Perfect Competition: Master

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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

. 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

A monopolistic competitor has the following information about cost and demand. If this industry was perfectly competitive, what price would the good sell for?

$21

Recall that in perfect competition a firm's demand curve is a horizontal line drawn at the market price level and that P=MR. With this in mind, based on the figure below, total revenues are: $200 $240 $264 $220

$220

Recall that in perfect competition a firm's demand curve is a horizontal line drawn at the market price level and that P=MR. With this in mind, based on the figure below, total revenues are:

$220 $264 $240 (incorrect) $200

Recall that in perfect competition a firm's demand curve is a horizontal line drawn at the market price level and that P=MR. With this in mind, based on the figure below, total revenues are:

$220 $264 $240 * $200 (incorrect)

$23 million

The following table shows the demand curve and cost information for a firm that is a monopoly. If they maximize their profits, what will their revenue equal?

$54,000

If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have reached its A. allocative efficiency B. productive efficiency C. utility-maximizing efficiency D. minimum price efficiency

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

The following table shows a monopolist's demand curve and cost information for the production of its good. What quantity will it produce?

An _________________ is calculated by subtracting the firm's costs from its total revenues, _______________________________ . A. accounting profit; excluding opportunity cost B. accounting profit; including opportunity cost C. economic profit; excluding opportunity cost D. opportunity cost; including economic profit

The information below sets out the estimated market shares for the cellular phone manufacturing market Based on this information, the Herfindahl-Hirschman Index is

1836

Refer to the diagram above. Based on the information illustrated in this graph, which of the following is an accurate statement? A. MC is initially downward sloping in the region of increasing MR at low output levels B. As production increases, marginal revenue always increase so profits rise C. as production decreases, marginal revenue will increase so profits will rise D. a profit-seeking firm should continue to expand production as long as MR is less than MC

Refer to the table below. In this instance, expansion of output Q P TR MR TC MC 0 $30 0 --- $15 --- 1 $30 $30 $30 $25 $10 2 $30 $60 $30 $40 $15 3 $30 $90 $30 $60 $20 4 $30 $120 $30 $85 $25 5 $30 $150 $30 $115 $30 6 $30 $180 $30 $150 $35 A. causes input prices to rise as demand for inputs increases. B. leaves input prices constant as demand for inputs increases. C. causes diseconomies of scale to occur. D. occurs because of increasing returns to scale.

Given the data provided in the table below, what will the amount of profit be for production at quantity (Q) level 7? Q P TC TR MR MC Profit 0 $5 $9 1 $5 $10 2 $5 $12 3 $5 $15 4 $5 $19 5 $5 $24 6 $5 $30 7 $5 $45 A. -$10.00 B. zero C. -$5.00 D. $1.00

If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have achieved:

Allocative efficiency (correct) Productive efficiency Utility-maximizing efficiency

Decreasing Cost Industry

As the market expands, the old and new firms experience lower costs of production, which makes the new zero-profit level intersect at a lower price than before. In this case, the industry and all the firms in it are experiencing falling average total costs

In economic terms, a practical approach to maximizing profits requires an examination of how changes in production affect ________________ and ________________ . A. total revenue; total cost B. marginal revenue; marginal cost C. total revenue; marginal cost D. marginal revenue; total cost

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 A. $25 B. $20 C. $50 D. $60

In the ________, the perfectly competitive firm will react to losses by __________________________ . A. short run; reducing production or shutting down B. long run; reducing production or shutting down C. short run; increasing physical inputs D. long run; increasing capital inputs

Refer to the diagram above. At the point marked m, A. price is determining production at a level where P = MC. B. TR is exactly equal to TC, so profits equal zero. C. price is above average cost of production. D. the leftover rectangle is the profit earned.

Refer to the diagram above. In this instance, at the range of output represented at point c, A. the shutdown point has been reached. B. profits will be maximized. C. physical input levels have been reduced. D. capital input levels have been reduced.

Refer to the diagram above. In this instance, point e shown on the graph indicates A. the point where profits will increase by increasing output B. the point where profits will increase by reducing output C. the profit-maximizing point where MR = MC D. the profit-maximizing point where MR is less an MC

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

Even when competitive firms are unable to calculate marginal revenue product directly, _________________________________________ will push wage rates toward the marginal revenue product of labor. A. planned future investment in physical capital B. the pressures of competition in the labor market C. the marginal workers ongoing skills training D. wages that exceed workers' net revenue product

Firms operating in a market situation that creates ___________________, sell their product in a market with other firms who produce identical or extremely similar products. A. a perfect monopoly B. perfect competition C. an oligopoly D. a free-market

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

Given the data provided in the table below, what will the marginal cost equal for production at quantity (Q) level 4? Q P TC TR MR MC Profit 0 $5 $9 1 $5 $10 2 $5 $12 3 $5 $15 4 $5 $19 5 $5 $24 6 $5 $30 7 $5 $45 A. $5.00 B. $4.00 C. $1.00 D. $3.00

If a firm's revenues do not cover its average variable costs, then that firm has reached its _________________ . A. price taking point B. shutdown point C. marginal point D. opportunity margin

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

In the _________, the perfectly competitive firm will seek out ________________________ . A. long run; the quantity of output where profits are highest B. short run; profits by ignoring the concept of total cost analysis C. short run; the quantity of output where profits are highest D. long run; methods to reduce production and shut down

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? A. higher retained earnings from past profits B. cost of financial capital paid by a firm C. imposition of hurdle rates of interest D. tax credits for physical capital investments

In a perfectly competitive market setting, which of the following would be a true statement? A. Market price automatically sets itself exactly at equilibrium. B. Market price rarely trends toward the equilibrium value. C. Wage rates mirror marginal revenue product levels exactly. D. Wage rates trend toward marginal revenue product levels.

In economics, labor demand is synonymous with A. market demand. B. average demand. C. marginal demand. D. derived demand.

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 average variable cost curve.

In the ________, the perfectly competitive firm will react to profits by __________________________ . A. short run; increasing quality of products B. long run; tailoring their quality controls C. short run; reducing its labor inputs D. long run; increasing its production

Marginal Cost Formula

Change in total cost/Change in quantity

Which of the following would be classified as a differentiated product produced by a monopolistic competitor?

Channel No. 5

Given the data provided in the table below, the total revenue (TR) for production at quantity (Q) level 4 equals Q P TC TR MR MC Profit 0 $5 $9 1 $5 $10 2 $5 $12 3 $5 $15 4 $5 $19 5 $5 $24 6 $5 $30 7 $5 $45 A. zero B. $1.00 C. $15.00 D. $20.00

Given the data provided in the table below, what will the fixed costs equal for production at quantity (Q) level 4? Q P TC TR MR MC Profit 0 $5 $9 1 $5 $10 2 $5 $12 3 $5 $15 4 $5 $19 5 $5 $24 6 $5 $30 7 $5 $45 A. $35.00 B. $4.00 C. $36.00 D. $9.00

Marginal Revenue formula

Marginal Revenue = Change in total revenue/Change in quantity

The term ________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.

Price setter Business entity Price taker (correct) Trend setter

For a perfectly competitive firm in the long run, all of the following conditions hold EXCEPT:

Price=MC (marginal cost) Price=minimum ATC (average total cost) Price=AFC (average fixed cost) (correct) MC=minimum ATC (average total cost)

_____________ has occurred if a government-owned firm becomes privately owned.

Privatization

_____________ and __________________ refer to the quantity and price at a point in time.

Productive; allocative efficiency

Juice and Co sells smoothies and mixed fruits drinks in a competitive market. Due to early severe freeze, the prices of many fruits have spiked and the supply of Juice and Co has been reduced. This

Will also reduce the demand for Juice and Co's smoothies. WRONG can also be interpreted as a shift of Juice and Co's marginal cost curve.

In order to analyze the effects of a particular business merger, economists typically measure whether the competitive change has

all of the above.

The result of regulatory capture is that government price regulation can often become a way for existing competitors to work together to

all of the above.

If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have reached its

allocative efficiency

Perfect competition displays _____________________ because the social benefits of additional production, as measured by the price that people are willing to pay, are in balance with the ____________ to society of that production.

allocative efficiency; marginal costs

In a perfectly competitive market, which of the following is correct?

The firm's demand curve is perfectly elastic (correct) The market demand curve is upward sloping The firm's demand curve is downward sloping

In a perfectly competitive market, which of the following is correct? The market demand curve is upward sloping. The firm's demand curve is downward sloping. The firm's demand curve is perfectly elastic.

The firm's demand curve is perfectly elastic.

Suppose grapefruit is produced in a constant cost industry and sold in a perfectly competitive market. If the price for grapefruit is lower than the average cost of producing grapefruit, what can we say about the long run equilibrium where productive and allocative efficiency is achieved?

There will be fewer producers and fewer grapefruit produced in the industry.

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

______________ give government the power to block certain mergers, and in some cases, to break up large firms into smaller ones.

antitrust laws

For the past two years, a cellphone manufacturer has been selling to a group of distributors, who then sell the products to retailers to sell to the general public. The firm has now informed its distributors that each of them must sell the cellphones for a minimum price the manufacturer has set. In these circumstances,

any resulting minimum resale price maintenance agreements will be illegal.

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

The long-term result of entry and exit in a perfectly competitive market is that all firms end up selling at the price level determined by the lowest point on the

average cost curve

If the average product for six workers is fifteen and the marginal product of the seventh worker is eighteen, then

average product is rising.

A firm's profit margin is also known as

average profit

The desire of businesses to __________________________, so that they can raise the prices that they charge and earn higher profits, has been well-understood by economists for a long time.

avoid competing with each other

If a monopoly or a monopolistic competitor raises their prices, then

decline in quantity demanded will be larger for the monopolistic competitor.

The two primary factors determining monopoly market power are the firm's

demand curve and its cost structure

If a perfectly competitive market involves many firms selling identical products, then, in the face of such competition,

each of these firms must act as a price-taker

In a monopolistic competitive industry, firms can try to differentiate their products by

enhancing product's physical aspects and all of the above.

In competitive settings, profits will lead firms to _________________ and losses will lead firms ___________, so the incentives for producing at low cost and coming up with new ways of pleasing customers are strong.

enter the market; to exit

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

When J.K. Rowling exerts copyright ownership of her literary works, she creates a monopoly 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

Currently, the approach to antitrust regulation involves

detailed analysis of specific markets and companies.

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.

Monopolistic competitors in the food industry will often include a recyclable symbol on packaging used for their product as a means to

differentiate their product.

In the competitive market for figure skate blades, manufacturers offer an array of products that are

distinctly different in a particular way.

If oligopolistic firms banded together with the intention of acting like a monopoly, it would likely result in their being able to

divide up the monopoly level of profit amongst themselves.

A successful advertising campaign may allow competing monopolists to

do all of the above.

In the framework of monopolistic competition, the way advertising works can be perceived as

causing both b and c to occur. B. causing a firm's perceived demand curve to become more inelastic. C. causing demand for the firm's product to increase.

If the U.S. electricity and the telecommunications industry are deregulated, the challenge that will need to be met will involve

combining competition where possible with regulation where necessary.

Which of the following has become a common condition for allowing a merger of large firms?

commitment to sell off certain parts of the firms

The US Federal Trade Commission justifies their record of approval of most mergers by asserting that, even though competition is diminished by consolidating two firms into one, mergers actually benefit

competition and consumers by allowing firms to operate more efficiently.

Because attempting to define a particular market can be difficult and controversial the Federal Trade Commission has begun to look less at market share and more at the data on actual ______________________________.

competition between businesses

For a monopolistic firm, the demand for its product is

completely inelastic

The four-firm ___________________ measures the percentage share of the total sales in the industry that is accounted for by the largest four firms.

concentration ratio

The concept of restrictive practices in the U.S. market economy is ____________________.

continually evolving

A narrowly defined market will tend to make concentration appear _________, while a broadly defined market will tend to make it appear _________.

higher; smaller

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

Economic profit can be derived from calculating total revenues minus all of the firm's costs, Economic profit can be derived from calculating total revenues minus all of the firm's costs,

including its opportunity costs.

A manufacturer would likely make an ___________ in a market following the long-run process of beginning and expanding production in response to ________________ .

entry; a sustained pattern of profits

An agreement between a manufacturer and a distributor stipulating that a dealer will only distribute that manufacturer's products would be classified as a form of

exclusive dealing.

City Gas is a natural monopoly that supplies natural gas to a particular city. Its cost and demand information are given below. If the government decides to regulate this natural monopoly by forcing them to produce at the point where the demand curve intersects average cost, then compared to the unregulated natural monopoly, the price will ____ and the quantity will ____.

fall, rise

How can parties who find themselves in a prisoner's dilemma situation avoid the undesired outcome and cooperate with each other?

find effective ways to penalize firms who do not cooperate

In the US, which of the following has likely been the most influential with respect to the increased level of competition faced by many local retail businesses?

globalization and all of the above All of the above

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

Which of the following is most likely to be a monopoly?

local electricity distributor

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.

In economics, the term "shutdown point" refers to the point where the

marginal cost curve crosses the average variable cost curve.

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

A competitive firm earning zero economic profits will produce output where ________.

marginal costs = marginal revenue = average cost (wrong)

In economic terms, a practical approach to maximizing profits requires an examination of how changes in production affect ________________ and ________________ .

marginal revenue; marginal cost

The single most common form of competition in the U.S. is

monopolistic competition among firms with differentiated products

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

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.

In monopolistic competition, the end result of entry and exist is that firms end up with a price that lies

on the downward-sloping portion of the average cost curve.

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

Perfect competition and monopoly stand at _____________ of the spectrum of competition.

opposite ends

In the closing decades of the nineteenth century, many industries in the U.S. economy were dominated by a single firm that had most of the sales for the entire country. In many cases these large firms were ___________________ .

organized in the legal form of a trust

Roughly speaking, patent law covers __________ and __________ law protects an author's original books.

original inventive creations; copyright

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

When exit occurs in a monopolistically competitive industry the

perceived demand and marginal revenue curves will shift to the right.

If a firm is a price taker, then the demand curve for a single firm is: The same slope as market demand perfectly elastic perfectly inelastic

perfectly elastic

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

If a perfectly competitive firm is a price taker, then

pressure from competing firms will force acceptance of the prevailing market price.

price of competing products

Which of the following poses a difficult challenge for U.S. competition policy?

natural monopoly

The term _________________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.

price taker

In the 1980s, the FTC followed guidelines stipulating that, should a proposed merger result in an HHI between 1,000 and 1,800, then it would

scrutinize the proposal prior to doing a above.

The first step to be undertaken by a profit-maximizing monopolistic competitor wanting to decide what price to charge is to

select the profit maximizing quantity to produce

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.

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 ADEH

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 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

The shape of the perceived demand curve for a perfectly competitive firm reflects that firm's ability to

sell any quantity it wishes at the prevailing market price.

What role can advertising play with respect to differentiated products?

shapes consumers intangible preferences

The most famous restrictive practices case of the last several decades involved a series of lawsuits by the U.S. government against Microsoft. These particular lawsuits were encouraged by

some of Microsoft's competitors

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

The perceived demand for a monopolistic competitor

takes competitors into account.

There have been two especially important shifts in how markets are defined in recent decades: one involves _________________ and the other involves _____________.

technology; globalization

Practices that reduce competition without actual documented agreements between firms to raise price are commonly referred to as ______________________ .

restrictive practices

If two companies are seeking regulatory approval to merge their respective businesses, which of the following will most likely be the focus of the arguments that they will present in favor of the merger?

the new firm will produce more efficiently and all of the above

When entry occurs in a monopolistically competitive industry,

the perceived demand and marginal revenue curves for each firm will shift to the left.

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

If an industry is perfectly competitive or monopolistically competitive, then the government has relatively little reason for concern about

the extent of competition.

If the firm is producing at a quantity of output where marginal revenue exceeds marginal cost, then,

the firm should keep expanding production

The fundamental belief behind the market-oriented US economy is that firms are in the best position to know if their actions will

the right answer is both b and c. B. lead to attracting more customers. C. let them produce more efficiently.

If one firm operating in an oligopoly raises its price and other firms do not do so,

the sales of the firm that increased its price will decline sharply.

(graph shown ) 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.

Antitrust law includes specific rules against restrictive practices in particular because

their effects can reduce competition

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.

there will only be 1 firm in this market, and they will produce where marginal revenue equals marginal cost

A manufacturer that only allows a consumer to purchase one product if they also buy another product is using ____________ to increase its profits.

tie-in sales

Prior to the onset of deregulation in the US during the 1970s, it was common for measurements of concentration ratios and HHIs

to stop at national borders.

(graph shown) 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

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

If a monopolistic competitor raises its price, it _________ customers than a perfectly competitive firm, but ________________ customers compared to the number that a monopoly that raised its prices would.

will lose fewer; it will lose more

Refer to the graph below. Total profit is: Demand =20 MC = between 12 and 18 $288 $132 $243 $144

$144

Given the data provided in the table below, what will the fixed costs equal for production at quantity (Q) level 4?

$35.00 $4.00 $36.00 $9.00 (correct)

Using the data in the table below, how much profit will be obtained for producing 7 units of output?

-10.00

if a firm's revenues do not cover its average variable costs, then that firm has reached its _________________ .

. shutdown point

A monopolistic competitor has the following information about cost and demand. What will the firm's profits equal in the short run?

A monopolistic competitor has the following information on cost and demand. What will the firm's profits equal in the long run?

Given the data provided in the table below, how much profit will be earned for producing 6 units of output?

0.00

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 A. marginal cost is above average variable cost. B. marginal cost is below average fixed cost. C. marginal cost is below average variable cost. D. average fixed cost is constant.

If the price that a firm charges is higher than its ________________ cost of production for that quantity produced, then the firm will earn profits. A. marginal B. variable C. average D. fixed

In the _________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where _____________________ . A. long run; increasing production B. short run; fixed costs can be reduced C. short run; losses are smallest D. long run; fixed costs can be eliminated

Perfectly Competitive Industry Characteristics

1) A large number of small firms 2) Identical products sold by all firms 3) Perfect resource mobility or the freedom of entry into and exit out of the industry 4) Perfect knowledge of prices and technology

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

The information below sets out the estimated market revenue for the television manufacturing market. Based on this information, the Herfindahl-Hirschman Index is

1,074.04

19. In the United States, a pharmaceutical company's exclusive patent rights last for

20 years

Economic profit can be derived from calculating total revenues minus all of the firm's costs, A. excluding its opportunity costs. B. including its opportunity costs. C. including its marginal revenue. D. excluding its marginal revenue.

A perfectly competitive industry is a A. realistic extreme. B. hypothetical assumption. C. hypothetical extreme. D. realistic assumption.

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 A. $250.00 B. $500.00 C. $300.00 D. $200.00

Profit formula

Profit = Total Revenue-Total Cost = (Price)(Quantity Produced)-(Average Cost)(Quantity Produced)

Antitrust laws were created to give government the power to

block certain mergers and break up large firms into smaller ones.

The term "tie-in sales" is synonymous with

bundling

Which of the following may be legal and even common practice in a market economy?

bundling several products together and selling them as a package

The graph below shows a perfectly competitive firm in short run equilibrium, where the firm has chosen the output level which maximizes profit. Think about what will happen in the market over time. In the long run

firms will exit the market until economic profits are zero.

Which of the following would most likely create the setting for an oligopoly?

government grants Alex, Trent, and Alyse each a patent for their respective molybdenum based electric car batteries

Why are some producers forced to sell their products at the prevailing market price?

high degree of similarity to competitor's products

The demand curve perceived by a perfectly competitive firm

is horizontal

The term ____________ refers to the percentage share of a firm's total sales in the market.

market share

The Herfindahl-hirschman index is calculated by taking ___________________, squaring it, and adding them up to get a total.

market share of each firm in the industry

As the name monopolistic competition implies, a firm's decisions in this setting will in certain ways resemble ______________ and in other ways resemble________________ .

monopoly; perfect competition

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

If oligopolists compete hard against each other

zero profits result for all.

A monopolistic competitor has the following information about cost and demand. What will this firm's profits equal in the short run?

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

(table shown) Given the data provided in the table below, what will the marginal cost equal for production at quantity (Q) level 4?

$4.00

What is the maximum value that can be reached using the HHI?

10,000

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

Refer to the graph below. Assuming the firm chooses the level of output that maximizes profit, what is total profit at that output level?

144

In long run equilibrium, firms ________. Earn negative economic profit Earn positive economic profit Neither enter nor exit the industry

Neither enter nor exit the industry

For a perfectly competitive firm, in the long run, all of the following conditions hold EXCEPT

PRICE=AFC (Average Fixed Cost)

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

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

In the framework of an oligopoly, what strategy can work like a silent form of cooperation?

always match other cartel firms' price cuts, but don't match price increases

_____________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry.

an oligopoly

Antitrust regulations would most likely require one of the following in order to determine whether or not a merger may enhance competition. Which one is it?

analysis using numerical tools.

must accept market price for its physical capital inputs.

The term _______________ is used to describe circumstances where government takes over ownership of a business.

nationalization

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

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

A monopolistically competitive firm may earn abnormally high profits in the

short term, but the process of entry will drive those profits to zero in the long run.

are two stark realities any business firm must recognize.

Which of the following denotes a weakness that is common to both the four firm concentration ratio and the HHI?

assuming the subject market is well-defined relative to measuring how sales are divided within it.

If the price that a firm charges is lower than its ____________ of production, the firm will suffer losses.

average cost

In a monopolistically competitive market, the rule for maximizing profit is to set MR = MC, which means

price is higher than marginal revenue

quantity produced; both total revenue and total costs, measured in dollars.

A profit maximizing firm in a competitive industry should ________ when marginal costs are falling.

raise output until marginal costs are equal to marginal revenue

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.

Refer to the diagram above. In this instance, the marginal revenue curve

reflects each of the above

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

When a firm pursues a predatory pricing strategy, it does so

to maximize profits in the long run

A firm that can cover its ________ will break even.

total cost

The following table shows a monopolist's demand curve and cost information for the production of its good. What price will it charge?

$25

Recall that in perfect competition a firm's demand curve is a horizontal line drawn at the market price level and that P=MR. With this in mind, based on the figure below, if we assume that the firm chooses the level of output that maximizes profit, what is total cost at that output level?

$264

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

(table shown) Given the data provided in the table below, what will the marginal revenue equal for production at quantity (Q) level 4?

$5.00

Recall that in perfect competition a firm's demand curve is a horizontal line drawn at the market price level and that P=MR. With this in mind, based on the figure below, total revenues are:

$660 $720 $432 $576 (incorrect)

(table shown) Given the data provided in the table below, what will the fixed costs equal for production at quantity (Q) level 4?

$9.00

Even if it is making economic losses, a perfectly competitive firm should keep operating in the short run so long as the price is not:

Higher than the average variable cost Lower than the average total cost Lower than the average variable cost (correct)

. A perfectly competitive industry is a

Hypothetical extreme

A perfectly competitive firm should not shut down immediately as long as the price is:

Lower than the zero-profit point Higher than the average variable cost (correct) Higher than the average total cost (incorrect) Lower than the average variable cost (incorrect)

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

How is the total revenue calculated in a perfectly competitive firm? Quantity of goods sold minus the production costs. Quantity of goods sold times the market price, minus the fixed costs. Quantity of goods sold times the market price.

Quantity of goods sold times the market price.

After learning about both the perfect competition model and more about real-world markets, which of these statements rings true?

Real-world firms do not reach productive or allocative efficiency, while the perfect competition model in the long run is mostly a hypothetical benchmark.

Government passed the ______________________ to limit the power of large, consolidated firms that were run by trustees as if they were a single firm.

Sherman Act in 1890

The point where the marginal cost curve crosses the average cost curve is called the:

Shut-down point Zero-profit point (correct) Profit-maximizing point

The demand curve for a firm in a perfectly competitive market is different from that of the entire market. The market demand curve ________, while the perfectly competitive firm's demand curve ________.

Slopes upward: is a horizontal line Slopes downward: is a horizontal (correct) Is a horizontal line: slopes upward

A monopolistic competitor has the following information about cost and demand. If this industry was perfectly competitive, what price would the good sell for?

$10

If a perfectly competitive firm is a price taker, then A. pressure from competing firms will force acceptance of the prevailing market price. B. it must be a relatively small player compared to its competitors in the overall market. C. it can increase or decrease its output without affecting overall quantity supplied in the market. D. quality differences will be very perceptible and will play a major role in purchasers' decisions.

Refer to the diagram above. In this instance, at the range of output represented at point b, A. total costs exceed total revenues. B. total revenues exceed total costs. C. the firm is earning profits. D. the firm should shut-down.

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%? Quantity of Financial Capital for Physical Capital Investment Projects Estimated Rate of Return for the Firm $6 million 1% $5 million 3% $4 million 5% $1.5 million 7% $500,000 9% A. $1.5 million B. $2 million C. $250,000 D. $500,000

What happens in a perfectly competitive industry when economic profit is greater than zero? A. existing firms may expand their operations B. firms may move along their LRAC curves to new outputs C. there may be pressure on the market price to fall D. new firms may enter the industry and all of the above

All of the following are characteristics of Perfect Competition except: Ease of entry and exit. Large number of buyers and sellers. Incomplete information about prices. Identical goods.

Incomplete information about prices.

If a firm's revenues do not cover its average variable costs, then that firm has reached its ________.

Opportunity margin Price-taking point Shutdown point (correct)

Which of the following statements accurately explains why profits for firms in a perfectly competitive industry tend to vanish in the long run?

The demand for products falls over time, so firms are unable to generate revenue Firms that experience losses try to increase supply to cover their costs, leading to zero profits Prices drop when other perfectly competitive firms see an opportunity to earn profits and enter the market (correct)

In perfectly competitive market, which of the following is correct?

The firm's demand curve is downward sloping and the market demand curve is downward sloping The market's demand curve is flat and the firm's demand curve is downward sloping The market demand curve is downward sloping and the firm's demand curve is flat (correct)

Exit

The long-run process of reducing production and shutting down in response to a sustained pattern of industry losses

In perfectly competitive market, which of the following is correct? The market demand curve is downward sloping and the firm's demand curve is flat. The market demand curve is flat and the firm's demand curve is downward sloping. The firm's demand curve is downward sloping and the market demand curve is downward sloping.

The market demand curve is downward sloping and the firm's demand curve is flat.

The graph below shows a perfectly competitive firm in short run equilibrium, where the firm has chosen the output level maximizing its profit. Considering the level of profits being earned here, what will happen over time as the market adjusts to long run equilibrium?

The market price will decrease until economic profit is zero.

When comparing the perfect competition model to the real-world markets, what can you surmise that is true?

The perfect competition model in the long run is a hypothetical benchmark, while real-world markets firms do not always attain allocative and productive efficiency.

Which of the following are assumptions of perfect competition?

The products are identical (correct) There are many buyers and sellers (correct) Consumers have all the relevant information to make rational buying decisions (correct)

Assume that tangerines are produced in a constant cost industry which sells in a perfectly competitive market. Suppose that at the current level of output, firms are earning positive economic profits. What can we say about the long run equilibrium where productive and allocative efficiency is achieved?

There will be more producers and more tangerines produced in the industry.

Through the process of exit, monopolistically competitive firms remaining in the market

are no longer earning losses.

Firms should shutdown if they cannot cover their ________ .

VARIABLE COST

Pete owns a firm that produces wheat in a purely competitive market. The firm's demand curve is a:

Vertical Line Horizontal line (correct) Downward sloping line

In a perfectly competitive market setting, which of the following would be a true statement?

Wage rates trend toward marginal revenue product levels.

Yes, you would raise the price enough to meet your target pricing Yes, you would raise the price slightly No, you would not raise the price (correct)

_________ arises when firms act together to reduce output and keep prices high.

a cartel

By 2007, US market deregulation has proven to be most toxic to the overall health of the US economy in the ________________________ .

banking sector

Occasionally, _________________ may lead to pure monopoly; in other market conditions, they may limit competition _________________ .

barriers to entry; to a few oligopoly firms

Firms operating under cost-plus regulation have an incentive to generate high costs by building huge factories or employing lots of staff,

because what they can charge is linked to the costs they incur.

In economics, labor demand is synonymous with

derived demand

If a perfectly competitive firm raises its price, the quantity demanded of its product _____________.

falls to zero

City Gas is a natural monopoly that supplies natural gas to a particular city. Its cost and demand information are given below. If the government decides to regulate this natural monopoly by forcing them to produce at the point where the demand curve intersects marginal cost, then the firm will make a ____ and ____ continue in the long run.

loss of $33 million, will not

Firms operating in a/an ________ market, sell their product in a market with many other firms who produce identical or extremely similar products.

PERFECTLY COMPETITIVE

The demand curve as perceived by a monopolistic competitor is ______________ .

downward-sloping

. Norway's government nationalized the country's oil resources, and it has been accumulating a massive sovereign wealth fund worth billions of dollars ever since. This sovereign fund is used as a monetary source for government funded national education and healthcare. This is because the wealth generated by nationalized industries

is used to serve the citizens of the country.

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

What is the shape of a marginal revenue curve for a perfectly competitive firm?

It slopes upward It slopes downward (incorrect) It is flat *

Which of the following would a market competition regulator be most likely to assign the maximum HHI valuation to?

a monopoly

When entry occurs in a monopolistically competitive industry,

a smaller quantity will be demanded at any given price.

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

In the framework of monopolistic competition, advertising works because it causes

a steeper perceived demand curve, as well as c above.

The implicit assumption that competitive conditions across industries are similar enough to make a decision about the effects of a merger is

a weakness of the concentration ratio analysis method.

The FTC and the Department of Justice guidelines state that, in the US market-driven economy, firms will be forbidden to

agree to rig bids or allocate lines of commerce.

The typical pattern of costs for a monopoly can be analyzed by using:

all of the above

The typical pattern of costs for a perfectly competitive firm can be analyzed by using:

all of the above

In the U.S., about __________ of all reported merger and acquisition transactions in 2008 exceeded $500 million, while about _________ exceeded $1 billion.

25%; 10%

Use the data provided in the table below and calculate what the total revenue (TR) will be from selling 5 units of output.

25.00

Government policy-makers often must decide how to balance the potential benefits of ______________ against the potential benefits of _____________ .

corporate size; competition

A local regulator has calculated the average cost of production for the public water utility. The regulator has allowed an adjustment for the normal rate of profit the firm should expect to earn, and then set the price that consumers can be charged accordingly. In this instance, the regulator has used which of the following?

cost-plus regulation

Regulations that permit a regulated firm to cover its costs and to make a normal level of profit are commonly referred to as

cost-plus regulation.

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

during the author's life plus 70 years

$500,000

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

Recall that in perfect competition a firm's demand curve is a horizontal line drawn at the market price level and that P=MR. With this in mind, based on the figure below, total costs are:

$200 $264 (correct) $240 $220

Refer to the graph below. Total profit is:

$144 (correct) $132 $243 $288

Given the data provided in the table below, what is the marginal cost for producing the 7th unit of output?

$15

The following table shows a monopolist's demand curve and cost information for the production of its good. What price will it charge?

$15

JustMeInc. is the only provider of high speed internet in Tinytown. The firm charges their customers on an annual basis. Its cost and demand information are given below. If the government decides to regulate this natural monopoly by forcing them to sell the quantity and price

$150

JustMeInc. is the only provider of high speed internet in Tinytown. The firm charges their customers on an annual basis. Its cost and demand information are given below. An unregulated monopoly will have profits of

$160 million

Given the data provided in the table below, the total revenue (TR) from selling 4 units of output equals

$20

City Gas is a natural monopoly that supplies natural gas to a particular city. Its cost and demand information are given below. The marginal cost of going from a production of 4 million therms to a production of 5 million therms is

$20 million

(table shown) Given the data provided in the table below, the total revenue (TR) for production at quantity (Q) level 4 equals

$20.00

Recall that in perfect competition a firm's demand curve is a horizontal line drawn at the market price level and that P=MR. With this in mind, based on the figure below, total variable costs are: $432 $720 $576 $660

$432

JustMeInc., is the only provider of high speed internet in Tinytown. The firm charges its customers on an annual basis. The firm's cost and demand information are given below. An unregulated monopoly will have ____ million subscribers and charge each of them ____.

$4;210

The table below shows the demand curve and cost information for a firm that is a monopoly. If they maximize their profits, what price will they charge?

$600

The following table shows the demand curve and cost information for a firm that is a monopoly.If they maximize their profits, what will their profits equal?

$650

A monopolistic competitor has the following information about cost and demand. Then, in the long run equilibrium, the firm will sell this good at what price?

Recall that in perfect competition a firm's demand curve is a horizontal line drawn at the market price level and that P=MR. With this in mind, based on the figure below, total variable costs are:

$720 $660 $432 (correct) $576

$9.00

(table shown) Given the data provided in the table below, what will the amount of profit be for production at quantity (Q) level 7?

-$10.00

A monopolistic competitor has the following information about cost and demand. What will this firm's profits equal in the long run?

-$55

The information below sets out the estimated market shares for the cellular phone manufacturing market are given in the table below. If Samsung were to acquire Sanyo, the Herfindahl-Hirschman Index would be

1,884

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

If a firm sells 6 units at a price of $7 with a total cost of $6, what is the firm's profit from selling 6 units?

City Gas is a natural monopoly that supplies natural gas to a particular city. Its cost and demand information are given below. An unregulated monopoly will produce ____ million therms of natural gas and sell each therm for ____.

3; $38

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?

The information below sets out the estimated market revenue for the television manufacturing market is given in the table below. Based on this information, the four-firm concentration ratio is

55.1

The following table shows the demand curve and cost information for a firm that is a monopoly. What quantity should they produce to maximize their profits?

600 units

The information below sets out the estimated market shares for the cellular phone manufacturing market Based on this information, the four-firm concentration ratio is

The information below sets out the estimated market shares for the cellular phone manufacturing market If Samsung were to acquire Sanyo, the four-firm concentration ratio would be

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

Sam owns an antique store in Boston. Many of his competitors left the market, causing his perceived demand curve to change. The following 2 tables show his old and new perceived demand curves. Assume Sam can only choose from the quantities of output given in the table. By how much will the quantity that he sells change as a result of his competitors leaving the market

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 A. must accept market price for its physical capital inputs. B. must reduce what it pays for inputs that make up its costs of production. C. must reduce production to encourage speculators to drive gold prices higher. D. must alter the price of its labor inputs to maximize profits.

If a competitive firm experiences a shift in costs of production that decreases marginal costs at all levels of output, A. expanding output levels at any given price will be profitable. B. producing less at any market price will off-set marginal cost . C. the firm's marginal cost curve will shift to the left. D. the firm's demand curve will also shift to the left.

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 A. the average product of labor is always equal to the marginal product of labor. B. the average product of labor is always greater that the marginal product of labor. C. the average product of labor is always less than the marginal product of labor. D. as more labor inputs are used, the average product of labor inputs will fall.

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

When a firm makes plans for investments in physical capital, it compares the _______________ on these investments with ______________________ . A. projected rates of return; the cost of financial capital to the firm B. present inputs of physical capital; future hurdle rates C. present inputs of physical capita; future marginal revenue product D. projected rates of return; the competitive pressures for labor

______________________ refers to the additional revenue gained from selling one more unit. A. Marginal revenue B. Total revenue C. Economic profit D. Accounting profit

perfectly competitive firm (aka. price taker)

A firm in a perfectly competitive market that must take the prevailing market price as given. The pressure of competing firms forces them to accept the prevailing equilibrium price in the market

Firms operating in a market situation that creates ________, sell their product in a market with other firms who produce identical or extremely similar products.

A free-market Perfect competition (correct) An oligopoly A perfect monopoly

Who can influence the market price in perfect competition?

Any individual buyer Any individual seller No individual buyer or seller (correct)

Increasing Cost Industry

As the market expands, the old and new firms experience increases in their costs of production, which makes the new zero-profit level intersect at a higher price than before

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 A. can be tailored to exceed the price of its inputs. B. is dictated by the forces of demand and supply. C. can be tailored to meet the price of its inputs. D. can be set by management to maximize profits.

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.

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 A. raise her prices above the perfectly competitive level set by the market. B. keep the business open in the short-run, but plan to go out of business in the long-run. C. keep the business open in the short-run, and plan to expand the business in the long-run. D. lay-off her staff, break her lease, and close the business down immediately.

When a business adopts a strategy of reducing and/or discontinuing production in response to a sustained pattern of losses, it is A. considering opportunity costs. B. preparing to exit operations. C. preparing to reach its shutdown point. D. considering capital investments.

When a firm uses retained profits to invest in more energy efficient equipment, an economist would calculate the _________________ of investing in physical capital. A. typical hurdle rate B. opportunity cost C. degree of risk D. hurdle rate premium

Refer to the diagram below. Based on the information illustrated in this graph, which of the following is an accurate statement?

Because this is a perfectly competitive firm, the profit maximizing rule is not P=MR Production should keep expanding because MR is always less than MC Profits will be reduced by expanding production to the zone where MC exceeds MR (correct) Because this is a perfectly competitive firm, the profit maximizing rule is not P=MC

Given the data provided in the table below, what will the marginal revenue equal for production at quantity (Q) level 4? Given the data provided in the table below, what is the marginal revenue for producing the 4th unit of output? Q P TC TR MR MC Profit 0 $5 $9 1 $5 $10 2 $5 $12 3 $5 $15 4 $5 $19 5 $5 $24 6 $5 $30 7 $5 $45 A. $20.00 B. $15.00 C. $5.00 D. $1.00

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 ______________________ . A. price, measured in dollars; quantity of goods produced B. total costs measured in dollars; quantity of goods produced C. quantity produced; both total revenue and total costs, measured in dollars. D. quantity produced; total revenue and total variable costs, measured in dollars.

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? A. 6% of output B. 10% of output C. 12% of output D. 8% of output

If the average product for six workers is fifteen and the marginal product of the seventh worker is eighteen, then A. marginal product is rising. B. marginal product is falling. C. average product is rising. D. average product is falling.

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

Refer to the diagram above. In this instance, the range of production possibilities at point d, A. is a steeper slope reflecting increasing profits due to diminishing costs. B. is a steeper slope reflecting a lower price. C. is a steeper slope reflecting a return to losses due to diminishing returns. D. is a steeper slope reflecting higher total revenue.

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 A. will determine what price to produce at given the market demand. 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.

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%? Quantity of Financial Capital for Physical Capital Investment Projects Estimated Rate of Return for the Firm $18 million 2% $15 million 4% $12 million 6% $8 million 8% $3 million 10% A. $11 million B. $12 million C. $23 million D. $33 million

The term _________________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product. A. price setter B. business entity C. price taker D. trend setter

Why are some producers forced to sell their products at the prevailing market price? A. price takers find market analysis is too costly B. they are very small players in the overall market C. high degree of similarity to competitor's products D. they can increase output without affecting quality

Refer to the diagram above. Based on the information illustrated in this graph, which of the following is an accurate statement? A. production should keep expanding because MR is always less than MC B. because this is a perfectly competitive firm, the profit maximizing rule is not P = MC C. because this is a perfectly competitive firm, the profit maximizing rule is not P = MR D. profits will be reduced by production in the zone where MC exceeds MR

Refer to the diagram above. In this instance, the marginal revenue curve A. reflects a perfectly competitive firm B. is equal to the price of the good C. is a horizontal straight line D. reflects each of the above

Refer to the diagram above. Which of the following explains the slope of the total revenue curve illustrated in this graph? A. total revenue shown as a straight line sloping up indicates a perfectly competitive firm B. the slope of the total revenue curve is determined by the price of the goods produced C. at higher levels of output, diminishing returns will cause total cost to slope downward steeply D. the slope of the total revenue curve is explained by both a and b above.

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 Q P TR MR TC MC 0 $30 0 --- $15 --- 1 $30 $30 $30 $25 $10 2 $30 $60 $30 $40 $15 3 $30 $90 $30 $60 $20 4 $30 $120 $30 $85 $25 5 $30 $150 $30 $115 $30 6 $30 $180 $30 $150 $35 A. marginal cost is increasing. B. total cost is increasing. C. economic profits are zero. D. marginal revenue is constant.

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 buy from other firms instead A. will reduce the revenue a firm receives and it should shut down. B. means the firm has reached it shutdown point and should exit. C. is part of the process to a sustained pattern of profits. D. are two stark realities any business firm must recognize.

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 A. determine the company's annual revenue, variable costs and its profits. B. no longer be dictated by the forces of demand and supply. C. have no effect on the market forces of demand and supply. D. determine the company's total revenue, total costs, and its profits.

Which of the following government institutions bears the responsibility of enforcing US antitrust laws?

Department of Justice

Which of the following has the power to allow a merger, prohibit it, or allow it if certain conditions are met?

Department of Justice

In long run equilibrium, firms ________.

Earn negative economic profit Earn positive economic profit Neither enter nor exit the industry (correct)

In perfect competition if firms produce where P=MC they ensure ________ because the social benefits of production as measured by the price that people are willing to pay, are in balance with the ________ to society of that production.

Economic efficiency: total revenues Allocative efficiency: marginal costs (incorrect) Economic efficiency: Marginal revenues Allocative efficiency: costs

Which of the following happens in a perfectly competitive industry when economic profit is greater than zero? Existing firms may expand their operations There may be pressure on the market price to increase. Old firms have an incentive to exit the industry.

Existing firms may expand their operations

Study the information located on the following graph. Using the graph select the statement that is an accurate statement.

Expanding production will reduce profits to the zone where MC exceeds MR.

What was created by the U.S. government in 1914 to specifically define what types of competition were legally unfair?

Federal Trade Commission

Suppose there is a perfectly competitive market for grapefruit. If the price for grapefruit is lower than the marginal cost of producing grapefruit, what will happen in the long run, in order for the market to achieve productive and allocative efficiency?

Fewer grapefruit will be produced (correct) More grapefruit will be produced The same amount of grapefruit will continue to be produced

Refer to the graph below. In the long run: Market demand will increase resulting in positive economic profit Firms will exit the market resulting in positive economic profit Firms will exit the market until economic profits are zero

Firms will exit the market until economic profits are zero

The demand curve of a perfectly competitive firm is ________.

HORIZONTAL LINE or FLAT

Perfectly Competitive Firm

Has only one major decision to make—namely, what quantity to produce

Even if it is making economic losses, a perfectly competitive firm should keep operating in the short run so long as the price is not: Higher than the average variable cost Lower than the average total cost Lower than the average variable cost

Higher than the average variable cost

__________________ law implies ownership over an idea or concept or image

Intellectual property

What is the shape of a marginal revenue curve for a perfectly competitive firm? It slopes upward It is flat It slopes downward

It is flat

Shutdown Point

Level of output where the marginal cost curve intersects the average variable cost curve at the minimum point of AVC; if the price is below this point, the firm should shut down immediately

The profit-maximizing choice for a perfectly competitive firm will occur where marginal revenue is equal to ________.

Marginal cost (correct) Fixed cost Variable revenue

Firms in a perfectly competitive market are said to be "price takers"—that is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent? Yes, you would raise the price enough to meet your target pricing. Yes, you would raise the price slightly. No, you would not raise the price.

No, you would not raise the price.

Which of the following statements are correct? Perfect competition guarantees that all market participants have equal access to all goods and services produced by an economy. Perfect competition guarantees that all market participants have equal access to all goods and services produced by an economy. Perfect competition guarantees equality of well-being among a country's citizens. Perfect competition guarantees equality of well-being among a country's citizens. Perfect competition guarantees that prices charged for goods exactly reflect the marginal cost of producing them.

Perfect competition guarantees that prices charged for goods exactly reflect the marginal cost of producing them.

Does this graph show the demand curve for a perfectly competitive firm, a perfectly competitive industry, or neither?

Perfectly competitive firm (correct) Neither Perfectly competitive industry

Does this graph show the demand curve for a perfectly competitive firm, a perfectly competitive industry, or neither? Perfectly competitive firm Perfectly competitive industry neither

Perfectly competitive industry

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

When new firms enter a perfectly competitive market, what is the impact on prices?

Price goes down

Consider the graph of a perfectly competitive firm showing the short run average total cost, average variable cost, and marginal cost curves. Suppose the firm's marginal revenue line intersects marginal cost (MC) below the average total cost (ATC) curve, but above the average variable cost curve. If the firm chooses the level of output which maximizes profit, which of the following is true?

Price is above average variable cost and the firm is making a loss.

Which of the following statements are true for a perfectly competitive firm that is seeking to maximize profits?

Price is the same as marginal revenue.

Given the information presented in the following graph, which of the following is an accurate statement? Hint: What quantity of output is the firm currently producing and what price is it charging?

Profits will be reduced by expanding production to the zone where MC exceeds MR.

How is the total revenue calculated in a perfectly competitive firm?

Quantity of goods sold times the market price (correct) Quantity of goods sold times the market price, minus the fixed costs Quantity of goods sold minus the production costs

If a perfectly competitive firm is producing output at a point where marginal revenue is equal to marginal cost, then it should: Increase output in order to maximize profits x Decrease output in order to maximize profts Stick with that level of production in order to maximize profits

Stick with that level of production in order to maximize profits

If a perfectly competitive firm is producing output at a point where marginal revenue is equal to marginal cost, then it should:

Stick with that level of production in order to maximize profits (correct) Increase output in order to maximize profits Decrease output in order to maximize profit

For a perfectly competitive firm, the marginal cost curve is identical to the firm's ________.

Supply curve Average variable cost curve Demand curve Average total cost curve (incorrect)

Refer to the diagram above. At the point marked M,

TR is exactly equal to TC, so profits equal zero.

Marginal Revenue

The additional revenue gained from selling one more unit

Market Structure

The conditions in an industry, such as number of sellers, how easy or difficult it is for a new firm to enter, and the type of products that are sold

Which of the following is a true statement?

The government approves most proposed mergers.

Entry

When new long-un process of firms entering an industry in response to increased industry profits

Perfect Competition

When the following conditions occur: (1) many firms produce identical products; (2) many buyers are available to buy the product, and many sellers are available to sell the product; (3) sellers and buyers have all relevant information to make rational decisions about the product being bought and sold; and (4) firms can enter and leave the market without any restrictions—in other words, there is free entry and exit into and out of the market. each firm faces many competitors that sell identical products

Constant Cost Industry

Whenever there is an increase in market demand and price, then the supply curve shifts to the right with new firms' entry and stops at the point where the new long-run equilibrium intersects at the same market price as before

Long-run equilibrium

Where all firms earn zero economic profits producing the output level where P = MR = MC and P = AC

If a perfectly competitive dairy farmer takes her marginal cost, average cost, marginal revenue and price point and plots these curves out on a graph, where is her business break-even point on the graph?

Where the price intersects the marginal cost at the minimum point of the average cost curve.

Which of the following is a question economists have struggled to address with only partial success?

Whether a market-oriented economy produces the optimal amount of variety?

When P > MC in a monopolistically competitive market, that industry will most likely produce ______________________ than would be found in a perfectly competitive industry.

a lower quantity of a good and charge a higher price

Why are the underlying economic meanings of the perceived demand curves for a monopolist and monopolistic competitor different?

a monopolist faces the market demand curve and a monopolist competitor does not

Which of the following represents a difference in the process by which a monopolistic competitor and a monopolist make their respective decisions about quantity and price?

a monopolist need not fear entry and also selection b above

A firm that holds a monopoly position in the market place is

a price maker

A business ________________ occurs when, for practical purposes, one firm purchases another.

acquisition

Oligopoly firms acting individually may seek to gain profits ___________________________ .

by expanding levels of output and cutting prices

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.

Intellectual property law is a body of law that includes

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 competitors

Bob competes in a monopolistically competitive market. Suppose some new firms enter the market, causing his perceived demand curve to shift. The following tables show his demand curves, before and after the change, and his cost information Assume that Bob can only choose from the quantities of output given in the table. By how much will his profit change after these new firms enter the market?

decrease by $9,000

Mary competes in a monopolistically competitive market. Suddenly, 5 new firms enter the market, causing her perceived demand curve to shift. The following tables show her original and new demand curves and her cost information. Assume that Mary can only choose from the quantities of output given in the table. By how much will the quantity that she produces change after the new firms enter the market?

decrease by 10

The slope of the demand curve for a monopoly firm is

downward sloping

In a perfectly competitive market, each firm produces at a quantity where price is set

equal to marginal cost, both in the short run and in the long run.

Today, a common starting point is for US antitrust regulators to use statistical tools and real-world evidence to_______________________ faced by firms proposing a merger of their respective businesses.

estimate the demand and supply curves

When it comes to producing and selling goods, compared with a rival firms' goods, a perfectly competitive firm's goods are ________.

exactly identical

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.

The demand curve as perceived by a perfectly competitive firm is __________ .

flat

The branch of mathematics that analyzes situations in which players must make decisions and then receive payoffs most often used by economists is

game theory

The application of current US antitrust law

includes a wide arrange of anticompetitive practices

Joe owns a restaurant. Many of the restaurants that he competes with recently closed, shifting his perceived demand curve. The following 2 tables show his old and new perceived demand curves. Assume that Joe can only choose from the quantities of output given in the table. By how much does the price that he charges change after the restaurants leave the market?

increase by 3

(graph shown) 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.

is dictated by the forces of demand and supply.

Why would regulators find that a proposed merger is likely to lessen competition?

it can lead to lower quality products

A merger will likely lessen competition if

it enables the new single firm to raise price.

When a monopolist increases sales by one unit,

it loses some marginal revenue and all of the above.

keep the business open in the short-run, but plan to go out of business in the long-run.

If the CEO of I'MaBigBank is playing prisoner's dilemma then, from his perspective, the gains to be had from cooperation are

larger than the rewards from pursuing self-interest.

The profit-maximizing choice for a perfectly competitive firm will occur where marginal revenue is equal to ________. fixed cost marginal cost variable revenue

marginal cost

______________________ refers to the additional revenue gained from selling one more unit.

marginal revenue

When ________, a competitive firm will produce and earn economic profits.

marginal revenue is above average costs

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.

Shopping malls typically lease retail space to a large number of clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call ________________________.

monopolistic competition

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.

The perceived demand curve for a group of competing oligopoly firms will appear kinked as a result of their commitment to

match price cuts, but not price increases.

Which of the following is a valid criticism of the reduction of competition that results from corporate mergers?

merged firms can increase price and maintain permanently higher profits

Which of the following typically leads to two formerly separate firms being under common ownership?

mergers and acquisitions

For the restaurant industry in Seattle, with dozens or hundreds of extremely small competitors, the value of the HHI

might drop as low as 100 or even less.

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

A government sanctioned merger between two companies can sometimes lead to a clash _______________________ that makes both firms worse off.

of corporate personalities

What role does the US government play with respect to market competition?

policing anticompetitive behavior and prohibiting contracts that restrict competition

When the regulator sets a price that a firm cannot exceed over the next few years, the regulator is enforcing

price cap regulation

If a competitive firm's marginal revenue is equal to marginal cost, the firm is earning positive economic profits when ________.

price is above average cost

A _________ refers to a group of firms colluding with one another to produce at the monopoly output and sell at the monopoly price.

prisoner's dilemma

Since the Margaret Thatcher era of the 1970s, many countries have sold off vast numbers of government-owned firms to _________________ .

private ownership

A monopolist is able to maximize its profits by

producing output where MR = MC and charging a price along the demand curve.

A monopolistically competitive industry does not display ____________________ in either the short-run, when firms are making _______________, nor in the long-run, when firms are earning ________________ .

productive and allocative efficiency; profits and losses; zero profits

Monopolistic competitors can make a _____________ in the short-run, but in the long run, ______________ will drive these firms toward _______________________ .

profit or loss; entry and exit; a zero-profit outcome

City Gas is a natural monopoly that supplies natural gas to a particular city. Its cost and demand information are given below. An unregulated monopoly will have a ____ of ____.

profit, $24 million

(graph shown) Refer to the diagram above. In this instance, at the range of output represented at point c,

profits will be maximized.

Splitting up a the natural monopoly held by a public utility that produces and provides electricity would

raise the average cost of production and force consumers to pay more.

Following the commencement of deregulation of US airline industry in the 1970s, reduced airfares saved consumers billions of dollar a year however, the more recent string of airline mergers has

raised new concerns over how competition in the industry can once again be strengthened.

The typical slope of the demand curve as perceived by a monopolistic competitor will

reflect that firm's ability raise its price without losing all of its customers.

The term ______________ refers to a situation where the firms supposedly being regulated end up playing a large role in setting the regulations that they will follow.

regulatory capture

The total revenue curve for a monopolist will

start low, rise, and then decline.

The statistical models currently used by competition regulators do require some degree of ___________________, and can become the subject of ___________ between the antitrust authorities and the companies that wish to merge.

subjective judgment; legal disputes

In the 1980s, the FTC followed guidelines stipulating that, should a proposed merger result in an HHI of less than 1,000

the FTC would probably approve it.

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 ABGH

Which of the following best identifies what the concept of differentiated products is closely related to?

the degree of product variety that is available.

The figure below shows the demand curve and the long run average cost curve for an electric company.

the demand curve intersects the long run average cost curve at a point where the long run average cost curve is downward sloping.

The graph below shows a perfectly competitive firm in short run equilibrium, where the firm has chosen the output level which maximizes profit. Think about the level of profits being earned here, and what will happen over time. In the long run

the market price will increase until economic profit is zero.

Which of the following concerns would groups like the Consumer Federation of America and Public Knowledge most likely raise with regulators considering a merger application?

the merger would reduce competition

Product differentiation may occur in _______________ because ____________________ created strong preferences for certain brands.

the minds of buyers; past habits and advertising

Which of the following completes the argument against deregulation of U.S. banks that began with the phrase: "if banks competed to pay higher rates of interest",

they might also compete to make riskier loans, potentially imperiling the safety of the banking system.

If monopolistic competitors must expect a process of entry and exit like perfectly competitive firms,

they will be unable to earn higher-than-normal profits in the long run.

If each of two competing monopolists undertakes equal advertising efforts to attract consumers away from the other, the total result is

they will simply neutralize one another's efforts.

they will be unable to earn higher-than-normal profits in the long run.

to cooperate to act as a single monopoly and all of the above

The main challenge for antitrust regulators is

to determine when a merger may hinder competition

Why would a competition regulator need details relating to how firms are competing to cut prices, raise output levels, or build a high quality reputation?

to permit competitive mergers to proceed, as well as all of the above

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

A minimum resale price maintenance agreement requires a dealer who buys from a manufacturer ______________________________ .

to sell for at least a certain minimum price

If a monopoly or a monopolistic competitor raises their prices, the quantity demanded ____________.

will decline

If the largest four firms in an industry control less than half the market, their competitive concentration ratio

would not be considered particularly high

If the two smallest firms in a competitive market merged, the four-firm concentration ratio _______________ because ____________________________ .

would not change; the degree of competition isn't notably diminished

Would raising the price for a product create a larger decline in quantity demanded for a monopolistic competitor's than it would for a monopoly?

yes; consumers will buy from competitors offering lower priced substitutes

If a firm is earning zero economic profits, Which two lines should intersect at level of output the firm is supplying?

Perfect Competition: Master

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