Micro Exam Final Unit 2

a price maker

A firm that holds a monopoly position in the market place is A - a price maker B - a price taker C - monopolistically competitive D - subject to infinite market forces

a sustained pattern of profits

A manufacturer would likely make an entry in a market following the long-run process of beginning and expanding production in response to ________________ . A - a strategy to grow profits B - an incentive for profit C - a sustained pattern of profits D - an incentive to add to profits

True

Economist usually refer to elasticity of demand in absolute terms. A - True B - False

what quantity to produce

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? A - what quantity to produce B - what price to charge C - what quantity of labor is needed D - what quality to produce

average variable cost curve crosses the marginal cost curve.

In economics, the term "shutdown point" refers to the point where the A - marginal cost curve crosses the total revenue curve. B - average variable cost curve crosses the total revenue curve. C - average variable cost curve crosses the marginal cost curve. D - marginal cost curve crosses the fixed cost curve.

increasing returns to scale

In microeconomics, the term _____________________ is synonymous with economies of scale. A - diminishing marginal returns B - increasing returns to scale C - decreasing returns to scale D - constant returns to scale

the quantity of output

In order to determine the average variable cost, the firm's variable costs are divided by _______________________. A - its' fixed costs B - the quantity of output C - its' average costs D - diminishing marginal costs

elastic

Demand is said to be ___________ when the quantity demanded is very responsive to changes in price. A - elastic B - unit elastic C - inelastic D - independent

natural monopoly

Deregulation occurs when a government eliminates or scales back rules relating to all but one of the following. Which one is it? A - prices that can be charged B - natural monopoly C - conditions of entry in a certain industry D - quantities that can be produced

to make a profit

What is the number one goal of a firm? A - to go out of business B - to make a profit C - produce goods and services D - advertise

It depends on the elasticity of demand.

When a business wants to increase it's revenue should it raise it's price? A - It depends on the elasticity of demand. B - Yes C - No

consumers are not very responsive to changes in price.

When demand is inelastic: A - price elasticity of demand is greater than 1. B - consumers are not very responsive to changes in price. C - the percentage change in quantity demanded resulting from a price change is greater than the percentage change in price. D - demand curves appear to be fairly flat.

monopoly

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. A - oligopoly B - patent C - monopoly D - monopolistic competition

always lies beneath

The marginal revenue curve for a monopolist ____________________ the market demand curve. A - always rises above B - always lies beneath C - always runs parallel D - always is the same

downward sloping

The slope of the demand curve for a monopoly firm is A - horizontal, parallel to the x-axis B - vertical, parallel to the y-axis C - upward sloping D - downward sloping

marginal costs

Under perfect competition, any profit-maximizing producer faces a market price equal to its A - average costs B - marginal costs C - total costs D - variable costs

less than

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. A - greater than B - less than C - equal to D - a or c above

elastic

A price cut will increase the total revenue a firm receives if the demand for its product is: A - unit inelastic B - unit elastic C - inelastic D - elastic

constant returns to scale

A situation known as _____________________ occurs when all production inputs are allowed to expand, but that expansion does not result in much of a change in the average cost of production. A - returns to scale B - economies of scale C - constant returns to scale D - diminishing marginal returns

3

Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop? A - 0.15 B - 3 C - 0.1 D - 0.05

supply curve

For a perfectly competitive firm, the marginal cost curve is identical to the firm�s ________________ . A - demand curve B - supply curve C - average total cost curve D - average variable cost curve

provided each is willing to accept the prevailing market price.

Idaho farmers can sell as large a quantity of their potato crop as they wish, A - if they set their own price in the short run, but in the long run, the market sets the price. B - provided each is willing to accept the prevailing market price. C - if they set their own price in the long run, but in the short run, the market sets the price. D - provided quality is perceptible and determines the market price.

variable costs

If a paper mill shuts down its operations for three months so that it produces nothing, its __________________ will be reduced to zero? A - variable costs B - fixed costs C - opportunity costs D - total cost

True

If elasticity of demand is greater than one economist say that the demand is elastic A - True B - False

that firm could set up barriers to entry to discourage competition.

If it was possible for one company to gain ownership control all of the uranium processing plants in the US, then A - they will strive to reach efficiencies only they know how to make. B - that firm could set up barriers to entry to discourage competition. C - government will deregulate to ensure the company's monopoly. D - the factors of market demand and supply will set the price.

high sustained profits.

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 A - elimination of barriers to entry B - irregularly high unsustainable profits. C - government deregulation. D - high sustained profits.

increase the quantity exchanged but result in no change in the price.

If the demand curve is perfectly elastic, then an increase in supply will: A - decrease the price but result in no change in the quantity exchanged. B - increase the quantity exchanged but result in no change in the price. C - increase the price but result in no change in the quantity exchanged. D - increase both the price and the quantity exchanged.

0.5

If the price of good increases by 10% and the quantity demanded falls by 5% what is the elasticity of demand? Answer in absolute terms. A - 0.5 B - 2 C - 5 D - 10

average cost

If the price that a firm charges is lower than its ____________ of production, the firm will suffer losses. A - average cost B - marginal cost C - fixed cost D - variable cost

price of competing products

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? A - price of competing products B - size of competing products C - purchaser's opportunity cost D - geographic origin of products

could likely result in a notable loss of sales to competitors

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, ____________________. A - will likely cause the firm to reach its shutdown point immediately B - will cause the firm to recover some of its opportunity costs C - could likely result in a notable loss of sales to competitors D - is a sure sign the firm is raising the given price in the market

Price times quantity (P*Q)

Revenue is equal to: A - Price times quantity (P*Q) B - Price divided by quantity (P/Q) C - Quantity divided by quantity (Q/P) D - Price minus quantity (P-Q)

there is a movement along the marginal costs curves

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 and coal rose sharply. This can be interpreted using supply and demand by saying it was a shift in the demand for electricity and coal, but what can be said about the supply curve? A - there is a movement along the marginal costs curves B - at all levels of output shifts marginal costs to the right. C - can also be interpreted as shifts of their respective marginal cost curves. D - shifts marginal costs to the right enabling both to produce more at any given market price.

local electricity distributor

Which of the following is most likely to be a monopoly? A - local fast-food restaurant B - local electricity distributor C - local bathroom fixtures shop D - local television broadcaster

sunk costs

Which of the following should typically be ignored because spending has already been made and cannot be changed? A - variable costs B - sunk costs C - marginal costs D - average marginal costs

a sole producer of a product for which good substitutes are lacking in a market with high barriers to entry

Which one of the following is the most accurate description of a monopolist? A - a sole producer of a narrowly defined product class, such as brown, Grade A eggs produced in Eagle County, Colorado B - a firm that is very large relative to all its competitors within a narrow product class C - a sole producer of a product for which good substitutes are lacking in a market with high barriers to entry D - a large, multinational firm that produces a single product in a narrow product class

producing larger quantities of a good or service generally requires more workers

Why would labor be treated as a variable cost? A - they are costs incurred in the act of producing that will decrease with quantity produced B - they are made before production starts and vary according to the specific line of business C - labor costs are an input cost that firms are unable to change in the short run D - producing larger quantities of a good or service generally requires more workers

Total costs

___________ include all spending on labor, machinery, tools, and supplies purchased from other firms. A - Total profits B - Total revenues C - Total costs D - Total profit margins

Total revenue

_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price. A - Total revenue B - Total profits C - Average profit margin D - Total cost

Monopolistic competition

________________________ arises where many firms are competing in a market to sell similar but differentiated products. A - Oligopolistic competition B - Perfect competition C - Monopolistic competition D - Monogopolised competition