microecon 2

Under perfect competition in the short run

A. most firms make zero economic profits.
B. all firms are making a profit.
C. firms can enter or leave the industry.
D. None of these conditions prevail.
E. all firms are losing money.

Under perfect competition, if some firms are taking losses in the short run, in the long run

A. firms will leave the industry until all firms are making a profit.
B. those firms will earn losses until demand increases
C. equilibrium price will rise until all firms are earning zero economic profits.
D. those firms will cut back their output until they get to the level at which marginal cost equals price.

Total profit

A. is the rectangle bounded by GHMO.
B. is the rectangle bounded by FGHI.
C. cannot be found on this graph.
D. is the rectangle bounded by EFIJ.

If a perfectly competitive firm were to raise its price above the market price, it would

A. sell significantly less than at the market price.
B. sell nothing.
C. sell slightly less than at the market price.
D. sell slightly more than at the market price.

If the perfect competitor is taking a loss, its output will be _______ it's most efficient output.

A. greater than
B. equal to
C. less than

Which of the following is NOT a basic characteristic of perfect competition?

A. Considerable non-price competition
B. A standardized or identical product
C. A large number of buyers and sellers
D. No barriers to the entry or exit of firms

If the market price is below the break-even point, in the long run we should expect

A. no change in the number of firms in this industry.
B. firms to leave the industry, market supply to fall, and product price to rise.
C. firms to enter the industry, market supply to rise, and product price to fall.
D. firms to leave the industry, market supply to rise, and product price to fall.

If marginal cost is greater than marginal revenue

A. the firm should hold output constant.
B. the firm should expand output.
C. the firm should contract output.
D. there is no way to determine if the firm should expand output, contract output, or hold output constant.

Marginal revenue at the profit-maximizing/loss-minimizing amount is

A. $8.
B. $7.
C. $5.
D. $6.

When operating at the profit-maximizing/loss-minimizing level of output, total revenue minus total cost
is a little under

A. -$45.
B. $200.
C. -$100.
D. $100.
E. $45.

The average total cost at the profit-maximizing/loss-minimizing amount is a little over

A. $8 per unit.
B. $11 per unit.
C. $9 per unit.
D. $10 per unit.

Which statement is true?

A. The firm is making a profit in the short run.
B. The firm is making a profit in the long run.
C. The firm is taking a loss in the short run.
D. The firm is breaking even in the long run.
E. The firm is taking a loss in the long run.

At an output of 55, AVC is $41 and MC is $38. At an output of 56, AVC is $42 and MC is $43. We may
conclude that at the shutdown point AVC is

A. less than $43.
B. greater than $43.
C. less than $41.
D. less than $42.

At an output of 19, MC = $39 and AVC = $44. At an output of 20, MC = $50 and AVC = $45. At the
shutdown point, AVC is

A. more than $45.
B. less than $44.
C. $45.
D. $44.
E. between $44 and $45.

A firm with explicit costs of $3,000,000, no implicit costs, and total revenue of $3,000,000 would
have

A. zero accounting profit.
B. zero economic profit.
C. accounting profits equal to economic profits, in this case both zero.
D. All of the choices are true of this firm.

Which statement is false?

A. The monopolist can sell more output only by lowering price.
B. The monopolist's demand and marginal revenue curves are two separate curves.
C. None of these statements are false.
D. The monopolist produces at the minimum point of its ATC curve.

Which statement is true?

A. Monopolies are always large firms.
B. The monopolist operates at the minimum point of its average total cost curve.
C. Price is always read off the demand curve.
D. Once a monopoly is set up, it is impossible to dislodge it.

Which statement is true?

A. None of these statements are true
B. All monopolists have control over an essential resource.
C. The monopolist charges a higher price than the perfect competitor in the long run.
D. The monopolist's most efficient output is its most profitable output as well.

Which statement is false?

A. None of these statements are false.
B. Economies of scale and high capital requirements are significant barriers to entry.
C. Natural monopolies can provide cheaper service as monopolies than could several competing firms.
D. The two main justifications for monopoly are economies of scale and natural monopoly.

When more substitutes become available, a monopolist has __________ power to raise price.

A. infinite
B. less
C. more

If the marginal cost were $14, output would be

A. 1.
B. 4.
C. 5.
D. 2.
E. 3.

If a monopolist's price were $8, it is likely that in equilibrium

A. MC = MR, and both are less than $8.
B. MC = MR, and both are more than $8.
C. MC = MR, and both are equal to $8.
D. None of the choices are correct

A natural monopoly

A. has a marginal cost curve that is steeply upward sloping.
B. has an average cost curve that reaches minimum possible average cost at a low level of output.
C. is usually allowed to choose its price so as to maximize profits in the United States.
D. occurs when a single firm can supply the entire market demand for a product at a lower average cost
E. is usually subject to antitrust suits.
than would be possible if two or more firms supplied the market.

If the marginal cost were $13, how many units of output would this firm produce?

A. 3
B. 4
C. 1
D. 2
E. 5

If the marginal cost were $21, output would be

A. 1.
B. 4.
C. 3.
D. 5.
E. 2.

The profit-maximizing firm will be earning total revenue of

A. NIKL.
B. OFKL.
C. OGHM.
D. OFJM.
E. OFIN.

If the government attempts to break up a natural monopoly to enforce competition in an industry

A. the smallest firm will have a significant cost advantage over the larger, less efficient firms.
B. the average cost of producing the good will increase.
C. the average cost of producing the good will decrease.
D. the price paid by consumers will be expected to remain the same.

If this firm were a perfect competitor, at what output would it produce in the long run?

A. OL
B. OP
C. OM
D. None of the choices are correct.

The profit-maximizing firm's output will be about

A. 500.
B. 450.
C. 750.
D. 625.
E. 550.

Assuming the monopolist shown in the graph adjusts output to maximize profits, it is

A. earning profits in the short-run.
B. earning profits and could be in the short-run or long-run.
C. earning profits in the long-run.
D. having losses in the short-run.

The profit-maximizing firm will operate at an output of

A. 0J.
B. 0L.
C. 0K.
D. 0M.

Which statement is the most accurate?

A. The monopolist produces at the minimum point of its average total cost curve.
B. Nearly all monopolists are very large firms.
C. The monopolist faces the entire industry demand curve.
D. The monopolist breaks even in the long run.

If the firm is maximizing profits or minimizing losses, it is producing _____ units of output and charging
a price of _____.

A. 50; $10
B. 50; $18.40
C. 60; $12
D. 60; $16.80

Which of the following is false?

A. The monopolist and perfect competitor both produce where MC equals MR.
B. A monopoly is a firm that produces all the output in an industry.
C. If a monopolist is losing money, it is in the long run.
D. Price is read off the demand curve for the monopolist

Which of the following is true?

A. Monopolies can be overcome by market forces or by government action.
B. Monopolists never lose money regardless of short-run or long-run.
C. The most efficient output is found where MC and MR cross.
D. Legal barriers are the basis for monopoly in the automobile industry.

Which is the most accurate statement about Wal-Mart?

A. It proves the case that bigness is always good.
B. It proves the case that bigness is always bad.
C. It has used its monopoly power to force price increases.
D. Directly and indirectly it saves American consumers up to $100 billion a year.

If this firm were a perfect competitor, at what output would it produce in the long run?

A. 50 units
B. 70 units
C. 40 units
D. 60 units

The marginal revenue that would be derived from production of the second unit would be

A. $24
B. $18
C. $30
D. $27
E. $21

Which of the following is true?

A. Having a recognizable brand name is a barrier to entry that can preserve monopoly power.
B. Monopolists never lose money in the short-run or long-run.
C. Patents are granted to investors who have control over an essential resource.
D. Monopolies can only be overcome by government action.

Statement I. Patents are granted to investors so that they have a chance to get rich before someone else
uses their ideas.
Statement II. Patents are essential to pharmaceutical companies, which may spend hundreds of millions
of dollars developing a drug.

A. Both statements are true.
B. Statement I is true and statement II is false.
C. Statement II is true and statement I is false.
D. Both statements are false.

Price discrimination means

A. exploiting the working masses by charging the highest single price possible.
B. eliminating all costs so that only profits are realized.
C. paying wages according to race or sex rather than productivity.
D. charging different prices for identical goods that have identical production costs.

Which statement is true?
A. There are many firms in a monopolistically competitive industry.
B. Monopolistic competitors produce an identical product.
C. In order for product differentiation to take place, there must be clear physical differences among the
products sold.
D. None of these statements are true.

Which statement is true?

A. The monopolistic competitor is often a large firm.
B. None of these statements are true.
C. Price discrimination is impossible under monopolistic competition.
D. Most firms in the U.S. are not monopolistic competitors.

Long-run equilibrium for firms in monopolistically competitive industries is similar to that for firms in
perfect competition in that

A. price equals minimum possible average total cost.
B. price equals average total cost.
C. price equals marginal cost.
D. marginal revenue equals average total cost.

If the firm is maximizing profits, this firm charges a price of

A. $25.
B. $16.
C. $12.
D. $13.

This firm maximizes profits (or minimizes losses) by producing a quantity of about _____ units.

A. 300
B. 150
C. 250
D. 200

An important result in long-run equilibrium in monopolistic competition is that the equilibrium point
results in

A. ATC = MR.
B. price = ATC.
C. ATC = MC.
D. price = MR.
E. price is greater than ATC.

Which would be an example of perfect price discrimination?

A. When doctors charge rich and poor patients different prices for the same medical services
B. When airlines charge different prices for seats on the same flight
C. None of the choices are examples of price discrimination.
D. When movies charge different prices at different times

If demand curve D2 represents a monopolistic competitor and demand curve D3 represents a monopoly,
then

A. the monopolist and the monopolistic competitor have identical elasticity in their demand curves.
B. the monopolist has a more elastic demand curve than the monopolistic competitor.
C. the monopolistic competitor has a more elastic demand curve than the monopolist.
D. None of these choices are true.

In the long run the monopolistic competitor ________ at peak efficiency and the perfect competitor
________ at peak efficiency.

A. operates; operates
B. does not operate; operates
C. operates; does not operate
D. does not operate; does not operate

Monopolistically competitive firms prevent the efficient use of resources because in long-run
equilibrium

A. marginal cost is less than average total cost.
B. price is greater than marginal cost.
C. price is less than marginal cost.
D. price equals marginal cost.

Product differentiation

A. is based solely on deceiving the buyer.
B. is rare under monopolistic competition.
C. takes place in the minds of the buyers.
D. takes place in the minds of the sellers.

Each of the following is an example of price discrimination except

A. high-priced tickets just behind the bench of the NBA championship team.
B. student rates for subscriptions to Business Week.
C. lower-priced movie tickets at "rush hour" to attract customers at dinner time.
D. senior citizen discounts at restaurants.

This profit-maximizing (loss-minimizing) firm produces a quantity of about _______ units.

A. 100
B. 50
C. 80
D. 30

Statement I: The trend toward customization is taking product differentiation one step further.

Statement II: Americans are provided with about the same amount of product differentiation as people in
most other countries.

A. Both statements are true.
B. Statement I is true and statement II is false.
C. Statement II is true and statement I is false.
D. Both statements are false.

This profit-maximizing firm produces a quantity of about ________ units.

A. 55
B. 40
C. 50
D. 45

This monopolistic competitor is in the

A. long run breaking even
B. short run taking a loss.
C. short run making a profit.
D. long run taking a loss.
E. long run making a profit.

This profit-maximizing (loss-minimizing) firm produces a quantity of about ________ units.

A. 80
B. 70
C. 100
D. 90

You could conclude that

A. the industry is in the long run.
B. new firms will enter the industry.
C. existing firms will leave the industry.

Providing better service, ambience, or a convenient location are all forms of

A. product differentiation
B. price discrimination
C. consumer surplus
D. economies of scale

Which of the following statements are true?

A. The demand curve of a monopolistic competitor is more horizontal (flatter) than a monopolist's demand curve.
B. In the long run the monopolistic competitor will definitely make a profit.
C. The demand curve of a monopolistic competitor is identical to its marginal revenue curve.
D. In the long run the monopolistic competitor is as efficient as the perfect competitor.

In the long run if some firms are losing money in monopolistic competition

A. the industry supply curve will decrease and market price will rise.
B. the industry supply curve cannot increase because of high barriers to entry.
C. the industry supply curve cannot decease because of high barriers to entry.
D. the industry supply curve will increase and market price will fall.

This profit-maximizing firm produces a quantity of a little over _______ units.

A. 125
B. 65
C. 85
D. 110

If this firm produced at its most efficient output level it would produce _______ units.

A. 50
B. 115
C. 80
D. 140

Statement I: The absence of significant barriers to entry ensures that long run profits will be competed
away for the monopolistic competitor.

Statement II: Providing better service, ambience, or a convenient location are all forms of price
discrimination.

A. Both statements are false.
B. Both statements are true.
C. Statement II is true and statement I is false.
D. Statement I is true and statement II is false.

Which one of these firms would be an oligopolist?

A. Proctor & Gamble
B. A family farm
C. A McDonald's restaurant in Manhattan
D. The only dentist in Hendry County, Florida

The demand curve facing an oligopoly will be less elastic

A. the larger its share of the market and the more differentiated the product.
B. the smaller its share of the market and the more differentiated the product.
C. the larger its share of the market and the less differentiated the product.
D. the smaller its share of the market and the less differentiated the product.

The highest Herfindahl-Hirschman Index

A. is in Industry X.
B. is in Industry Y.
C. is in Industry Z.
D. cannot be determined.

The strong interdependence of oligopolistic firms is shown by

A. the vulnerability of their sales to the actions of their rivals.
B. their inability to form a price conspiracy.
C. their reluctance to advertise.
D. their willingness to change prices frequently.

Which statement is true?

A. Industry Y has an H-H-I of 2,738.
B. Industry Y has an H-H-I of 100.
C. Industry Y has an H-H-I of 1,000.
D. Industry Y has a Herfindahl-Hirschman Index of 95.

Which is the most accurate statement?

A. There are virtually no oligopolies in the U.S.
B. An oligopolistic industry cannot have more than five firms.
C. There are a whole range of oligopolistic models, from a cartel to cutthroat competition.
D. The most important aspect of oligopoly is product differentiation.

Statement I. Most cars sold in the United States were made in Japan or assembled in the United States by
Japanese-owned companies.

Statement II. Imports of fuel-efficient cars made in Japan reduced the concentration ratio in the United
States that was dominated by G.M., Ford, and Chrysler.

A. Statement II is true and statement I is false.
B. Both statements are false.
C. Both statements are true.
D. Statement I is true and statement II is false.

Which statement is true?

A. There is no relationship between the concentration ratio and the degree of oligopolization.
B. The higher the concentration ratio, the higher the degree of oligopolization.
C. The lower the concentration ratio, the higher the degree of oligopolization.
D. The concentration ratio remains constant as the degree of oligopolization rises.

The higher the degree of oligopolization

A. the greater the likelihood of collusion. B. the smaller the likelihood of collusion. C. the greater the likelihood of product differentiation.
D. the greater the likelihood of cut-throat competition.

The highest Herfindahl-Hirschman index

A. is in Industry Z.
B. is in Industry Y.
C. cannot be determined.
D. is in Industry X.