1. (Figure: Pricing Strategy in Cable TV Market 1) If both CableNorth and CableSouth advertise, then without any collusion: (Points: 4.2) Figure: Pricing Strategy in Cable TV Market 1
Reference: Ref 15-3
(Figure: Pricing Strategy in Cable TV Market 1) If both CableNorth and CableSouth advertise, then without any collusion:
1. CableSouth will stop advertising to maximize profits. 2. there will be no tendency for either CableNorth or CableSouth to stop advertising. 3. CableNorth will stop advertising to maximize profits. 4. there is a tendency for both CableNorth and CableSouth to stop advertising.
Save Answer 2. If marginal cost is equal to average total cost, then: (Points: 4.2) If marginal cost is equal to average total cost, then:
1. marginal cost is increasing. i ncreasing. 2. average total cost is at its maximum. 3. average total cost is increasing.
4. average total cost is at its minimum.
Save Answer 3. The curve that shows the additional cost of each additional unit of output is called the: (Points: 4.2) The curve that shows the additional cost of each additional unit of output is called the:
1. average cost curve. 2. marginal product curve. 3. total cost curve. 4. marginal cost curve.
Save Answer 4. In oligopoly, a firm must realize: (Points: 4.2) In oligopoly, a firm must realize:
1. that it is in an i ndustry in which one major firm may dominate, and the firm will need to judge its actions accordingly. 2. that what it does affects the other firms in the industry. 3. that it must pursue policies while always remembering there will be a reaction to those policies by other firms in the industry. 4. all of the above.
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4. average total cost is at its minimum.
Save Answer 3. The curve that shows the additional cost of each additional unit of output is called the: (Points: 4.2) The curve that shows the additional cost of each additional unit of output is called the:
1. average cost curve. 2. marginal product curve. 3. total cost curve. 4. marginal cost curve.
Save Answer 4. In oligopoly, a firm must realize: (Points: 4.2) In oligopoly, a firm must realize:
1. that it is in an i ndustry in which one major firm may dominate, and the firm will need to judge its actions accordingly. 2. that what it does affects the other firms in the industry. 3. that it must pursue policies while always remembering there will be a reaction to those policies by other firms in the industry. 4. all of the above.
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5. If a firm wants to charge different customers different prices: (Points: 4.2) If a firm wants to charge different customers different prices:
1. the firm must be a price maker. 2. the firm must be in perfect competition. 3. both A and B are true. 4. the firm must be a price taker.
Save Answer 6. In the short run, a monopoly will stop producing if: (Points: 4.2) In the short run, a monopoly will stop producing if:
1. P < ATC. 2. P < AVC. 3. P > ATC. 4. P > MR.
Save Answer 7. (Figure: Profit Maximization in Monopolistic Competition) In Panel A, the profitmaximizing price and quantity are _______ and _______ . (Points: 4.2) Figure: Profit Maximization in Monopolistic Competition
Reference: Ref 16-1
(Figure: Profit Maximization in Monopolistic Competition) In Panel A, the profit-maximizing price and quantity are _______ and _______ .
1. 0P; 0M 2. 0P; 0Q 3. 0T; 0Q 4. 0S; 0M
Save Answer 8. An industry characterized by many firms, producing similar but differentiated products, in a market with easy entry and exit is called: (Points: 4.2) An industry characterized by many firms, producing similar but differentiated products, in a market with easy entry and exit is called:
1. monopolistic competition. 2. oligopoly. 3. perfect competition. 4. monopoly.
Save Answer 9. (Figure: A Profit-Maximizing Monopoly Firm) This profit-maximizing monopoly firm's profit per unit is: (Points: 4.2)
Figure: A Profit-Maximizing Monopoly Firm
Reference: Ref 14-2
(Figure: A Profit-Maximizing Monopoly Firm) This profit-maximizing monopoly firm's profit per unit is:
1. $ 5. 2. $13. 3. $14. 4. $20.
Save Answer 10. A feature of monopolistic competition that makes it different from monopoly is the: (Points: 4.2) A feature of monopolistic competition that makes it different from monopoly is the:
1. downward-sloping demand curve. 2. fact that firms in the model of monopolistic competition follow the marginal decision rule while monopolies do not. 3. number of firms in the industry. 4. downward-sloping marginal revenue curve.
Save Answer 11. (Table: Costs of Producing Bagels) The average total cost of producing 6 bagels is: (Points: 4.2) Table: Costs of Producing Bagels Quantity of bagels (per period) Total variable costs
Total fixed costs
0
$0.00
$0.10
1
0.20
0.10
2
0.30
0.10
3
0.35
0.10
4
0.45
0.10
5
0.60
0.10
6
0.80
0.10
7
1.05
0.10
8
1.35
0.10
Reference: Ref 8-3
(Table: Costs of Producing Bagels) The average total cost of producing 6 bagels is:
1. $0.10. 2. $0.20. 3. $0.80. 4. $0.15.
Save Answer 12. (Exhibit: Accounting and Economic Profit) The economic profit of Wang's Wicker Furniture Store is (Points: 4.2) Exhibit: Accounting and Economic Profit (Exhibit: Accounting and Economic Profit) Rather than put the $100,000 that his grandmother left him in a mutual fund and earn 5% each year, Tommy Wang quit his job that paid $60,000 per year and used the $100,000 to start Wang's Wicker Furniture Store. He rented a showroom for $15,000 for the year, purchased $100,000 in capital equipment (an amount that could have earned an annual rate of interest of 5% and depreciates $5,000 each year), purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and advertising. In his first year, his revenue was approximately $150,000. Reference: Ref 7-1
(Exhibit: Accounting and Economic Profit) The economic profit of Wang's Wicker Furniture Store is
1. $67,000. 2. –$20,000. 3. $0. 4. –$35,000.
Save Answer 13. (Figure: A Perfectly Competitive Firm in the Short Run) The firm's total cost of producing its most profitable level of output is: (Points: 4.2) Figure: A Perfectly Competitive Firm in the Short Run
Reference: Ref 9-4
(Figure: A Perfectly Competitive Firm in the Short Run) The firm's total cost of producing its most profitable level of output is:
1. 0FKD. 2. DK . 3. BS. 4. 0ESB.
Save Answer 14. Due to the existence of a large number of similar, but not identical, substitutes in most communities, and the fact that it is not overly difficult to obtain a hair dresser's license, the market for hair dressers is best considered: (Points: 4.2) Due to the existence of a large number of similar, but not identical, substitutes in most communities, and the fact that it is not overly difficult to obtain a hair dresser's license, the market for hair dressers is best considered:
1. monopolistic competition. 2. a monopoly. 3. perfect competition.
4. an oligopoly.
Save Answer 15. (Table: Total Product and Marginal Product) The average product of the fourth worker is ________ units. (Points: 4.2) Table: Total Product and Marginal Product Labor per day Total products (units per period) 0
0
1
10
2
30
3
70
4
90
5
100
6
107
7
110
8
105
Reference: Ref 8-1
(Table: Total Product and Marginal Product) The average product of the fourth worker is ________ units.
1. 22.5 2. 20 3. 50 4. 90
Save Answer 16. The demand curve for a firm under monopolistic competition is: (Points: 4.2) The demand curve for a firm under monopolistic competition is:
1. horizontal, unlike the downward-sloping demand curve facing a perfectly competitive firm. 2. downward sloping, the same as that facing a perfectly competitive firm. 3. downward sloping, unlike the horizontal demand curve facing a perfectly competitive firm. 4. horizontal, the same as that facing a perfectly competitive firm.
Save Answer 17. The marginal revenue received by a firm in a perfectly competitive market: (Points: 4.2) The marginal revenue received by a firm in a perfectly competitive market:
1. is greater than the market price. 2. increases with the quantity of output sold. 3. is less than the market price. 4. is equal to its average revenue.
Save Answer 18. Suppose that each of two prisoners has the independent choice of confessing to a crime or not confessing. If neither confesses, they spend 2 years in jail; if both confess, they spend 3 years in jail; and if one confesses while the other does not, the conf (Points: 4.2) Suppose that each of two prisoners has the independent choice of confessing to a crime or not confessing. If neither confesses, they spend 2 years in jail; if both confess, they spend 3 years in jail; and if one confesses while the other does not, the confessor gets off with 1 year in jail while the other gets 6 years in jail. According to game theory, the likely strategy by the prisoners is:
1. one will confess and the other will not.
2. both will confess. 3. both may or may not confess. 4. neither will confess.
Save Answer 19. An unwritten, unspoken agreement through which firms limit competition among themselves is: (Points: 4.2) An unwritten, unspoken agreement through which firms limit competition among themselves is:
1. satisfying. 2. overt collusion. 3. tacit collusion. 4. a cartel.
Save Answer 20. The demand curve facing a monopolist is: (Points: 4.2) The demand curve facing a monopolist is:
1. horizontal, the same as that facing a perfectly competitive firm. 2. downward sloping, but much steeper than the market demand curve. 3. vertical, because the monopolist is the only seller of the product. 4. downward sloping, and the same as the market or industry demand curve.
Save Answer 21. (Exhibit: Accounting and Economic Profit) The accounting profit of the Wang's Wicker Furniture Store is : (Points: 4.2) Exhibit: Accounting and Economic Profit (Exhibit: Accounting and Economic Profit) Rather than put the $100,000 that his grandmother left him in a mutual fund and earn 5% each year, Tommy Wang quit his job that paid $60,000 per year and used the $100,000 to start Wang's Wicker Furniture Store. He rented a showroom for $15,000 for the year, purchased $100,000 in capital equipment (an amount that could have earned an annual rate of interest of 5% and depreciates $5,000 each year), purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and advertising. In his first year, his revenue was approximately $150,000. Reference: Ref 7-1
(Exhibit: Accounting and Economic Profit) The accounting profit of the Wang's Wicker Furniture Store is :
1. $60,000. 2. $0. 3. $30,000. 4. $200,000.
Save Answer 22. (Figure: Marginal Decision Rule) If P1 is the market price, and if this firm is trying to maximize profit, it should produce: (Points: 4.2) Figure: Marginal Decision Rule
Reference: Ref 9-2
(Figure: Marginal Decision Rule) If P 1 is the market price, and if this firm is trying to maximize profit, it should produce:
1. where MR > MC. 2. quantity q2. 3. quantity q1 where MR > MC. 4. a quantity greater than q1 but less than q2.
Save Answer 23. Which of the following is true regarding monopolies? (Points: 4.2) Which of the following is true regarding monopolies?
1. Monopolies usually are economically efficient because they have economic profits with which to work. 2. Monopolies produce too little and charge too much from the standpoint of efficiency. 3. Monopolies produce too much and charge too much from the standpoint of efficiency. 4. Monopolies create an efficiency problem but are not associated with an equity problem.
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24. The perfectly competitive model assumes all of the following except: (Points: 4.2) The perfectly competitive model assumes all of the following except:
1. complete information on the part of buyers and sellers. 2. easy entry into and easy exit from the market. 3. a great number of buyers. 4. that firms attempt to maximize their total revenue.
Save Answer 25. When marginal cost is below average variable cost, average variable cost must be: (Points: 4.2) When marginal cost is below average variable cost, average variable cost must be:
1. at its minimum. 2. falling. 3. at its maximum. 4. rising.
Save Answer 26. A well-known example of an international cartel is: (Points: 4.2) A well-known example of an international cartel is:
1. OPEC.
2. Japan. 3. General Motors. 4. Exxon.
Save Answer 27. Price takers are individuals in a market who: (Points: 4.2) Price takers are individuals in a market who:
1. select the average of prices available in a competitive market. 2. have no ability to affect the price of a good in a market. 3. select the lowest price available in a competitive market. 4. select a price from a wide range of alternatives.
Save Answer 28. (Figure: Long-Run Average Cost) Output per period in the region from O to A indicates that a firm is experiencing: (Points: 4.2) Figure: Long-Run Average Cost
Reference: Ref 8-5
(Figure: Long-Run Average Cost) Output per period in the region from O to A indicates that a firm is experiencing:
1. diseconomies of scale. 2. economies of scale. 3. constant returns to scale. 4. negative costs of production.
Save Answer 29. In a monopoly in the long run: (Points: 4.2) In a monopoly in the long run:
1. none of the above is true. 2. economic profits will be reduced, but not eliminated entirely, by the entry of rival firms. 3. economic profits will be eliminated by the entry of rival firms, and only normal profits will be earned. 4. entry will not occur because of high barriers to entry, and economic profits will continue into the long run.
Save Answer 30. (Figure: Computing Monopoly Profit) The profit-maximizing price is _______ and will generate total economic profit of _______. (Points: 4.2) Figure: Computing Monopoly Profit
Reference: Ref 14-1
(Figure: Computing Monopoly Profit) The profit-maximizing price is _______ and will generate total economic profit of _______.
1. P 3; the rectangle P 2P 3EF 2. P 3; the rectangle P 1P 2FG 3. P 2; EF 4. P 2; EF
Save Answer 31. (Table: Total Product and Marginal Product) The marginal product of the second worker is: (Points: 4.2) Table: Total Product and Marginal Product Labor per day Total products (units per period) 0
0
1
10
2
30
3
70
4
90
5
100
6
107
7
110
8
105
Reference: Ref 8-1
(Table: Total Product and Marginal Product) The marginal product of the second worker is:
1. 30. 2. 10. 3. 20. 4. 15.
Save Answer 32. Marginal cost pricing (or P=MC) at the profit maximizing level of output will exist in which of the following markets? (Points: 4.2) Marginal cost pricing (or P=MC) at the profit maximizing level of output will exist in which of the following markets?
1. monopolistic competition 2. perfect competition 3. oligopoly 4. monopoly
Save Answer 33. The amount by which an additional unit of an activity increases total benefit is: (Points: 4.2) The amount by which an additional unit of an activity increases total benefit is:
1. net benefit.
2. utility. 3. marginal cost. 4. marginal benefit.
Save Answer 34. Whenever MB < MC, the decision maker should do _______ of the activity. (Points: 4.2) Whenever MB < MC, the decision maker should do _______ of the activity.
1. less 2. the same amount 3. more 4. none
Save Answer 35. The industry characterized by a few interdependent firms where there are barriers to entry is called: (Points: 4.2) The industry characterized by a few interdependent firms where there are barriers to entry is called:
1. perfect competition. 2. monopoly. 3. oligopoly. 4. monopolistic competition.
Save Answer 36. The shutdown price is: (Points: 4.2) The shutdown price is:
1. the intersection of the MC and ATC curves. 2. the minimum level of AFC. 3. the minimum level of AVC. 4. the price at which economic profit is zero.
Save Answer 37. Concentration ratios are: (Points: 4.2) Concentration ratios are:
1. calculated for the four or eight largest firms in the industry. 2. no longer reported, because markets change so rapidly. 3. based on surveys of manufacturing firms. 4. computed using the ratio of MC to ATC.
Save Answer 38. (Figure: Profit Maximization in Monopolistic Competition) A firm in monopolistic competition will maximize profits by producing the level of output where: (Points: 4.2) Figure: Profit Maximization in Monopolistic Competition
Reference: Ref 16-1
(Figure: Profit Maximization in Monopolistic Competition) A firm in monopolistic competition will maximize profits by producing the level of output where:
1. P = MR. 2. MR = MC. 3. P = MC. 4. price minus ATC (i.e., economic profit per unit) is the largest.
Save Answer 39. A perfectly competitive firm's supply curve is the: (Points: 4.2) A perfectly competitive firm's supply curve is the:
1. MC curve below the shutdown point. 2. entire MC curve. 3. rising part of MC curve beginning at the shutdown point. 4. rising part of MC curve beginning at the point at which the firm starts earning economic profit.
Save Answer 40. A perfectly competitive firm will incur an economic loss but will continue producing the profit-maximizing quantity of output in the short run if price is: (Points: 4.2) A perfectly competitive firm will incur an economic loss but will continue producing the profitmaximizing quantity of output in the short run if price is:
1. less than average variable cost. 2. less than marginal cost. 3. greater than average variable cost and less than average total cost. 4. greater than average total cost.
Save Answer 41. Price discrimination: (Points: 4.2) Price discrimination:
1. is possible only if the market can be segmented into distinctly different price elasticities of demand, and if it is not possible for consumers to purchase the product from the cheaper segment and resell it in the more expensive one. 2. Both answers (A) and (C) are correct. 3. leads to a higher price in the market segment with a more elastic demand and a lower price in market segment with a lower elasticity of demand. 4. leads to a higher price in the less elastic market segment, and a lower price in the market segment with a more elastic demand.
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42. (Figure: Total Product) Between points A and B the marginal product of labor is: (Points: 4.2) Figure: Total Product
Reference: Ref 8-2
(Figure: Total Product) Between points A and B the marginal product of labor is:
1. increasing at a decreasing rate. 2. negative. 3. increasing at a an increasing rate. 4. falling.
Save Answer 43. Which of the following is(are) true? (Points: 4.2) Which of the following is(are) true?
1. The monopolistic competitive market offers a wide range of product choices. 2. In a monopolistically competitive market, the price is higher and the output is lower, as compared to a perfectly competitive market. 3. In monopolistic competition, compared to perfect competition, the average total cost (ATC) is higher, or that it is less efficient. 4. All of the above are true.
Save Answer 44. The practice of selling the same product at different prices in different markets, without corresponding differences in costs, is: (Points: 4.2) The practice of selling the same product at different prices in different markets, without corresponding differences in costs, is:
1. product differentiation. 2. illegal. 3. natural monopoly. 4. price discrimination.
Save Answer 45. (Figure: Short-Run Costs) A is the _______ cost curve. (Points: 4.2) Figure: Short-Run Costs
Reference: Ref 8-4
(Figure: Short-Run Costs) A is the _______ cost curve.
1. average total
2. total 3. marginal 4. average variable
Save Answer 46. An example of monopolistic competition is the _______ market. (Points: 4.2) An example of monopolistic competition is the _______ market.
1. breakfast cereal 2. restaurant 3. soft drink 4. automobile
Save Answer 47. (Figure: Pricing Strategy in Cable TV Market 1) In the figure, the dominant strategy for CableNorth: (Points: 4.2) Figure: Pricing Strategy in Cable TV Market 1
Reference: Ref 15-3
(Figure: Pricing Strategy in Cable TV Market 1) In the figure, the dominant strategy for CableNorth:
1. is to do whatever CableSouth does. 2. is to not advertise. 3. does not exist. 4. is to advertise.
Save Answer 48. (Figure: Firms in Monopolistic Competition) Long-run equilibrium is illustrated at the profit-maximizing price _______ in Panel _______. (Points: 4.2) Figure: Firms in Monopolistic Competition
Reference: Ref 16-3
(Figure: Firms in Monopolistic Competition) Long-run equilibrium is illustrated at the profitmaximizing price _______ in Panel _______.
1. 0F; A 2. 0G; A 3. 0H ; B 4. 0I; C
Save Answer 49. A natural monopoly exists whenever a single firm: (Points: 4.2) A natural monopoly exists whenever a single firm:
1. is investor owned but has been granted the exclusive right by the government to operate in a market. 2. has gained control over a strategic input of an important production process. 3. confronts economies of scale over the entire range of production that is relevant to its market. 4. is owned and operated by the federal or local government.
Save Answer 50. If your local government gives you the exclusive right to sell breakfast bagels in your community, your monopoly would result from: (Points: 4.2) If your local government gives you the exclusive right to sell breakfast bagels in your community, your monopoly would result from:
1. government restrictions. 2. economies of scale. 3. sunk costs. 4. location.
Save Answer 51. In the long run, monopolistically competitive firms tend to experience: (Points: 4.2) In the long run, monopolistically competitive firms tend to experience:
1. substantial economic losses. 2. high economic profits. 3. negative economic profits. 4. zero economic profits.
Save Answer 52. Compared to perfect competition: (Points: 4.2) Compared to perfect competition:
1. all of the above are true. 2. monopoly produces where MR = MC, and a perfectly competitively firm produces where P = MC. 3. monopoly produces less at a higher price. 4. monopoly may have economic profits in the long run, but in perfect competition in the long run economic profits are zero.
Save Answer 53. The short run is a period that is: (Points: 4.2) The short run is a period that is:
1. less than 1 week. 2. long enough in which to vary output but not plant capacity.
3. less than 1 month. 4. long enough in which to make all economic adjustments.
Save Answer 54. A cartel is an example of: (Points: 4.2) A cartel is an example of:
1. tacit collusion. 2. price leadership. 3. price extortion. 4. overt collusion.
Save Answer 55. A demand curve that is downward sloping will ensure that: (Points: 4.2) A demand curve that is downward sloping will ensure that:
1. P = MC. 2. P < MR. 3. P = MR. 4. P > MR.
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56. The long run is a planning period: (Points: 4.2) The long run is a planning period:
1. over which a firm can consider all inputs as variable. 2. that is at least 5 years in length. 3. that must be between 6 months and 5 years. 4. that must be over 6 months in length.
Save Answer 57. A university that benefits from lower costs per unit as it grows is an example of: (Points: 4.2) A university that benefits from lower costs per unit as it grows is an example of:
1. increasing opportunity costs. 2. economies of scale. 3. scale reduction. 4. diseconomies of scale.
Save Answer 58. Product differentiation under monopolistic competition means that each firm: (Points: 4.2) Product differentiation under monopolistic competition means that each firm:
1. charges the same price. 2. receives economic profits.
3. maximizes profit where MC = P. 4. faces a downward-sloping demand curve.
Save Answer 59. A monopoly is a market characterized by a: (Points: 4.2) A monopoly is a market characterized by a:
1. product with no close substitutes. 2. small number of large firms. 3. single buyer and several sellers. 4. large number of small firms.
Save Answer 60. If economic profits exist in perfect competition, in the long run firms will enter because of easy entry, the _______ curve will shift to the right, and _______ in the market will ______. (Points: 4.2) If economic profits exist in perfect competition, in the long run firms will enter because of easy entry, the _______ curve will shift to the right, and _______ in the market will ______.
1. supply; demand; also shift to the right 2. demand; supply; fall 3. demand; price; increase 4. supply; output; increase
