Question 1 (2 points) If the long-run supply curve slopes upward, we know that t

Question

Question 1 (2 points)

If the long-run supply curve slopes upward, we know that this is

Question 1 options:

A)

a decreasing-cost industry.

B)

a constant-cost industry.

C)

an increasing-cost industry.

D)

a situation in which no input prices change as firms enter and exit the industry.

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Question 2 (2 points)

Economists generally assume that firms attempt to maximize

Question 2 options:

A)

total revenue.

B)

sales.

C)

marginal revenue.

D)

total economic profits.

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Question 5 (2 points)

The demand curve faced by a perfectly competitive industry

Question 5 options:

A)

slopes upward.

B)

slopes downward.

C)

has no slope.

D)

is perfectly inelastic.

Question 8 (2 points)

At the short-run break-even price, the firm

Question 8 options:

A)

is earning positive economic profits.

B)

is earning negative economic profits.

C)

is making a normal rate of return on its capital investment.

D)

may be earning a positive or negative profit economic depending upon costs.

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Question 9 (2 points)

Suppose a perfectly competitive ukulele factory can produce 35 ukuleles at an output at which marginal cost equals marginal revenue. The price per ukulele is $1300 and the average total cost is $1500. What is the profit or loss that this furniture factory is earning?

Question 9 options:

A)

$700.00

B)

-$7,000.00

C)

-$1,050.00

D)

-$450.00

Question 11 (2 points)

The difference between price and average total cost is

Question 11 options:

A)

total costs.

B)

marginal costs.

C)

average profit.

D)

an irrelevant quantity.

Question 13 (2 points)

A patent on a product gives a firm

Question 13 options:

A)

protection from having the invention copied or stolen for a period of 20 years.

B)

economies of scale in producing the product.

C)

excessive profits in the long run.

D)

the power to impose a tariff on a competing product.

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Question 14 (2 points)

One problem associated with a monopoly firm is that it

Question 14 options:

A)

produces too little output but also charges a low price.

B)

produces too much output and charges too low a price.

C)

restricts output and charges a relatively higher price than a purely competitive firm.

D)

is just as good as a purely competitive firm in terms of output and price.

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Question 15 (2 points)

A monopolist will earn economic profits when

Question 15 options:

A)

AVC is a minimum.

B)

ATC intersects the demand curve.

C)

ATC lies above the demand curve.

D)

ATC lies below the demand curve.

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Question 16 (2 points)

When a firm sells a given product at more than one price and the price difference is NOT caused by differences in cost then there is

Question 16 options:

A)

price discrimination.

B)

price differentiation.

C)

price demarcation.

D)

price delineation.

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Question 17 (2 points)

When the number of substitutes increase, the demand curve for a monopolist will

Question 17 options:

A)

not change.

B)

become more elastic.

C)

become more inelastic.

D)

become steeper.

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Question 18 (2 points)

The portion of consumer surplus that no one in society is able to obtain in a situation of monopoly is known as

Question 18 options:

A)

a market failure.

B)

a deadweight loss.

C)

an unrealized loss.

D)

a market externality.

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Question 19 (2 points)

The more substitutes there are for a monopolist's product

Question 19 options:

A)

the less elastic is the demand curve.

B)

the more elastic is the demand curve.

C)

the steeper is the demand curve.

D)

the more positively sloped the demand curve becomes.

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Question 20 (2 points)

A tax that is imposed on an imported good is called a

Question 20 options:

A)

tariff.

B)

quota.

C)

government license.

D)

patent.

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Question 21 (2 points)

Drug companies protect their monopolies over various drugs they develop by utilizing

Question 21 options:

A)

patent protection.

B)

low cost production.

C)

diseconomies of scale.

D)

zero economic profits in the long run.

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Question 22 (2 points)

Which of the following is NOT a barrier to entry?

Question 22 options:

A)

Patents

B)

Licenses

C)

Economies of scale

D)

U.S. antitrust legislation

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Question 23 (2 points)

The number of firms in a monopolistically competitive market means that

Question 23 options:

A)

all firms will have substantial monopoly power since there are so few firms in the industry.

B)

each firm has a relatively small share of the total market since there are many firms in the industry.

C)

the firms will be likely to collude since there are only a few firms in the industry.

D)

firms will have a hard time earning non-negative profits since there are many firms in the industry.

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Question 24 (2 points)

A market situation in which a large number of firms produce similar but not identical products is

Question 24 options:

A)

a collusive market structure.

B)

competitive monopoly.

C)

a homogeneous market.

D)

monopolistic competition.

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Question 25 (2 points)

The marginal revenue curve of a monopolistically competitive firm is

Question 25 options:

A)

downward sloping and above the demand curve.

B)

downward sloping and below the demand curve.

C)

identical to the demand curve as there are many small firms in the market.

D)

perfectly elastic.

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Question 26 (2 points)

Direct marketing is

Question 26 options:

A)

advertising that permits a consumer to follow up directly by searching for more information and placing direct product orders.

B)

advertising that targets a specific audience and allows the consumer to follow up directly by placing direct product orders usually through television or radio.

C)

advertising targeted at specific consumers.

D)

advertising intended to reach as many consumers as possible.

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Question 27 (2 points)

A distinguishing characteristic of producers of information products is their

Question 27 options:

A)

low fixed costs.

B)

short-run economies of operation.

C)

low average fixed costs.

D)

low overhead.

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Question 29 (2 points)

Information products (e.g., software)

Question 29 options:

A)

have relatively high fixed costs but low marginal and average variable costs.

B)

have relatively low fixed costs but high marginal and average variable costs.

C)

have relatively high fixed costs and relatively high marginal and average variable costs.

D)

have relatively low fixed costs and relatively low marginal and average variable costs.

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Question 30 (2 points)

Firms in a monopolistically competitive market will advertise because

Question 30 options:

A)

they want to differentiate their products.

B)

they want to increase the elasticity of the demand curve.

C)

of the significant differences in their product over their competitors.

D)

the elasticity for their product is inelastic.

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Question 31 (2 points)

Interdependence is the key characteristic of

Question 31 options:

A)

perfect competition.

B)

monopolistic competition.

C)

oligopoly.

D)

monopoly.

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Question 32 (2 points)

A noncooperative game would refer to a situation in which oligopoly firms

Question 32 options:

A)

are too small to be interdependent.

B)

do not engage in collusive behavior together.

C)

are made worse off by their actions.

D)

behave as a joint monopoly.

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Question 33 (2 points)

When U.S. Steel, a steel producer, bought control of iron ore companies at the beginning of the 20th century, the company was initiating

Question 33 options:

A)

a horizontal merger.

B)

a vertical merger.

C)

a cartel.

D)

an expropriation.

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Question 34 (2 points)

Use the above table. If firms 4 and 5 merge, the four-firm concentration ratio will be

Question 34 options:

A)

80 percent.

B)

75 percent.

C)

64 percent.

D)

50 percent.

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Question 35 (2 points)

Four-Firm Concentration Ratios




The most competitive industry of those presented in the above table is likely to be industry

Question 35 options:

A)

W.

B)

X.

C)

Y.

D)

Z.

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Question 36 (2 points)

The manner in which one oligopolist reacts to a change in price, output, or quality made by another oligopolist in the industry is

Question 36 options:

A)

a cooperative game.

B)

the reaction function.

C)

a zero-sum game.

D)

the concentration ratio.

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Question 37 (2 points)

Within a game theory model, if a change in decision-making raises corporation A's profits by $50 and lowers corporation B's profits by $40, the game is a

Question 37 options:

A)

negative-sum game.

B)

zero-sum game.

C)

positive-sum game.

D)

cooperative game.

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Question 38 (2 points)

Which of the following is NOT a common characteristic of oligopoly?

Question 38 options:

A)

strategic dependence among firms in the industry

B)

product differentiation

C)

barriers to entry

D)

marginal cost pricing.

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Question 39 (2 points)

The total costs of federal regulation

Question 39 options:

A)

encompasses only explicit costs of satisfying regulatory demands.

B)

also includes the explicit costs associated with regulations issued by 50 different state governments.

C)

encompasses only opportunity costs of satisfying regulatory demands.

D)

encompasses both explicit and opportunity costs of satisfying regulatory demands..

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Question 40 (2 points)

The problem of asymmetric information that brings about a general decline in product quality in an industry is

Question 40 options:

A)

a market failure.

B)

the result of government regulation.

C)

creative response.

D)

the lemons problem.

Question 43 (2 points)

The Sherman Antitrust Act was passed to

Question 43 options:

A)

protect companies from foreign competition.

B)

protect the monopoly profits of firms.

C)

control the growth of monopolies in the U.S.

D)

prevent market price from equaling marginal cost.

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Question 44 (2 points)

The idea behind antitrust legislation is to

Question 44 options:

A)

promote competition in the market.

B)

justify deregulation of industries.

C)

implement contestable markets.

D)

create larger firms.

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Question 45 (3 points)

Explain how advertising can act as a signal.

Question 46 (3 points)

Why would economies of scale be a barrier to entry?

Question 47 (3 points)

How does a monopoly maximize profits? What price does it charge?

Question 48 (3 points)

Why do firms form a cartel? How do cartels achieve their goals?

A)

a decreasing-cost industry.

B)

a constant-cost industry.

C)

an increasing-cost industry.

D)

a situation in which no input prices change as firms enter and exit the industry.

Explanation / Answer

1

A)

a decreasing-cost industry

44 .The idea behind antitrust legislation is to promote competition in the market.

43 The Sherman Antitrust Act was passed to protect control the growth of monopolies in the U.S

40. the potential for asymmetric information to bring about a general decline in product quality in an industry is known as the ___ problem.lemons

A)

a decreasing-cost industry

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