Question 1
A factor of production whose quantity can be changed during a particular period is a:
| marginal factor of production. | |
| fixed factor of production. |
| incremental factor of production. | |
| variable factor of production. |
Question 2
Assuming that all other factors of production are held constant, marginal product is the change in ________ output resulting from a 1-unit change in _______ .
| total; a variable input | |
| total; a fixed input |
| total; average product | |
| per unit; a fixed input |
Question 3
Average variable cost is the ratio of:
| total cost to the marginal cost. | |
| total cost to the amount of variable input. |
| variable cost to the quantity of output. | |
| marginal cost to the quantity of output. |
The curve labeled V represents the firm’s _______ curve.
| total cost | |
| average total cost | |
| marginal cost | |
| average variable cost |
Question 5
When an increase in the firm’s output reduces its long-run average cost, it experiences:
| economies of scale. | |
| diseconomies of scale. |
| constant returns to scale. | |
| variable returns to scale. |
Question 6
A firm that is able to more efficiently utilize by-products as it increases production in the long run is an example of:
| economies of scale. | |
| diseconomies of scale. |
| labor-intensive production. | |
| capital-intensive production. |
Question 7
If your plant is operating in the positively-sloped portion of a long-run average cost curve, this could be the result of:
| decreased input prices. | |
| improved utilization of by-products. |
| specialization of resources. | |
| limited decision-making capacity. |
Question 8
Perfect competition is a model of the market that assumes all of the following EXCEPT:
| a large number of firms. | |
| firms face downward-sloping demand curves. |
| firms produce identical goods. | |
| many buyers. |
Question 9
The Case in Point on the Burkha Industry suggested that this industry:
| might be an example of perfect competition although it did not feature easy entry and exit. | |
| might be an example of perfect competition because it did feature easy entry and exit. |
| might not be an example of perfect competition although it did feature easy entry and exit. | |
| might not be an example of perfect competition because it did not feature easy entry and exit. |
Question 10
If a perfectly competitive firm sells 30 units of output at a price of $10 per unit, its marginal revenue is:
| $10. | |
| more than $10. |
| less than $10. | |
| $300. |
Question 11
The difference between total revenue and total cost is:
| economic profit. | |
| nominal revenue. |
| average revenue. | |
| marginal revenue. |
Question 12
If a perfectly competitive firm is producing a quantity that generates MC < MR, then profit:
| is maximized. | |
| can be increased by increasing production. |
| can be increased by decreasing production. | |
| can be increased by increasing the price. |
Question 13
In the short run, a perfectly competitive firm does not produce output and earns a negative economic profit if:
| P = ATC. | |
| P < AVC. |
| AVC > P > ATC. | |
| AVC < P < ATC. |
Question 14
If all firms in a perfectly competitive industry earn zero economic profits, in the long run, the:
| industry supply curve will shift to the right. | |
| number of firms in the industry will decrease. |
| number of firms in the industry will increase. | |
| industry is in long-run equilibrium. |
Question 15
Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the short run, we expect that the market price will _______ and the output of a typical firm will _______ .
| rise; rise | |
| rise; fall |
| fall; rise | |
| fall; fall |
Question 16
Which of the following is (are) true concerning monopoly?
| It is at the opposite end of the spectrum from a perfectly competitive firm. | |
| A monopoly has no rivals. |
| A monopoly does not need to worry about other firms entering the industry. | |
| All of the above are true. |
Question 17
A natural monopoly exists whenever a single firm:
| is owned and operated by the federal or local government. | |
| is investor owned but granted the exclusive right by the government to operate in a market. |
| confronts economies of scale over the entire range of production that is relevant to its market. | |
| has gained control over a strategic input of an important production process. |
Question 18
If your local government gives you the exclusive right to sell breakfast bagels in your community, your monopoly would result from:
| sunk costs. | |
| location. |
| economies of scale. | |
| government restrictions. |
Question 19
In 1999, a judge declared that Microsoft was a monopolist. Assuming that it was maximizing its profits at its chosen level of output, we may conclude that the absolute value of the price elasticity of demand for its systems was:
| less than 1. | |
| equal to 1. |
| greater than 1. | |
| There is insufficient information upon which to make a determination. |
Question 20
The profit-maximizing price is _______ and will generate total economic profit of _______ .
| P2; EF | |
| P3; the rectangle P1P2FG | |
| P3; the rectangle P2P3EF | |
| P2; EF |
Question 21
The profit-maximizing rule MR = MC is:
| followed by a monopoly, but not a perfectly competitive firm. | |
| followed by a perfectly competitive firm but not by a monopoly. |
| followed by any firm. | |
| not followed by a monopoly, because it would reduce economic profit to zero. |
Question 22
A statement that best reflects an evaluation of monopoly firms is that:
| they are economically efficient. | |
| they have little or no market power. |
| consumers are given more choices, lower costs, and higher quality. | |
| none of the above is true. |
Question 23
An industry with more than one firm and in which at least one firm is a price setter is:
| perfect competition. | |
| imperfect competition. |
| monopoly. | |
| perfect monopolistic. |
Question 24
A(n) _______ is a single firm with _______ , whereas _______ implies an industry with ________ firm(s) who have (has) _______ .
| oligopoly; no barriers to entry; monopoly; many; easy entry and exit | |
| monopoly; barriers to entry; monopolistic competition; many; easy entry and exit |
| monopoly; barriers to entry; oligopoly; few; no barriers to entry | |
| monopolistic competitor; barriers to entry; monopoly; one; barriers to entry |
Question 25
The exhibit shows curves facing a typical restaurant in a community. Assume that the market is characterized by many firms, differentiated products, easy entry and easy exit. The restaurant shown here will maximize profits at a quantity of:
| Q1. | |
| Q2. | |
| Q3. | |
| There is not enough information given to answer the question. |
Question 26
Oligopoly is a market structure characterized by:
| a horizontal demand curve. | |
| a large number of small firms. |
| interdependence in decisionmaking. | |
| relatively easy entry and exit. |
Question 27
When firms openly agree on price, output, and other decisions aimed at achieving monopoly profits, those firms are practicing:
| overt collusion. | |
| tacit collusion. |
| leadership price. | |
| competitive game. |
Question 28
An unwritten, unspoken agreement through which firms limit competition among themselves is:
| satisficing. | |
| tacit collusion. |
| overt collusion. | |
| a cartel. |
Question 29
A decision based on the recognition that the actions of others will affect the outcome of the choice, and that takes these actions into account, is a:
| tacit supply curve model. | |
| playoff payoff. |
| perfect competition. | |
| strategic choice. |
Question 30
Which of the following is (are) true?
| There is no role for advertising in perfect competition. | |
| Firms in monopolistic competition and oligopoly use advertising in expectation of increasing profit. |
| Advertising has costs but few, if any, benefits. | |
| A and B are true. |
