Managerial Economics Test 2

question

Which of the following is not a characteristic of a perfectly competitive market?

answer

Firms have difficulty entering the market.

question

Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in the market?

answer

exactly $2.50. P=MR

question

When profit-maximizing firms in competitive markets are earning profits,

answer

new firms will enter the market.

question

For any given price, a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

answer

marginal cost curve.

question

When imposing an excise tax, the greater (in absolute value) the elasticity of demand for a product,

answer

the lower is the consumer share of the tax burden.

question

Competitive markets are characterized by

answer

a large number of buyers and sellers.

question

Which of the following statements is correct?

answer

only for competitive firms does price equal marginal revenue.

question

A competitive firm's short-run supply curve is part of which of the following curves?

answer

marginal cost.

question

One of the most important determinants of the success of free-markte capitalism is

answer

free entry and exit in markets.

question

If marginal costs is equal to average total cost, then average total cost

answer

is minimized.

question

When a natural monopoly exists, it is

answer

never cost effective for two or more private firms to produce the product.

question

Competitive firms and monopolist differ in which of the following ways?

answer

A competitive firm's marginal revenue curve is horizontal; a monopolist's marginal revenue curve is downward sloping.

question

Which type of public policy toward monopolies is much more common in the United States than in Europe?

answer

price regulation.

question

By setting price of a regulated monopoly equal to average costs, the regulator in theory ensures that

answer

the firms will earn a "fair" rate return.

question

The "co-optation of the regulators" theory states that:

answer

some regulators actively seek regulation to limit competition and obtain government subsidies for their industries.

question

In perfect competition, the equality that assures productive efficiency of the produced outcome:

answer

P=min ATC

question

Monopoly firms exert their market power by charging a price that is

answer

above marginal cost.

question

Which of the following is not a characteristic of a perfectly competitive market?

answer

Firms have difficulty entering the market.

question

Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market?

answer

exactly $2.50. P=MR

question

When profit-maximizing firms in competitive markets are earning profits,

answer

new firms will enter the market.

question

For any given price, a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

answer

marginal cost curve.

question

In the short run, a firm operating in a competitive industry will shut down price is

answer

less than average variable cost.

question

In a market with 1,000 identical firms, the short-run market supply is the

answer

sum of the quantities supplied by each of the 1,ooo individual firms at each price.

question

In a competitive market with identical firms, the short-run market supply is the

answer

free entry and exit into the market requires that firms earn zero economic profit in the long run even though they may be able to warn positive economic profit in the short run.

question

Consider a competitive market with a large number of identical firms. The firms in this market do no use any resources that are available only in limited quantities. In long-run equilibrium, market price

answer

is determined by minimum point on the firms' average total cost curve.

question

When a tax is levied on a good, the buyer and sellers of the good share the birder,

answer

regardless of how the tax is levied.

question

Other things equal, the deadweight loss of a tax,

answer

increases as the size of the tax increases, and the increase in the deadweight loss is more rapid than the increase in the size of the tax.

question

One problem with regulating a monopolist on the basis of cost is that

answer

it does not provide an incentive for the monopolist to reduce its costs.

question

Since natural monopolies have a declining average cost curve, regulating natural monopolies by setting price equal to marginal cost would

answer

cause the monopolist to operate at a loss.

question

If for some reason the price of a good is below the equilibrium price, then

answer

finding inventories depleted, supplies will increase output and raise prices.

question

A favorable shift in the demand curve occurs when

answer

consumers want to buy more than before at a given price.

question

A shift in the demand for sailboats due to an increase in income will typically cause

answer

higher prices of sailboats.

question

A shift in the supply curve of bicycles resulting from higher steel prices will lead to

answer

higher prices of bicycles.

question

We observe that the price of food rises and the quantity purchased also rises. Thus the

answer

demand curve has shifted to the right.

question

As a result of standardized products, under perfect competition,

answer

firms will face perfectly elastic demand curves.

question

An accurate description of a perfectly competitive industry is

answer

a large number of small firms producing standardize products.

question

In order to maximize profit, a firm under perfect competition should continue production until the extra cost of producing the last unit of output

answer

is equal to the market price.

question

The demand curve faced by a firm is a perfectly competitive industry is

answer

the same as the market price.

question

In the long run, perfectly competitive firms are at equilibrium when

answer

P=LMC=LAC.

question

The idea behind the concept of the "invisible hand" is that

answer

competitive markets are efficient, i.e. maximize social welfare.

question

The net "gain'" a buyer of a good obtains is called

answer

consumer surplus

question

the efficient industry outcome under perfect competition occurs at an output where

answer

MB=P=MC

question

Competition on the internet

answer

increases competition by reducing consumer search costs, allows firms to charge optimal markups for differentiated products.

1 of 43

question

Which of the following is not a characteristic of a perfectly competitive market?

answer

Firms have difficulty entering the market.

question

Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in the market?

answer

exactly $2.50. P=MR

question

When profit-maximizing firms in competitive markets are earning profits,

answer

new firms will enter the market.

question

For any given price, a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

answer

marginal cost curve.

question

When imposing an excise tax, the greater (in absolute value) the elasticity of demand for a product,

answer

the lower is the consumer share of the tax burden.

question

Competitive markets are characterized by

answer

a large number of buyers and sellers.

question

Which of the following statements is correct?

answer

only for competitive firms does price equal marginal revenue.

question

A competitive firm's short-run supply curve is part of which of the following curves?

answer

marginal cost.

question

One of the most important determinants of the success of free-markte capitalism is

answer

free entry and exit in markets.

question

If marginal costs is equal to average total cost, then average total cost

answer

is minimized.

question

When a natural monopoly exists, it is

answer

never cost effective for two or more private firms to produce the product.

question

Competitive firms and monopolist differ in which of the following ways?

answer

A competitive firm's marginal revenue curve is horizontal; a monopolist's marginal revenue curve is downward sloping.

question

Which type of public policy toward monopolies is much more common in the United States than in Europe?

answer

price regulation.

question

By setting price of a regulated monopoly equal to average costs, the regulator in theory ensures that

answer

the firms will earn a "fair" rate return.

question

The "co-optation of the regulators" theory states that:

answer

some regulators actively seek regulation to limit competition and obtain government subsidies for their industries.

question

In perfect competition, the equality that assures productive efficiency of the produced outcome:

answer

P=min ATC

question

Monopoly firms exert their market power by charging a price that is

answer

above marginal cost.

question

Which of the following is not a characteristic of a perfectly competitive market?

answer

Firms have difficulty entering the market.

question

Suppose that in a competitive market the equilibrium price is $2.50. What is marginal revenue for the last unit sold by the typical firm in this market?

answer

exactly $2.50. P=MR

question

When profit-maximizing firms in competitive markets are earning profits,

answer

new firms will enter the market.

question

For any given price, a firm in a competitive market will maximize profit by selecting the level of output at which price intersects the

answer

marginal cost curve.

question

In the short run, a firm operating in a competitive industry will shut down price is

answer

less than average variable cost.

question

In a market with 1,000 identical firms, the short-run market supply is the

answer

sum of the quantities supplied by each of the 1,ooo individual firms at each price.

question

In a competitive market with identical firms, the short-run market supply is the

answer

free entry and exit into the market requires that firms earn zero economic profit in the long run even though they may be able to warn positive economic profit in the short run.

question

answer

is determined by minimum point on the firms' average total cost curve.

question

When a tax is levied on a good, the buyer and sellers of the good share the birder,

answer

regardless of how the tax is levied.

question

Other things equal, the deadweight loss of a tax,

answer

increases as the size of the tax increases, and the increase in the deadweight loss is more rapid than the increase in the size of the tax.

question

One problem with regulating a monopolist on the basis of cost is that

answer

it does not provide an incentive for the monopolist to reduce its costs.

question

Since natural monopolies have a declining average cost curve, regulating natural monopolies by setting price equal to marginal cost would

answer

cause the monopolist to operate at a loss.

question

If for some reason the price of a good is below the equilibrium price, then

answer

finding inventories depleted, supplies will increase output and raise prices.

question

A favorable shift in the demand curve occurs when

answer

consumers want to buy more than before at a given price.

question

A shift in the demand for sailboats due to an increase in income will typically cause

answer

higher prices of sailboats.

question

A shift in the supply curve of bicycles resulting from higher steel prices will lead to

answer

higher prices of bicycles.

question

We observe that the price of food rises and the quantity purchased also rises. Thus the

answer

demand curve has shifted to the right.

question

As a result of standardized products, under perfect competition,

answer

firms will face perfectly elastic demand curves.

question

An accurate description of a perfectly competitive industry is

answer

a large number of small firms producing standardize products.

question

In order to maximize profit, a firm under perfect competition should continue production until the extra cost of producing the last unit of output

answer

is equal to the market price.

question

The demand curve faced by a firm is a perfectly competitive industry is

answer

the same as the market price.

question

In the long run, perfectly competitive firms are at equilibrium when

answer

P=LMC=LAC.

question

The idea behind the concept of the "invisible hand" is that

answer

competitive markets are efficient, i.e. maximize social welfare.

question

The net "gain'" a buyer of a good obtains is called

answer

consumer surplus

question

the efficient industry outcome under perfect competition occurs at an output where

answer

MB=P=MC

question

Competition on the internet

answer

increases competition by reducing consumer search costs, allows firms to charge optimal markups for differentiated products.

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Managerial Economics Test 2

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