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Question1
1.
Refer to the above diagram. The quantitative difference between areas A and C for reducing the price from P1 to P2 measures:
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marginal cost. |
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marginal revenue. |
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monopoly price. |
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a welfare or efficiency loss. |
1 points
Question 2
1.
The above diagram portrays:
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a competitive firm that should shut down in the short run. |
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the equilibrium position of a competitive firm in the long run. |
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a competitive firm that is realizing an economic profit. |
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the loss-minimizing position of a competitive firm in the short run. |
1 points
Question 3
1.
(Consider This) Approximately what percentage of start-up firms in the U.S. go bankrupt within the first two years?
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9.5 |
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10.2 |
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22 |
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53 |
1 points
Question 4
1.
(Consider This) The average life expectancy of a U.S. business is approximately:
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2 years. |
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9.5 years. |
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10.2 years. |
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22 years. |
1 points
Question 5
1.
(Last Word) DeBeers Consolidated Mines markets about:
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55 percent of the world’s rough-cut diamonds. |
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80 percent of the world’s rough-cut diamonds. |
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45 percent of the world’s rough-cut diamonds. |
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33 percent of the world’s rough-cut diamonds. |
1 points
Question 6
1.
(Last Word) In a recent policy change, DeBeers has decided to:
sell off its entire inventory of diamonds.
abandon its policy of profit maximization.
purchase the entire output of other mines and withhold diamonds from the market to bolster diamond prices.
promote “premium diamonds” and other luxury goods as preferable to synthetics.
1 points
Question 7
1.
(Last Word) Oil wells and seasonal resorts will often shut down temporarily because:
prices for their output temporarily fall below their average variable costs of production.
fixed costs temporarily rise, making production unprofitable.
variable costs for pumping oil and operating resorts fluctuate significantly.
government regulations require seasonal shutdowns for maintenance purposes.
1 points
Question 8
1.
A constant-cost industry is one in which:
a higher price per unit will not result in an increased output.
if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth.
the demand curve and therefore the unit price and quantity sold seldom change.
the total cost of producing 200 or 300 units is no greater than the cost of producing 100 units.
1 points
Question 9
1.
A decreasing-cost industry is one in which:
contraction of the industry will decrease unit costs.
input prices fall or technology improves as the industry expands.
the long-run supply curve is perfectly elastic.
the long-run supply curve is upsloping.
1 points
Question 10
1.
A firm reaches a break-even point (normal profit position) where:
marginal revenue cuts the horizontal axis.
marginal cost intersects the average variable cost curve.
total revenue equals total variable cost.
total revenue and total cost are equal.
1 points
Question 11
1.
A natural monopoly occurs when:
long-run average costs decline continuously through the range of demand.
a firm owns or controls some resource essential to production.
long-run average costs rise continuously as output is increased.
economies of scale are obtained at relatively low levels of output.
1 points
Question 12
1.
A purely competitive firm is precluded from making economic profit in the long run because:
it is a “price taker.”
its demand curve is perfectly elastic.
of unimpeded entry to the industry.
it produces a differentiated product.
1 points
Question 13
1.
A purely competitive firm’s short-run supply curve is:
perfectly elastic at the minimum average total cost.
upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve.
upsloping and equal to the portion of the marginal cost curve that lies above the average total cost curve.
upsloping only when the industry has constant costs.
1 points
Question 14
1.
A purely monopolistic firm:
has no entry barriers.
faces a downsloping demand curve.
produces a product or service for which there are many close substitutes.
earns only a normal profit in the long run.
1 points
Question 15
1.
Allocative efficiency is achieved when the production of a good occurs where:
P = minimum ATC.
P = MC.
P = minimum AVC.
total revenue is equal to TFC.
1 points
Question 16
1.
An increasing-cost industry is associated with:
a perfectly elastic long-run supply curve.
an upsloping long-run supply curve.
a perfectly inelastic long-run supply curve.
an upsloping long-run demand curve.
1 points
Question 17
1.
An industry comprised of 40 firms, none of which has more than 3 percent of the total market for a differentiated product is an example of:
monopolistic competition.
oligopoly.
pure monopoly.
pure competition.
1 points
Question 18
1.
An industry comprised of a small number of firms, each of which considers the potential reactions of its rivals in making price-output decisions is called:
monopolistic competition.
oligopoly.
pure monopoly.
pure competition.
1 points
Question 19
1.
An industry comprised of a very large number of sellers producing a standardized product is known as:
monopolistic competition.
oligopoly.
pure monopoly.
pure competition.
1 points
Question 20
1.
An industry comprised of four firms, each with about 25 percent of the total market for a product is an example of:
monopolistic competition.
oligopoly.
pure monopoly.
pure competition.
1 points
Question 21
1.
An unregulated pure monopolist will maximize profits by producing that output at which:
P = MC.
P = ATC.
MR = MC.
MC = AC.
1 points
Question 22
1.
Creative destruction is:
the process by which large firms buy up small firms.
the process by which new firms and new products replace existing dominant firms and products.
a term coined many years ago by Adam Smith.
is applicable to planned economies, but not to market economies.
1 points
Question 23
1.
Economists use the term imperfect competition to describe:
all industries which produce standardized products.
any industry in which there is no nonprice competition.
a pure monopoly only.
those markets which are not purely competitive.
1 points
Question 24
1.
Firms seek to maximize:
per unit profit.
total revenue.
total profit.
market share.
1 points
Question 25
1.
For a purely competitive firm total revenue:
is price times quantity sold.
increases by a constant absolute amount as output expands.
graphs as a straight upsloping line from the origin.
has all of these characteristics.
1 points
Question 26
1.
If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue:
may be either greater or less than $35.
will also be $35.
will be less than $35.
will be greater than $35.
1 points
Question 27
1.
If a pure monopolist is producing at that output where P = ATC, then:
its economic profits will be zero.
it will be realizing losses.
it will be producing less than the profit-maximizing level of output.
it will be realizing an economic profit.
1 points
Question 28
1.
In the short run the individual competitive firm’s supply curve is that segment of the:
average variable cost curve lying below the marginal cost curve.
marginal cost curve lying above the average variable cost curve.
marginal revenue curve lying below the demand curve.
marginal cost curve lying between the average total cost and average variable cost curves.
1 points
Question 29
1.
In which of the following industry structures is the entry of new firms the most difficult?
pure monopoly
oligopoly
monopolistic competition
pure competition
1 points
Question 30
1.
In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies?
pure monopoly
oligopoly
monopolistic competition
pure competition
1 points
Question 31
1.
Marginal revenue is the:
change in product price associated with the sale of one more unit of output.
change in average revenue associated with the sale of one more unit of output.
difference between product price and average total cost.
change in total revenue associated with the sale of one more unit of output.
1 points
Question 32
1.
Price discrimination is:
always legal.
always illegal.
only illegal if it hurts consumers more than non-discrimination.
only illegal if used to lessen or eliminate competition.
1 points
Question 33
1.
Price discrimination refers to:
selling a given product for different prices at two different points in time.
any price above that which is equal to a minimum average total cost.
the selling of a given product at different prices that do not reflect cost differences.
the difference between the prices a purely competitive seller and a purely monopolistic seller would charge.
1 points
Question 34
1.
Pure monopoly refers to:
any market in which the demand curve to the firm is downsloping.
a standardized product being produced by many firms.
a single firm producing a product for which there are no close substitutes.
a large number of firms producing a differentiated product.
1 points
Question 35
1.
Resources are efficiently allocated when production occurs where:
marginal cost equals average variable cost.
price is equal to average revenue.
price is equal to marginal cost.
price is equal to average variable cost.
1 points
Question 36
1.
Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9. We thus know that:
demand is inelastic at this price.
the firm is maximizing profits.
total revenue is increasing.
total revenue is at a maximum.
1 points
Question 37
1.
The MR = MC rule applies:
to firms in all types of industries.
only when the firm is a “price taker.”
only to monopolies.
only to purely competitive firms.
1 points
Question 38
1.
The demand curve faced by a pure monopolist:
may be either more or less elastic than that faced by a single purely competitive firm.
is less elastic than that faced by a single purely competitive firm.
has the same elasticity as that faced by a single purely competitive firm.
is more elastic than that faced by a single purely competitive firm.
1 points
Question 39
1.
The demand curve in a purely competitive industry is _____, while the demand curve to a single firm in that industry is _____.
perfectly inelastic, perfectly elastic
downsloping, perfectly elastic
downsloping, perfectly inelastic
perfectly elastic, downsloping
1 points
Question 40
1.
The demand schedule or curve confronted by the individual purely competitive firm is:
relatively elastic, that is, the elasticity coefficient is greater than unity.
perfectly elastic.
relatively inelastic, that is, the elasticity coefficient is less than unity.
perfectly inelastic.
1 points
Question 41
1.
The gains to monopolists from exercising market power:
exceed the losses to consumers in monopoly markets, resulting in a net gain to society.
equal the losses to consumers in monopoly markets, resulting in no net change for society.
are less than the losses to consumer in monopoly markets, resulting in a net loss to society.
create smaller deadweight losses than occur in purely competitive industries.
1 points
Question 42
1.
The marginal revenue curve of a purely competitive firm:
lies below the firm’s demand curve.
is downsloping because price must be reduced to sell more output.
is horizontal at the market price.
has all of these characteristics.
1 points
Question 43
1.
The primary force encouraging the entry of new firms into a purely competitive industry is:
normal profits earned by firms already in the industry.
economic profits earned by firms already in the industry.
government subsidies for start-up firms.
a desire to provide goods for the betterment of society.
1 points
Question 44
1.
The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the:
output-maximizing rule.
profit-maximizing rule.
shut-down rule.
break-even rule.
1 points
Question 45
1.
The process by which new firms and new products replace existing dominant firms and products is called:
monopolistic competition.
mergers and acquisitions.
process innovation.
creative destruction.
1 points
Question 46
1.
The term allocative efficiency refers to:
the level of output that coincides with the intersection of the MC and AVC curves.
minimization of the AFC in the production of any good.
the production of the product-mix most desired by consumers.
the production of a good at the lowest average total cost.
1 points
Question 47
1.
The term productive efficiency refers to:
any short-run equilibrium position of a competitive firm.
the production of the product-mix most desired by consumers.
the production of a good at the lowest average total cost.
fulfilling the condition P = MC.
1 points
Question 48
1.
When a purely competitive firm is in long-run equilibrium:
marginal revenue exceeds marginal cost.
price equals marginal cost.
total revenue exceeds total cost.
minimum average total cost is less than the product price.
1 points
Question 49
1.
Which of the following conditions is true for a purely competitive firm in long-run equilibrium?
P > MC = minimum ATC.
P > MC > minimum ATC.
P = MC = minimum ATC.
P < MC < minimum ATC. 1 points
Question 50
1.
Which of the following distinguishes the short run from the long run in pure competition?
Firms can enter and exit the market in the long run, but not in the short run.
Firms attempt to maximize profits in the long run, but not in the short run.
Firms use the MR=MC rule to maximize profits in the short run, but not in the long run.
The quantity of labor hired can vary in the long run, but not in the short run.
1 points
Question 51
1.
Which of the following is a characteristic of pure monopoly?
close substitute products
barriers to entry
the absence of market power
“price taking”
1 points
Question 52
1.
Which of the following is characteristic of a pure monopolist’s demand curve?
Average revenue is less than price.
Its elasticity coefficient is 1 at all levels of output.
Price and marginal revenue are equal at all levels of output.
It is the same as the market demand curve.
1 points
Question 53
1.
Which of the following is correct?
Both purely competitive and monopolistic firms are “price takers.”
Both purely competitive and monopolistic firms are “price makers.”
A purely competitive firm is a “price taker,” while a monopolist is a “price maker.”
A purely competitive firm is a “price maker,” while a monopolist is a “price taker.”
1 points
Question 54
1.
Which of the following is not a barrier to entry?
patents
X-inefficiency
economies of scale
ownership of essential resources
1 points
Question 55
1.
Which of the following is true concerning purely competitive industries?
There will be economic losses in the long run because of cut-throat competition.
Economic profits will persist in the long run if consumer demand is strong and stable.
In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.
There are economic profits in the long run, but not in the short run.
1 points
Question 56
1.
Which of the following statements is correct?
The demand curve for a purely competitive firm is perfectly elastic, but the demand curve for a purely competitive industry is downsloping.
The demand curve for a purely competitive firm is downsloping, but the demand curve for a purely competitive industry is perfectly elastic.
The demand curves are downsloping for both a purely competitive firm and a purely competitive industry.
The demand curves are perfectly elastic for both a purely competitive firm and a purely competitive industry.
1 points
Question 57
1.
Which of the following statements is correct?
The long-run supply curve for a purely competitive increasing-cost industry will be upsloping.
The long-run supply curve for a purely competitive increasing-cost industry will be perfectly elastic.
The long-run supply curve for a purely competitive industry will be less elastic than the industry’s short-run supply curve.
The long-run supply curve for a purely competitive decreasing-cost industry will be upsloping.
1 points
Question 58
1.
Which of the following will not hold true for a competitive firm in long-run equilibrium?
P equals AFC
P equals minimum ATC
MC equals minimum ATC
P equals MC
1 points
Question 59
1.
With respect to the pure monopolist’s demand curve it can be said that:
the stronger the barriers to entry, the more elastic is the monopolist’s demand curve.
price exceeds marginal revenue at all outputs greater than 1.
demand is perfectly inelastic.
marginal revenue equals price at all outputs.
1 points
Question 60
1.
X-inefficiency refers to a situation in which a firm:
is not as technologically progressive as it might be.
encounters diseconomies of scale.
fails to realize all existing economies of scale.
fails to achieve the minimum average total costs attainable at each level of output.
