Question 1

When government regulations are influenced by lobbyists for the producers in a market, the regulations often:

Accepted Answer

A) make it more difficult for new producers to enter the market. 
B) reduce costs of production, increasing competitive pressures. 
C) are biased in favor of consumer safety. 
D) raise market demand. 
A) make it more difficult for new producers to enter the market. 
B) reduce costs of production, increasing competitive pressures. 
C) are biased in favor of consumer safety. 
D) raise market demand.

Question 2

A(n) _____ gives an inventor a temporary monopoly on the use or sale of an invention.

Accepted Answer

A) patent 
B) copyright 
C) monopoly 
D) externality 
A) patent 
B) copyright 
C) monopoly 
D) externality

Question 3

Marta's company definitely has economic profits in which of the following situations?

Accepted Answer

A) Implicit opportunity costs are less than direct financial costs. 
B) Total revenue is less than direct financial costs. 
C) Total costs are less than total revenue. 
D) Total revenue exceeds implicit opportunity costs. 
A) Implicit opportunity costs are less than direct financial costs. 
B) Total revenue is less than direct financial costs. 
C) Total costs are less than total revenue. 
D) Total revenue exceeds implicit opportunity costs.

Question 4

Marcella is deciding whether to start a bakery in her hometown. She should start it if she expects that:

Accepted Answer

A) her marginal revenue will be below her marginal cost. 
B) her average revenue will exceed her average cost. 
C) the average cost curve will shift downward. 
D) the number of bakeries will soon decrease. 
A) her marginal revenue will be below her marginal cost. 
B) her average revenue will exceed her average cost. 
C) the average cost curve will shift downward. 
D) the number of bakeries will soon decrease.

Question 5

Economic profits encourage firms to _____ the industry, and losses encourage firms to _____ the industry.

Accepted Answer

A) exit; enter 
B) enter; enter 
C) enter; exit 
D) exit; exit 
A) exit; enter 
B) enter; enter 
C) enter; exit 
D) exit; exit

Question 6

Mario's company definitely has economic losses in which of the following situations?

Accepted Answer

A) Total costs exceed total revenue. 
B) Implicit opportunity costs exceed direct financial costs. 
C) Total revenue exceeds direct financial costs. 
D) Total revenue exceeds implicit opportunity costs. 
A) Total costs exceed total revenue. 
B) Implicit opportunity costs exceed direct financial costs. 
C) Total revenue exceeds direct financial costs. 
D) Total revenue exceeds implicit opportunity costs.

Question 7

When new sellers enter a market, existing sellers will:

Accepted Answer

A) have less market power. 
B) face reductions in average cost. 
C) see average revenue rise. 
D) face upward shifts in their average cost curves. 
A) have less market power. 
B) face reductions in average cost. 
C) see average revenue rise. 
D) face upward shifts in their average cost curves.

Question 8

Victor owns a shoe store that is losing money, and several other shoe stores in his market are also losing money. Which of the following guidelines will help him decide whether to remain in business or exit the market?

Accepted Answer

A) Remain in the market only if average costs are greater than average revenue. 
B) Remain in the market only if average costs exceed marginal revenue. 
C) Exit the market if price is expected to be less than average costs. 
D) Exit the market if price is less than average revenue. 
A) Remain in the market only if average costs are greater than average revenue. 
B) Remain in the market only if average costs exceed marginal revenue. 
C) Exit the market if price is expected to be less than average costs. 
D) Exit the market if price is less than average revenue.

Question 9

Mass production typically creates:

Accepted Answer

A) higher demand. 
B) cost disadvantages. 
C) lower demand. 
D) cost advantages. 
A) higher demand. 
B) cost disadvantages. 
C) lower demand. 
D) cost advantages.

Question 10

Suppose the New York Rangers can rent out Madison Square Garden (the arena where they play hockey) to American Hockey League (AHL) affiliates for $11,000 per game. The $11,000 per game is the _____ cost of capital.

Accepted Answer

A) implicit opportunity 
B) explicit financial 
C) direct 
D) total 
A) implicit opportunity 
B) explicit financial 
C) direct 
D) total

Question 11

(Figure: Market for Designer Clothing) Use Figure: Market for Designer Clothing. In the long run, firms will:

Accepted Answer

A) enter this market until all firms earn zero economic profit. 
B) exit this market until all remaining firms earn zero profit. 
C) enter this market, leading to excess profit for all the firms. 
D) exit this market, leading to excess profit for all the remaining firms. 
A) enter this market until all firms earn zero economic profit. 
B) exit this market until all remaining firms earn zero profit. 
C) enter this market, leading to excess profit for all the firms. 
D) exit this market, leading to excess profit for all the remaining firms.

Question 12

How does brand proliferation create a barrier to entry in a market?

Accepted Answer

The answer of How does brand proliferation create a barrier...

Question 13

Why is the average cost curve typically a U-shaped curve?

Accepted Answer

The answer of Why is the average cost curve typically...

Question 14

Google is often cited as an example of a company that grew into a monopolist through:

Accepted Answer

A) ownership of a scarce resource. 
B) patents. 
C) network externalities. 
D) economies of scale. 
A) ownership of a scarce resource. 
B) patents. 
C) network externalities. 
D) economies of scale.

Question 15

(Scenario: Accounting and Economic Profit) Use Scenario: Accounting and Economic Profit.
Scenario: Accounting and Economic Profit
Casey recently inherited $100,000 from her grandmother. Rather than invest the money in a mutual fund that earns 5% per year, she quit her job as a translator for the United Nations, which paid $60,000 per year, and started Casey's Coffee Crush, a small café in Tribeca. The location she rented cost $20,000 for the year. The equipment, café furniture, and coffee machines cost another $60,000. Staff, sales help, and advertising cost yet another $40,000. In her first year, her revenue was $150,000. What is the implicit opportunity cost of Casey's Coffee Crush?

Accepted Answer

A) $7,000 
B) $60,000 
C) $65,000 
D) $69,000 
A) $7,000 
B) $60,000 
C) $65,000 
D) $69,000

Question 16

A cable TV company gives current customers a year-long discount for each new customer they bring to the cable company. Jose, a current customer, gets five of his friends to sign up for cable TV service with his provider so that he can receive discounts on his cable bill. The cable TV company is using a _____ strategy to create a barrier to entry.

Accepted Answer

A) free exit 
B) reputation and goodwill 
C) switching cost 
D) network effect 
A) free exit 
B) reputation and goodwill 
C) switching cost 
D) network effect

Question 17

Where there are short-run profits, new competitors will enter the market until:

Accepted Answer

A) the minimum average cost is achieved. 
B) demand increases. 
C) economic profits are zero. 
D) losses are incurred. 
A) the minimum average cost is achieved. 
B) demand increases. 
C) economic profits are zero. 
D) losses are incurred.

Question 18

Describe four strategies firms may use to deter new companies from entering a market.

Accepted Answer

The answer of Describe four strategies firms may use to...

Question 19

A seller strives to achieve consistently high quality in all its output so that customers can trust that they will be pleased with the product. Building a reputation for high quality is consistent with a seller trying to _____ through _____ strategy.

Accepted Answer

A) build a network; an entry deterrence 
B) proliferate brands; a supply-side 
C) raise switching costs; an entrepreneurial 
D) create customer lock-in; a demand-side 
A) build a network; an entry deterrence 
B) proliferate brands; a supply-side 
C) raise switching costs; an entrepreneurial 
D) create customer lock-in; a demand-side

Question 20

When firms in a market with free entry and exit have economic profits, then:

Accepted Answer

A) some companies will exit the market, reducing average company profits. 
B) new companies will enter the market, reducing average company profits. 
C) some companies will exit the market, raising average company profits. 
D) new companies will enter the market, raising average company profits. 
A) some companies will exit the market, reducing average company profits. 
B) new companies will enter the market, reducing average company profits. 
C) some companies will exit the market, raising average company profits. 
D) new companies will enter the market, raising average company profits.

Exam 15: Entry, Exit, and Long-Run Profitability

When government regulations are influenced by lobbyists for the producers in a market, the regulations often:

A(n) _____ gives an inventor a temporary monopoly on the use or sale of an invention.

Marta's company definitely has economic profits in which of the following situations?

Marcella is deciding whether to start a bakery in her hometown. She should start it if she expects that:

Economic profits encourage firms to _____ the industry, and losses encourage firms to _____ the industry.

Mario's company definitely has economic losses in which of the following situations?

When new sellers enter a market, existing sellers will:

Victor owns a shoe store that is losing money, and several other shoe stores in his market are also losing money. Which of the following guidelines will help him decide whether to remain in business or exit the market?

Mass production typically creates:

Suppose the New York Rangers can rent out Madison Square Garden (the arena where they play hockey) to American Hockey League (AHL) affiliates for $11,000 per game. The $11,000 per game is the _____ cost of capital.

(Figure: Market for Designer Clothing) Use Figure: Market for Designer Clothing. In the long run, firms will:

How does brand proliferation create a barrier to entry in a market?

Why is the average cost curve typically a U-shaped curve?

Google is often cited as an example of a company that grew into a monopolist through:

Where there are short-run profits, new competitors will enter the market until:

Describe four strategies firms may use to deter new companies from entering a market.

A seller strives to achieve consistently high quality in all its output so that customers can trust that they will be pleased with the product. Building a reputation for high quality is consistent with a seller trying to _____ through _____ strategy.

When firms in a market with free entry and exit have economic profits, then:

The Core Principles of Economics

Demand: Thinking Like a Buyer

Supply: Thinking Like a Seller

Equilibrium: Where Supply Meets Demand

Elasticity: Measuring Responsiveness

When Governments Intervene in Markets

Welfare and Efficiency

Gains From Trade

International Trade

Externalities and Public Goods

Labor Demand and Supply

Wages, Workers, and Management

Inequality, Social Insurance, and Redistribution

Market Structure and Market Power

Business Strategy

Sophisticated Pricing Strategies

Game Theory and Strategic Choices

Decisions Involving Uncertainty

Decisions With Private Information

Sizing up the Economy Using Gdp

Economic Growth

Unemployment

Inflation and Money

Consumption and Saving

Investment

The Financial Sector

International Finance and the Exchange Rate

Business Cycles

IS-MP Analysis: Interest Rates and Output

Phillips Curve

The Fed Model: Linking Interest Rates, Output, and Inflation

Aggregate Demand and Aggregate Supply

Monetary Policy

Government Spending, Taxes, and Fiscal Policy

Appendix: Aggregate Expenditure and the Multiplier

Filters

Economic profits encourage firms to _ the industry, and losses encourage firms to _ the industry.

A seller strives to achieve consistently high quality in all its output so that customers can trust that they will be pleased with the product. Building a reputation for high quality is consistent with a seller trying to _ through _ strategy.