Chapter 9 ECO.

question

For most producing firms:

answer

average total costs decline as output is carried to a certain level, and then begin to rise.

question

Which of the following is most likely to be a fixed cost?

answer

Property insurance premiums.

question

Which of the following is a short-run adjustment?

answer

A local bakery hires two additional bakers.

question

To the economist, total cost includes:

answer

explicit and implicit costs.

question

Economies and diseconomies of scale explain:

answer

why the firm's long-run average total cost curve is U-shaped.

question

The law of diminishing returns describes the:

answer

relationship between resource inputs and product outputs in the short run.

question

(Consider This) If the law of diminishing returns applies to study time:

answer

the tenth hour of study will likely be less productive than the third.

question

Normal profit is:

answer

the return to the entrepreneur when economic profits are zero.

question

The long-run average total cost curve:

answer

indicates the lowest unit costs achievable when a firm has had sufficient time to alter plant size.

question

If a firm decides to produce no output in the short run, its costs will be:

answer

its fixed cost

question

In the short run, which of the following statements is correct?

answer

Total cost will exceed variable cost.

question

If an industry's long-run average total cost curve has an extended range of constant returns to scale, this implies that:

answer

both relatively small and relatively large firms can be viable in the industry.

question

Marginal cost:

answer

equals both average variable cost and average total cost at their respective minimums.

question

In the short run:

answer

TVC will increase for a time at a diminishing rate, but then beyond some point will increase at an increasing rate.

question

To economists, the main difference between the short run and the long run is that:

answer

in the long run all resources are variable, while in the short run at least one resource is fixed.

question

Fixed cost is:

answer

any cost that does not change when the firm changes its output.

question

The vertical distance between a firm's ATC and AVC curves represents:

answer

AFC, which decreases as output increases.

question

Diseconomies of scale arise primarily because:

answer

of the difficulties involved in managing and coordinating a large business enterprise.

question

An explicit cost is:

answer

a money payment made for resources not owned by the firm itself.

question

Chp 10

answer

...

question

A purely competitive firm's short-run supply curve is:

answer

upsloping and equal to the portion of the (marginal cost curve) that lies above the average variable cost curve.

question

For a purely competitive firm, total revenue:

answer

-is price times quantity sold.
-increases by a constant absolute amount as output expands.
-graphs as a straight upsloping line from the origin.
Answer: has all of these characteristics above

question

The short-run supply curve of a purely competitive producer is based primarily on its:

answer

MC curve.

question

On a per unit basis, economic profit can be determined as the difference between:

answer

product price and average total cost.

question

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:

answer

oligopoly.

question

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:

answer

will also be $5

question

Which of the following is not a characteristic of pure competition?

answer

Price strategies by firms.

question

In which of the following industry structures is the entry of new firms the most difficult?

answer

Pure monopoly.

question

A purely competitive seller is:

answer

a "price taker."

question

If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing:

answer

price and minimum average variable cost.

question

A perfectly elastic demand curve implies that the firm:

answer

can sell as much output as it chooses at the existing price.

question

The demand schedule or curve confronted by the individual, purely competitive firm is:

answer

perfectly elastic. & down sloping

question

In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.

Refer to the information. For a purely competitive firm, total revenue graphs as a:

answer

straight, upsloping line.

question

When a firm is maximizing profit, it will necessarily be:

answer

maximizing the difference between total revenue and total cost.

question

Firms seek to maximize:

answer

total profit.

question

The MR = MC rule can be restated for a purely competitive seller as P = MC because:

answer

each additional unit of output adds exactly its price to total revenue.

question

A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its:

answer

total variable costs.

question

If a (purely competitive) firm is producing at the P = MC output and realizing an economic profit, at that output:

answer

marginal revenue exceeds ATC.

question

Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation:

answer

is realizing an economic profit of $40.

question

answer

straight line, parallel to the horizontal axis.

question

A firm reaches a break-even point (normal profit position) where:

answer

total revenue and total cost are equal.

question

In the short run, the individual competitive firm's supply curve is that segment of the:

answer

marginal cost curve lying above the average variable cost curve.

question

Which of the following is not a basic characteristic of pure competition?

answer

Considerable nonprice competition.

question

A purely competitive seller should produce (rather than shut down) in the short run:

answer

if total revenue exceeds total cost or if total cost exceeds total revenue by some amount less than total fixed cost.

question

(Consider This) An unprofitable motel will stay open in the short run if:

answer

price (average nightly room rate) exceeds average variable cost.

question

Chp11

answer

...

question

Suppose a purely competitive, increasing-cost industry is in long-run equilibrium. Now assume that a decrease in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price:

answer

and industry output will be less than the initial price and output.

question

Which of the following distinguishes the short run from the long run in pure competition?

answer

Firms can enter and exit the market in the long run but not in the short run.

question

A constant-cost industry is one in which:

answer

resource prices remain unchanged as output is increased.

question

Which of the following is true concerning purely competitive industries?

answer

in the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.i

question

We would expect an industry to expand if firms in that industry are

answer

earning economic profit

question

A decreasing-cost industry is one in which:

answer

input prices fall or technology improves as the industry expands.

question

Which of the following will not hold true for a competitive firm in long-run equilibrium?

answer

P equals AFC.

question

The primary force encouraging the entry of new firms into a purely competitive industry is:

answer

economic profits earned by firms already in the industry.

question

Innovations that lower production costs or create new products:

answer

often generate short-run economic profits that do not last into the long run.

question

Creative destruction is:

answer

the process by which new firms and new products replace existing dominant firms and products.

Example: Automobile production causes the wagon industry to shut down.

question

Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm:

answer

should continue producing in the short run but leave the industry in the long run if the situation persists.

question

If the long-run supply curve of a purely competitive industry slopes upward, this implies that the prices of relevant resources:

answer

rise as the industry expands.

question

Assume a purely competitive firm is maximizing profit at some output at which long-run average total cost is at a minimum. Then:

answer

there is no tendency for the firm's industry to expand or contract.

question

Which of the following outcomes is consistent with a purely competitive market in long-run equilibrium?

answer

Consumer and producer surplus will be maximized.

question

A purely competitive firm is precluded from making economic profits in the long run because:

answer

of unimpeded entry to the industry.

question

the term allocative efficiency refers to:

answer

the production of the product mix most desired by consumers.

question

A purely competitive firm:

answer

cannot earn economic profit in the long run.

question

If production is occurring where marginal cost exceeds price, the purely competitive firm will:

answer

fail to maximize profit and resources will be overallocated to the product.

question

The MR = MC rule applies:

answer

in both the short run and the long run.

question

chp 12

answer

...

question

A pure monopolist should never produce in the:

answer

inelastic segment of its demand curve because it can increase total revenue and reduce total cost by increasing price.

question

Which of the following best approximates a pure monopoly?

answer

The only bank in a small town.

question

A pure monopolist's short-run profit-maximizing or loss-minimizing position is such that price:

answer

will vertically intersect demand where MR = MC.

question

or a pure monopolist the relationship between total revenue and marginal revenue is such that:

answer

marginal revenue is positive when total revenue is increasing, but marginal revenue becomes negative when total revenue is decreasing.

question

When a firm is on the inelastic segment of its demand curve, it can:

answer

increase profits by increasing price.

question

If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue:

answer

will be less than $35.

question

monopolist

answer

price maker

question

Because the monopolist's demand curve is downsloping:

answer

price must be lowered to sell more output.

question

A pure monopolist:

answer

will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output.

question

Suppose that a pure monopolist can sell 20 units of output at $10 per unit and 21 units at $9.75 per unit. The marginal revenue of the 21st unit of output is:

answer

$4.75

question

Confronted with the same unit cost data, a monopolistic producer will charge:

answer

a higher price and produce a smaller output than a competitive firm.

question

A purely monopolistic firm:

answer

faces a downsloping demand curve.

question

Barriers to entering an industry:

answer

are the basis for monopoly.

question

What do economies of scale, the ownership of essential raw materials, and patents have in common?

answer

they are all barriers to entry

question

Fixed cost is:

answer

any cost that does not change when the firm changes its output.

question

In the short run, a monopolist's economic profits:

answer

may be positive or negative depending on market demand and cost conditions.

question

Price discrimination refers to:

answer

the selling of a given product at different prices to different customers that do not reflect cost differences.

question

(Consider This) Children are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands. Which of the following conditions of price discrimination explains why this occurs?

answer

The items can be bought by people in the low-price group and transferred to members of the high-price group.

question

Which of the following statements is correct?

answer

In seeking the profit-maximizing output, the pure monopolist underallocates resources to its production.

question

The profit-maximizing output of a pure monopoly is not socially optimal because in equilibrium:

answer

price exceeds marginal cost.

question

If a regulatory commission wants to establish a socially optimal price for a natural monopoly, it should select a price:

answer

at which the marginal cost curve intersects the demand curve.

question

For a pure monopolist, marginal revenue is less than price because:

answer

when a monopolist lowers price to sell more output, the lower price applies to all units sold.

question

A single-price monopoly is economically inefficient because, at the profit-maximizing output:

answer

society values additional units of the monopolized product more highly than it does the alternative products those resources could otherwise produce.

question

The vertical distance between the horizontal axis and any point on a non discriminating monopolist's demand curve measures:

answer

product price and average revenue.

question

Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9. We thus know that:

answer

total revenue is increasing.

question

chp.13

answer

...

question

Oligopolistic firms engage in collusion to:

answer

earn greater profits

question

Cartels are difficult to maintain in the long run because:

answer

-individual members may find it profitable to cheat on agreements.
-in violation of the antitrust laws.

question

The kinked-demand curve of an oligopolist is based on the assumption that:

answer

competitors will follow a price cut but ignore a price increase.

question

Monopolistic competition is characterized by a:

answer

large number of firms and low entry barriers.

question

In game theory, the credibility of a threat:

answer

influences the degree of cooperation between two rivals.

question

If the four-firm concentration ratio in an oligopolistic industry is 100 percent and each firm has an equal percentage of sales, the Herfindahl index is:

answer

2,500

question

Monopolistically competitive firms:

answer

may realize either profits or losses in the short run but realize normal profits in the long run.

question

Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut. In this case the firm perceives its:

answer

demand curve as kinked, being steeper below the going price than above.

question

When a monopolistically competitive firm is in long-run equilibrium:

answer

MR = MC and P > minimum ATC.

question

The Herfindahl index:

answer

gives much greater weight to larger firms than to smaller firms in an industry.

question

Aluminum competes with copper in the market for power transmission lines. This illustrates:

answer

interindustry competition.

question

Concentration ratios measure the:

answer

percentage of total industry sales accounted for by the largest firms in the industry.

question

In the short run, the price charged by a monopolistically competitive firm attempting to maximize profits:

answer

may be either equal to ATC, less than ATC, or more than ATC.

question

If the four-firm concentration ratio for industry X is 80:

answer

the four largest firms account for 80 percent of total sales.

question

Which of the following is correct for a monopolistically competitive firm in long-run equilibrium?

answer

P exceeds minimum ATC.

question

Excess capacity refers to the:

answer

amount by which actual production falls short of the minimum ATC output.

question

Suppose the Herfindahl indexes for industries A, B, and C are 1,200, 5,000, and 7,500 respectively. These data imply that:

answer

market power is greatest in industry C.

question

Under monopolistic competition, entry to the industry is:

answer

more difficult than under pure competition but not nearly as difficult as under pure monopoly.

question

As a general rule, oligopoly exists when the four-firm concentration ratio:

answer

is 40 percent or more.

question

Economic analysis of a monopolistically competitive industry is more complicated than that of pure competition because:

answer

of product differentiation and consequent product promotion activities.

question

A significant benefit of monopolistic competition compared with pure competition is:

answer

greater product variety

question

A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from:

answer

a relatively large number of firms and the monopolistic element from product differentiation.

question

Game theory can be used to demonstrate that oligopolists:

answer

can increase their profits through collusion.

question

The Herfindahl index for a pure monopolist is:

answer

10,000

question

Clear-cut mutual interdependence with respect to the price-output policies exists in:

answer

oligopoly

question

If the firms in an oligopolistic industry can establish an effective cartel, the resulting output and price will approximate those of:

answer

a pure monopoly.

question

Which of the following is an illustration of differentiated oligopoly?

answer

The soft drink industry.

question

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a differentiated oligopolist in a highly concentrated industry?

answer

Ford Motor company

question

Chp 14

answer

...

question

The general rule for hiring any input (say, labor) in the profit-maximizing amount is MRC = MRP. This rule takes the special form W = MRP (where W is the wage rate) when the:

answer

firm is hiring labor under purely competitive conditions.

question

The substitution effect indicates that a profit-seeking firm will use:

answer

more of an input whose price has fallen and less of other inputs in producing a given output.

question

Marginal resource cost is:

answer

the increase in total resource cost associated with the hire of one more unit of the resource.

question

The labor demand curve of an imperfectly competitive seller is downsloping:

answer

because of both diminishing returns and the necessity to lower price to sell more output.

question

Assume that the coefficient of elasticity of product demand is 0.5 in industry A and is 3.2 in industry B. Other things equal, labor demand will be:

answer

more elastic in industry B than in A.

question

Assuming a competitive resource market, a firm is hiring resources in the profit-maximizing amounts when the:

answer

marginal revenue product of each resource is equal to its price

question

Resource pricing is important because:

answer

All of the above

question

The demand for a resource depends primarily on:

answer

the demand for the product or service that it helps produce

question

The demand for airline pilots results from the demand for air travel. This fact is an example of:

answer

the derived demand for labor.

question

Assume the price of capital doubles and, as a result, firms make no change in the relative quantities of capital and labor they employ. This implies that:

answer

labor is not readily substitutable for capital.

question

If a firm is hiring variable resources D and F in perfectly competitive input markets, it will minimize the cost of producing any level of output by employing D and F in such amounts that:

answer

the price of each input equals its MP.

question

The marginal revenue product schedule is:

answer

the firm's resource demand schedule.

question

Resource X has many close substitutes, whereas resource Y has no close substitutes. Other things equal, we would expect:

answer

the demand for resource X to be more elastic than the demand for resource Y.

question

Other things equal, the resource demand curve of an imperfectly competitive seller will:

answer

be less elastic than that of a purely competitive seller.

question

Which of the following occupations is projected to be the fastest growing in the U.S. in terms of percentage increases?

answer

personal care aids

question

Marginal revenue product measures the:

answer

amount by which the extra production of one more worker increases a firm's total revenue.

question

Which of the following statements is true? Other things equal, the demand for labor will be less elastic the:

answer

smaller the ratio of labor costs to total costs.

question

Answer the question on the basis of the following information: Suppose a firm hires both labor (L) and capital (C) under purely competitive conditions. The price of labor is PL and that of capital is PC. The marginal product of labor is MPL and that of capital is MPC. The firm sells its product competitively at a price of PX.

answer

is equal to PL.

question

(Last Word) ATMs and human bank tellers:

answer

are substitute resources.

question

Assume labor is the only variable input and that an additional input of labor increases total output from 72 to 78 units. If the product sells for $6 per unit in a purely competitive market, the MRP of this additional worker is:

answer

$36

question

Answer the question on the basis of the following information: Harry owns a barber shop and charges $6 per haircut. By hiring one barber at $10 per hour, the shop can provide 24 haircuts per eight-hour day. By hiring a second barber at the same wage rate, the shop can now provide a total of 42 haircuts per day.

Refer to the given information. The MP of the second barber is:

answer

18 haircuts

question

For a firm selling its product in an imperfectly competitive market, the marginal revenue product of labor can be found by:

answer

multiplying marginal product by marginal revenue.

question

A decline in the price of resource A will:

answer

increase the demand for complementary resource B.

question

The relationship between the elasticity of product demand and the elasticity of demand for labor employed in its production is such that, other things being equal:

answer

the more elastic the demand for the product, the more elastic the demand for labor.

question

The labor demand curve of a purely competitive seller:

answer

slopes downward because of diminishing marginal productivity.

question

Answer the question on the basis of the following information. A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired; 32 when two workers are hired; 37 when three are hired; and 40 when four are hired. The farmer's product sells for $3 per unit and the wage rate is $13 per worker.

Refer to the given information. The marginal product of the second worker is:

answer

question

A profit-maximizing firm employs resources to the point where:

answer

MRP = MRC.

question

Suppose a firm is hiring resources l and m under purely competitive conditions to produce product Y, which sells for $2 in a purely competitive market. The prices of l and m are $10 and $4 respectively. In equilibrium the MPs of l and m, respectively, are:

answer

5 and 2

question

The elasticity of resource demand measures the:

answer

responsiveness of producers to changes in resource prices.

question

The elasticity of resource demand will be greater the:

answer

easier it is to substitute other resources in production.

question

If resources A and B are complementary and employed in fixed proportions:

answer

an increase in the price of A will decrease the demand for B.

1 of 152

question

For most producing firms:

answer

average total costs decline as output is carried to a certain level, and then begin to rise.

question

Which of the following is most likely to be a fixed cost?

answer

Property insurance premiums.

question

Which of the following is a short-run adjustment?

answer

A local bakery hires two additional bakers.

question

To the economist, total cost includes:

answer

explicit and implicit costs.

question

Economies and diseconomies of scale explain:

answer

why the firm's long-run average total cost curve is U-shaped.

question

The law of diminishing returns describes the:

answer

relationship between resource inputs and product outputs in the short run.

question

(Consider This) If the law of diminishing returns applies to study time:

answer

the tenth hour of study will likely be less productive than the third.

question

Normal profit is:

answer

the return to the entrepreneur when economic profits are zero.

question

The long-run average total cost curve:

answer

indicates the lowest unit costs achievable when a firm has had sufficient time to alter plant size.

question

If a firm decides to produce no output in the short run, its costs will be:

answer

its fixed cost

question

In the short run, which of the following statements is correct?

answer

Total cost will exceed variable cost.

question

If an industry's long-run average total cost curve has an extended range of constant returns to scale, this implies that:

answer

both relatively small and relatively large firms can be viable in the industry.

question

Marginal cost:

answer

equals both average variable cost and average total cost at their respective minimums.

question

In the short run:

answer

TVC will increase for a time at a diminishing rate, but then beyond some point will increase at an increasing rate.

question

To economists, the main difference between the short run and the long run is that:

answer

in the long run all resources are variable, while in the short run at least one resource is fixed.

question

Fixed cost is:

answer

any cost that does not change when the firm changes its output.

question

The vertical distance between a firm's ATC and AVC curves represents:

answer

AFC, which decreases as output increases.

question

Diseconomies of scale arise primarily because:

answer

of the difficulties involved in managing and coordinating a large business enterprise.

question

An explicit cost is:

answer

a money payment made for resources not owned by the firm itself.

question

Chp 10

answer

...

question

A purely competitive firm's short-run supply curve is:

answer

upsloping and equal to the portion of the (marginal cost curve) that lies above the average variable cost curve.

question

For a purely competitive firm, total revenue:

answer

-is price times quantity sold.
-increases by a constant absolute amount as output expands.
-graphs as a straight upsloping line from the origin.
Answer: has all of these characteristics above

question

The short-run supply curve of a purely competitive producer is based primarily on its:

answer

MC curve.

question

On a per unit basis, economic profit can be determined as the difference between:

answer

product price and average total cost.

question

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:

answer

oligopoly.

question

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:

answer

will also be $5

question

Which of the following is not a characteristic of pure competition?

answer

Price strategies by firms.

question

In which of the following industry structures is the entry of new firms the most difficult?

answer

Pure monopoly.

question

A purely competitive seller is:

answer

a "price taker."

question

If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing:

answer

price and minimum average variable cost.

question

A perfectly elastic demand curve implies that the firm:

answer

can sell as much output as it chooses at the existing price.

question

The demand schedule or curve confronted by the individual, purely competitive firm is:

answer

perfectly elastic. & down sloping

question

answer

straight, upsloping line.

question

When a firm is maximizing profit, it will necessarily be:

answer

maximizing the difference between total revenue and total cost.

question

Firms seek to maximize:

answer

total profit.

question

The MR = MC rule can be restated for a purely competitive seller as P = MC because:

answer

each additional unit of output adds exactly its price to total revenue.

question

A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its:

answer

total variable costs.

question

If a (purely competitive) firm is producing at the P = MC output and realizing an economic profit, at that output:

answer

marginal revenue exceeds ATC.

question

answer

is realizing an economic profit of $40.

question

answer

straight line, parallel to the horizontal axis.

question

A firm reaches a break-even point (normal profit position) where:

answer

total revenue and total cost are equal.

question

In the short run, the individual competitive firm's supply curve is that segment of the:

answer

marginal cost curve lying above the average variable cost curve.

question

Which of the following is not a basic characteristic of pure competition?

answer

Considerable nonprice competition.

question

A purely competitive seller should produce (rather than shut down) in the short run:

answer

if total revenue exceeds total cost or if total cost exceeds total revenue by some amount less than total fixed cost.

question

(Consider This) An unprofitable motel will stay open in the short run if:

answer

price (average nightly room rate) exceeds average variable cost.

question

Chp11

answer

...

question

answer

and industry output will be less than the initial price and output.

question

Which of the following distinguishes the short run from the long run in pure competition?

answer

Firms can enter and exit the market in the long run but not in the short run.

question

A constant-cost industry is one in which:

answer

resource prices remain unchanged as output is increased.

question

Which of the following is true concerning purely competitive industries?

answer

in the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.i

question

We would expect an industry to expand if firms in that industry are

answer

earning economic profit

question

A decreasing-cost industry is one in which:

answer

input prices fall or technology improves as the industry expands.

question

Which of the following will not hold true for a competitive firm in long-run equilibrium?

answer

P equals AFC.

question

The primary force encouraging the entry of new firms into a purely competitive industry is:

answer

economic profits earned by firms already in the industry.

question

Innovations that lower production costs or create new products:

answer

often generate short-run economic profits that do not last into the long run.

question

Creative destruction is:

answer

the process by which new firms and new products replace existing dominant firms and products.

Example: Automobile production causes the wagon industry to shut down.

question

Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm:

answer

should continue producing in the short run but leave the industry in the long run if the situation persists.

question

If the long-run supply curve of a purely competitive industry slopes upward, this implies that the prices of relevant resources:

answer

rise as the industry expands.

question

Assume a purely competitive firm is maximizing profit at some output at which long-run average total cost is at a minimum. Then:

answer

there is no tendency for the firm's industry to expand or contract.

question

Which of the following outcomes is consistent with a purely competitive market in long-run equilibrium?

answer

Consumer and producer surplus will be maximized.

question

A purely competitive firm is precluded from making economic profits in the long run because:

answer

of unimpeded entry to the industry.

question

the term allocative efficiency refers to:

answer

the production of the product mix most desired by consumers.

question

A purely competitive firm:

answer

cannot earn economic profit in the long run.

question

If production is occurring where marginal cost exceeds price, the purely competitive firm will:

answer

fail to maximize profit and resources will be overallocated to the product.

question

The MR = MC rule applies:

answer

in both the short run and the long run.

question

chp 12

answer

...

question

A pure monopolist should never produce in the:

answer

inelastic segment of its demand curve because it can increase total revenue and reduce total cost by increasing price.

question

Which of the following best approximates a pure monopoly?

answer

The only bank in a small town.

question

A pure monopolist's short-run profit-maximizing or loss-minimizing position is such that price:

answer

will vertically intersect demand where MR = MC.

question

or a pure monopolist the relationship between total revenue and marginal revenue is such that:

answer

marginal revenue is positive when total revenue is increasing, but marginal revenue becomes negative when total revenue is decreasing.

question

When a firm is on the inelastic segment of its demand curve, it can:

answer

increase profits by increasing price.

question

If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue:

answer

will be less than $35.

question

monopolist

answer

price maker

question

Because the monopolist's demand curve is downsloping:

answer

price must be lowered to sell more output.

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A pure monopolist:

answer

will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output.

question

Suppose that a pure monopolist can sell 20 units of output at $10 per unit and 21 units at $9.75 per unit. The marginal revenue of the 21st unit of output is:

answer

$4.75

question

Confronted with the same unit cost data, a monopolistic producer will charge:

answer

a higher price and produce a smaller output than a competitive firm.

question

A purely monopolistic firm:

answer

faces a downsloping demand curve.

question

Barriers to entering an industry:

answer

are the basis for monopoly.

question

What do economies of scale, the ownership of essential raw materials, and patents have in common?

answer

they are all barriers to entry

question

Fixed cost is:

answer

any cost that does not change when the firm changes its output.

question

In the short run, a monopolist's economic profits:

answer

may be positive or negative depending on market demand and cost conditions.

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Price discrimination refers to:

answer

the selling of a given product at different prices to different customers that do not reflect cost differences.

question

answer

The items can be bought by people in the low-price group and transferred to members of the high-price group.

question

Which of the following statements is correct?

answer

In seeking the profit-maximizing output, the pure monopolist underallocates resources to its production.

question

The profit-maximizing output of a pure monopoly is not socially optimal because in equilibrium:

answer

price exceeds marginal cost.

question

If a regulatory commission wants to establish a socially optimal price for a natural monopoly, it should select a price:

answer

at which the marginal cost curve intersects the demand curve.

question

For a pure monopolist, marginal revenue is less than price because:

answer

when a monopolist lowers price to sell more output, the lower price applies to all units sold.

question

A single-price monopoly is economically inefficient because, at the profit-maximizing output:

answer

society values additional units of the monopolized product more highly than it does the alternative products those resources could otherwise produce.

question

The vertical distance between the horizontal axis and any point on a non discriminating monopolist's demand curve measures:

answer

product price and average revenue.

question

Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9. We thus know that:

answer

total revenue is increasing.

question

chp.13

answer

...

question

Oligopolistic firms engage in collusion to:

answer

earn greater profits

question

Cartels are difficult to maintain in the long run because:

answer

-individual members may find it profitable to cheat on agreements.
-in violation of the antitrust laws.

question

The kinked-demand curve of an oligopolist is based on the assumption that:

answer

competitors will follow a price cut but ignore a price increase.

question

Monopolistic competition is characterized by a:

answer

large number of firms and low entry barriers.

question

In game theory, the credibility of a threat:

answer

influences the degree of cooperation between two rivals.

question

If the four-firm concentration ratio in an oligopolistic industry is 100 percent and each firm has an equal percentage of sales, the Herfindahl index is:

answer

2,500

question

Monopolistically competitive firms:

answer

may realize either profits or losses in the short run but realize normal profits in the long run.

question

Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut. In this case the firm perceives its:

answer

demand curve as kinked, being steeper below the going price than above.

question

When a monopolistically competitive firm is in long-run equilibrium:

answer

MR = MC and P > minimum ATC.

question

The Herfindahl index:

answer

gives much greater weight to larger firms than to smaller firms in an industry.

question

Aluminum competes with copper in the market for power transmission lines. This illustrates:

answer

interindustry competition.

question

Concentration ratios measure the:

answer

percentage of total industry sales accounted for by the largest firms in the industry.

question

In the short run, the price charged by a monopolistically competitive firm attempting to maximize profits:

answer

may be either equal to ATC, less than ATC, or more than ATC.

question

If the four-firm concentration ratio for industry X is 80:

answer

the four largest firms account for 80 percent of total sales.

question

Which of the following is correct for a monopolistically competitive firm in long-run equilibrium?

answer

P exceeds minimum ATC.

question

Excess capacity refers to the:

answer

amount by which actual production falls short of the minimum ATC output.

question

Suppose the Herfindahl indexes for industries A, B, and C are 1,200, 5,000, and 7,500 respectively. These data imply that:

answer

market power is greatest in industry C.

question

Under monopolistic competition, entry to the industry is:

answer

more difficult than under pure competition but not nearly as difficult as under pure monopoly.

question

As a general rule, oligopoly exists when the four-firm concentration ratio:

answer

is 40 percent or more.

question

Economic analysis of a monopolistically competitive industry is more complicated than that of pure competition because:

answer

of product differentiation and consequent product promotion activities.

question

A significant benefit of monopolistic competition compared with pure competition is:

answer

greater product variety

question

A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from:

answer

a relatively large number of firms and the monopolistic element from product differentiation.

question

Game theory can be used to demonstrate that oligopolists:

answer

can increase their profits through collusion.

question

The Herfindahl index for a pure monopolist is:

answer

10,000

question

Clear-cut mutual interdependence with respect to the price-output policies exists in:

answer

oligopoly

question

If the firms in an oligopolistic industry can establish an effective cartel, the resulting output and price will approximate those of:

answer

a pure monopoly.

question

Which of the following is an illustration of differentiated oligopoly?

answer

The soft drink industry.

question

answer

Ford Motor company

question

Chp 14

answer

...

question

The general rule for hiring any input (say, labor) in the profit-maximizing amount is MRC = MRP. This rule takes the special form W = MRP (where W is the wage rate) when the:

answer

firm is hiring labor under purely competitive conditions.

question

The substitution effect indicates that a profit-seeking firm will use:

answer

more of an input whose price has fallen and less of other inputs in producing a given output.

question

Marginal resource cost is:

answer

the increase in total resource cost associated with the hire of one more unit of the resource.

question

The labor demand curve of an imperfectly competitive seller is downsloping:

answer

because of both diminishing returns and the necessity to lower price to sell more output.

question

Assume that the coefficient of elasticity of product demand is 0.5 in industry A and is 3.2 in industry B. Other things equal, labor demand will be:

answer

more elastic in industry B than in A.

question

Assuming a competitive resource market, a firm is hiring resources in the profit-maximizing amounts when the:

answer

marginal revenue product of each resource is equal to its price

question

Resource pricing is important because:

answer

All of the above

question

The demand for a resource depends primarily on:

answer

the demand for the product or service that it helps produce

question

The demand for airline pilots results from the demand for air travel. This fact is an example of:

answer

the derived demand for labor.

question

Assume the price of capital doubles and, as a result, firms make no change in the relative quantities of capital and labor they employ. This implies that:

answer

labor is not readily substitutable for capital.

question

If a firm is hiring variable resources D and F in perfectly competitive input markets, it will minimize the cost of producing any level of output by employing D and F in such amounts that:

answer

the price of each input equals its MP.

question

The marginal revenue product schedule is:

answer

the firm's resource demand schedule.

question

Resource X has many close substitutes, whereas resource Y has no close substitutes. Other things equal, we would expect:

answer

the demand for resource X to be more elastic than the demand for resource Y.

question

Other things equal, the resource demand curve of an imperfectly competitive seller will:

answer

be less elastic than that of a purely competitive seller.

question

Which of the following occupations is projected to be the fastest growing in the U.S. in terms of percentage increases?

answer

personal care aids

question

Marginal revenue product measures the:

answer

amount by which the extra production of one more worker increases a firm's total revenue.

question

Which of the following statements is true? Other things equal, the demand for labor will be less elastic the:

answer

smaller the ratio of labor costs to total costs.

question

answer

is equal to PL.

question

(Last Word) ATMs and human bank tellers:

answer

are substitute resources.

question

answer

$36

question

answer

18 haircuts

question

For a firm selling its product in an imperfectly competitive market, the marginal revenue product of labor can be found by:

answer

multiplying marginal product by marginal revenue.

question

A decline in the price of resource A will:

answer

increase the demand for complementary resource B.

question

The relationship between the elasticity of product demand and the elasticity of demand for labor employed in its production is such that, other things being equal:

answer

the more elastic the demand for the product, the more elastic the demand for labor.

question

The labor demand curve of a purely competitive seller:

answer

slopes downward because of diminishing marginal productivity.

question

answer

question

A profit-maximizing firm employs resources to the point where:

answer

MRP = MRC.

question

answer

5 and 2

question

The elasticity of resource demand measures the:

answer

responsiveness of producers to changes in resource prices.

question

The elasticity of resource demand will be greater the:

answer

easier it is to substitute other resources in production.

question

If resources A and B are complementary and employed in fixed proportions:

answer

an increase in the price of A will decrease the demand for B.

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Chapter 9 ECO.

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