50. The minimum possible average variable cost is $2.00. The market price of the product is $2.50. To maximize profit or minimize losses, the firm should: A. Produce less than 1,000 units B. Shut down C. Produce more than 1,000 units D. Continue producing 1,000 units
D
A monopolistic competitive firm is inefficient because the firm: A. earns positive economic profit in the long run. B. is producing at an output corresponding to the condition that marginal cost equals price. C. is not maximizing its profit. D. produces an output where average total cost is not minimum.
D
A monopolized market is characterized by: A. a sole seller of a product for which there are few suitable substitutes. B. very strong barriers to entry. C. a single firm facing the market demand curve. D. all of these.
D
A monopoly: A. can increase price and increase output at the same time. B. can charge any price it wants and still sell all of its output. C. can sell any output it produces provided it accepts the market price. D. must lower price in order to increase output. E. faces a perfectly elastic demand curve.
D
A purely competitive firm's output is currently such that its marginal cost is $4 and marginal revenue is $5. Assuming profit maximization, the firm should: A. Raise its price and cut output B. Cut its price and raise its output C. Leave price unchanged and cut output D. Leave price unchanged and raise output
D
An oligopoly is a market structure in which: A. one firm has 100 percent of a market. B. there are many small firms. C. there are many firms with no control over price. D. there are few firms selling either a homogeneous or differentiated product.
D
An organization of sellers designed to coordinate their supply decisions to maximize joint profits is called a: A. consumer cooperative B. marketing association C. regulatory agency D. cartel
D
Average fixed cost: A. equals marginal cost when average total cost is at its minimum B. may be found for any output by adding average variable cost and average total cost C. graphs as a U-shaped curve D. declines continually as output increases
D
Cartel members have an incentive to cheat on the cartel because: A. the cartel does not maximize profits. B. the cartel price is the competitive price. C. each member's output quota is too high. D. each member's MR is not equal to the cartel's MC. E. the industry profit would be higher under competitive conditions.
D
For a monopolist with a downward-sloping demand curve, A. the coefficient of price elasticity of demand is infinite. B. the coefficient of price elasticity of demand is zero. C. as price increases, marginal revenue decreases. D. as price decreases, marginal revenue decreases. E. when the price is equal to zero, marginal revenue is equal to zero.
D
In a graph for a firm in pure competition with the quantity of output measured on the horizontal axis, the total revenue curve is: A. Horizontal B. Downward-sloping C. Vertical D. Upward-sloping
D
Suppose a monopolist's demand curve lies below its average variable cost curve. The firm will: A. stay in operation in the short-run. B. earn an economic profit. C. earn an economic profit in the long run. D. shut down
D
Suppose an oil cartel has an agreement to restrict members' production in order to maintain a price of $30 per barrel. A single cartel member may want to cheat and exceed its quota so that it can: A. reduce its costs. B. charge higher prices. C. make demand more inelastic. D. earn a bigger profit.
D
Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting: A. profits were $100,000 and its economic profits were zero B. losses were $500,000 and its economic losses were zero C. profits were $500,000 and its economic profits were $1 million D. profits were zero and its economic losses were $500,000
D
The demand curve any monopolist uses in making output decisions is: A. the same as the demand curve facing a perfectly competitive firm. B. vertical, because there are no close substitutes for its product. C. horizontal, because there are no close substitutes for its product. D. the same as the market demand curve. E. perfectly inelastic.
D
The long run is characterized by: A. the relevance of the law of diminishing returns B. at least one fixed input C. insufficient time for firms to enter or leave the industry D. the ability of the firm to change its plant size
D
The production of agricultural products such as wheat or corn would best be described by which market model? A. Monopolistic competition B. Pure monopoly C. Oligopoly D. Pure competition
D
The theory of monopolistic competition predicts that in long-run equilibrium a monopolistically competitive firm will: A. produce the output level at which price equals long-run marginal cost. B. operate at minimum long-run average cost. C. overutilize its insufficient capacity. D. produce the output level at which price equals long-run average cost.
D
The two tendencies of a firm in a cartel are the incentive to: A. cheat to maximize joint profits and the incentive to raise prices. B. cheat and avoid collusion and the incentive to raise price to maximize the firm's share of profits. C. increase output in order to minimize per-unit cost and the incentive to reduce price in order to maximize joint profit. D. cooperate to maximize joint profits and to cheat on the agreement in order to increase the firm's share of the profit.
D
Total fixed cost (TFC): A. falls as the firm expands output from zero, but eventually rises. B. falls continuously as total output expands. C. varies directly with total output. D. does not change as total output increases or decreases.
D
Which is not a required characteristic of a purely competitive industry? A. Firms can enter or leave the industry B. There are so many firms that none can influence market price C. Consumers have no reason to prefer one firm's product to another because products are homogeneous D. Industry demand is highly elastic
D
Which of the following firms operates in a natural monopoly? A. Telephone company B. Electric company C. Water company D. All of these
D
Which of the following is true about advertising by a firm? A. It is not always successful in increasing demand for a firm's product. B. It attempts to increase demand and to make demand more inelastic. C. It may reduce per unit costs of production when economies of scale are experienced. D. All of these.
D
Which of the following is true in long-run equilibrium for both perfect competition and monopolistic competition? A. Accounting profit is zero. B. Marginal cost equals price. C. Long-run average cost is at a minimum. D. Economic profit is zero.
D
Which of the following statements best describes the price, output, and profit conditions of monopoly? A. Price will equal marginal cost at the profit-maximizing level of output and profits will be positive in the long run. B. Price will always equal average variable cost in the short-run and either profits or losses may result in the long run. C. In the long run, positive economic profit will be eliminated. D. None of these.
D
A monopoly will be maximizing profits if it is operating at the point where: A. price is at a maximum. B. average cost is at a minimum. C. average cost is at a maximum. D. marginal cost is at a minimum. E. marginal revenue = marginal cost.
E
If a monopolistically competitive firm can earn a profit, it will increase production until: A. MR > AVC B. MR = ATC C. MC > MR D. MR = AR E. MR = MC
E
Pricing and output determination under an oligopoly is more complicated than pricing and output determinations in other industries. The primary reason for the complication is the: A. fewness of firms. B. brand loyalty of consumers. C. powerful effect of advertising. D. variability of concentration ratios. E. mutual interdependence of firms.
E
Which of the following is a characteristic of the monopolistic competition market structure? A. Many firms and a homogeneous product. B. Few firms and differentiated products. C. Few firms and similar products. D. Few firms and a homogeneous product. E. Many firms and differentiated products.
E
Which of the following statements is always true with respect to oligopolists? A. They react slowly to actions taken by other firms B. They lower prices together C. They raise prices together D. They know with certainty what the other firms will do E. They take into consideration how other firms might react
E
