Question 1

-According to the information provided in Exhibit K-11, the marginal revenue of the 12th unit of output equals

Accepted Answer

A)  $480 
B)  $40 
C)  $440 
D)  $4 
E)  an unknown amount because we have not been given the marginal cost 
A)  $480 
B)  $40 
C)  $440 
D)  $4 
E)  an unknown amount because we have not been given the marginal cost

Question 2

-In Exhibit K-5, which represents a monopoly, an economist would argue that

Accepted Answer

A)  output is lower and price is higher than in perfect competition 
B)  product price should be set at $6 
C)  output should be 6 units from society's perspective 
D)  an output of 10 should be chosen by this monopolist 
E)  the monopolist's interests are compatible with society's 
A)  output is lower and price is higher than in perfect competition 
B)  product price should be set at $6 
C)  output should be 6 units from society's perspective 
D)  an output of 10 should be chosen by this monopolist 
E)  the monopolist's interests are compatible with society's

Question 3

Unlike firms in perfect competition, monopolists have control over

Accepted Answer

A)  the costs of production 
B)  what technology to use 
C)  what price to charge 
D)  how much to produce 
E)  the choice of plant size 
A)  the costs of production 
B)  what technology to use 
C)  what price to charge 
D)  how much to produce 
E)  the choice of plant size

Question 4

Distinct from any other market structure, the firm in long-run perfect competition ends up producing where

Accepted Answer

A)  P = MR = MC = ATC, and AFC = 0 
B)  P > MR = MC = ATC, and AFC = 0 
C)  P  MR and ATC > MC, where MC = (AFC + AV
C)  
A)  P = MR = MC = ATC, and AFC = 0 
B)  P > MR = MC = ATC, and AFC = 0 
C)  P  MR and ATC > MC, where MC = (AFC + AV
C)

Question 5

Monopolistically competitive firms sell goods that are

Accepted Answer

A)  close substitutes 
B)  perfect substitutes 
C)  not substitutes 
D)  not differentiated products 
E)  complements 
A)  close substitutes 
B)  perfect substitutes 
C)  not substitutes 
D)  not differentiated products 
E)  complements

Question 6

A monopoly can charge any price it wishes, and chooses the

Accepted Answer

A)  highest price 
B)  price equal to marginal cost 
C)  price associated with the output level where MR = MC 
D)  competitive price to keep out potential entrants 
E)  price associated with greatest efficiency 
A)  highest price 
B)  price equal to marginal cost 
C)  price associated with the output level where MR = MC 
D)  competitive price to keep out potential entrants 
E)  price associated with greatest efficiency

Question 7

The market price in a perfectly competitive industry is $13. A firm is considering increasing its output from 30 units to 40 units. The marginal revenue of each of these extra units equals

Accepted Answer

A)  $13 
B)  $130 
C)  $390 
D)  $520 
E)  $130. 
A)  $13 
B)  $130 
C)  $390 
D)  $520 
E)  $130.

Question 8

Craig quit a job earning $12,000 per year to open his own lawn-care service. Yesterday, he was offered a job earning $20,000 per year at Home Depot, but he turned it down to continue running his lawn-care service. Assuming that his total revenue (= P × Q) has not changed, (a) explain the impact of this job offer on Craig's economic profit, and (b) explain the impact of this job offer on his normal profit.

Accepted Answer

a. The opportunity cost of Craig's time

Question 9

The demand curve facing a firm in monopolistic competition is elastic.

Accepted Answer

A) True 
 B)False

Question 10

If a firm makes normal profit, the entrepreneur must earn a wage that

Accepted Answer

A)  is at least as much as he can earn elsewhere 
B)  must be less than he can earn elsewhere 
C)  equals the economic profit generated by the firm 
D)  lowers the opportunity cost of finding alternative work 
E)  is enough for him to live on 
A)  is at least as much as he can earn elsewhere 
B)  must be less than he can earn elsewhere 
C)  equals the economic profit generated by the firm 
D)  lowers the opportunity cost of finding alternative work 
E)  is enough for him to live on

Question 11

A firm in a perfectly competitive market

Accepted Answer

A)  can raise the price to sell more but by selling more will end up earning less economic profit than it had earned before the price increase 
B)  can cut the price to sell more but by selling more will end up earning less economic profit than it had earned before the price cut 
C)  can increase its supply to lower the price and thereby raise its economic profit 
D)  can decrease its supply to raise the price and thereby raise its economic profit 
E)  is a price taker, that is, accepts the market price for its good as given 
A)  can raise the price to sell more but by selling more will end up earning less economic profit than it had earned before the price increase 
B)  can cut the price to sell more but by selling more will end up earning less economic profit than it had earned before the price cut 
C)  can increase its supply to lower the price and thereby raise its economic profit 
D)  can decrease its supply to raise the price and thereby raise its economic profit 
E)  is a price taker, that is, accepts the market price for its good as given

Question 12

The entry of new firms into a monopolistically competitive market makes the demand curves for the existing firms more elastic.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)  The firm is a price-taker. 
B)  The firm is a profit maximizer. 
C)  The firm's demand curve is horizontal. 
D)  The market demand is downward sloping. 
E)  The firm can earn an economic profit in the long run. 
A)  The firm is a price-taker. 
B)  The firm is a profit maximizer. 
C)  The firm's demand curve is horizontal. 
D)  The market demand is downward sloping. 
E)  The firm can earn an economic profit in the long run.

Question 14

Sally owns a beauty shop that generates a total revenue of $90,000 per year. She pays her employees a total of $45,000; pays $10,000 for rent, insurance, and utilities; and pays $15,000 for beauty supplies such as hair spray and shampoo. Sally is glad to have the shop, because her next best alternative is to work as a cafeteria attendant for a salary of$8,000 a year. From this we can conclude that Sally

Accepted Answer

A)  would earn more working at the cafeteria 
B)  makes an economic profit of $20,000 
C)  makes an economic profit of $12,000 
D)  has total explicit costs of $78,000 
E)  has total implicit costs of $12,000 
A)  would earn more working at the cafeteria 
B)  makes an economic profit of $20,000 
C)  makes an economic profit of $12,000 
D)  has total explicit costs of $78,000 
E)  has total implicit costs of $12,000

Question 15

For a monopolist, MR can never be negative.

Accepted Answer

A) True 
 B)False

Question 16

According to George Stigler, the monopolist is distinguished from other entrepreneurs because of his or her

Accepted Answer

A)  motivation 
B)  market position 
C)  profit objective 
D)  strategy 
E)  morality 
A)  motivation 
B)  market position 
C)  profit objective 
D)  strategy 
E)  morality

Question 17

When all perfectly competitive firms in a market or all monopolistically competitive firms in a market make zero economic profit,

Accepted Answer

A)  no firms will enter the market 
B)  all firms will exit the market 
C)  a monopolist will take over the market 
D)  the market demand shifts to the left 
E)  the price of the good produced will increase in the long run 
A)  no firms will enter the market 
B)  all firms will exit the market 
C)  a monopolist will take over the market 
D)  the market demand shifts to the left 
E)  the price of the good produced will increase in the long run

Question 18

A meatball sandwich vendor finds that when he charges a price of $6, he sells 100 meatball sandwiches. When he charges a price of $4, he sells 200 meatball sandwiches. The marginal revenue for each of the additional 100 meatball sandwiches he sells is

Accepted Answer

A)  $6 
B)  $4 
C)  $3 
D)  $2 
E)  $1 
A)  $6 
B)  $4 
C)  $3 
D)  $2 
E)  $1

Question 19

If a firm in a perfectly competitive industry maximizes profit by producing 100 units and the marginal cost of the 100th unit is $23, the price is

Accepted Answer

A)  more than $23 since it's earning an economic profit 
B)  $0.23 
C)  $2,300 
D)  $23 
E)  not able to be calculated from the data given 
A)  more than $23 since it's earning an economic profit 
B)  $0.23 
C)  $2,300 
D)  $23 
E)  not able to be calculated from the data given

Question 20

Show, or explain, why a monopolist with positive marginal costs charges a price on the elastic range ofhis/her demand curve.

Accepted Answer

In the elastic range of demand

-According to the information provided in Exhibit K-11, the marginal revenue of the 12th unit of output equals

-In Exhibit K-5, which represents a monopoly, an economist would argue that

Unlike firms in perfect competition, monopolists have control over

Distinct from any other market structure, the firm in long-run perfect competition ends up producing where

Monopolistically competitive firms sell goods that are

A monopoly can charge any price it wishes, and chooses the

The market price in a perfectly competitive industry is $13. A firm is considering increasing its output from 30 units to 40 units. The marginal revenue of each of these extra units equals

The demand curve facing a firm in monopolistic competition is elastic.

If a firm makes normal profit, the entrepreneur must earn a wage that

A firm in a perfectly competitive market

The entry of new firms into a monopolistically competitive market makes the demand curves for the existing firms more elastic.

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

For a monopolist, MR can never be negative.

According to George Stigler, the monopolist is distinguished from other entrepreneurs because of his or her

When all perfectly competitive firms in a market or all monopolistically competitive firms in a market make zero economic profit,

A meatball sandwich vendor finds that when he charges a price of $6, he sells 100 meatball sandwiches. When he charges a price of $4, he sells 200 meatball sandwiches. The marginal revenue for each of the additional 100 meatball sandwiches he sells is

If a firm in a perfectly competitive industry maximizes profit by producing 100 units and the marginal cost of the 100th unit is $23, the price is

Show, or explain, why a monopolist with positive marginal costs charges a price on the elastic range ofhis/her demand curve.

Introduction

Production Possibilities and Opportunity Costs

Demand and Supply

Elasticity

Happiness, Utility, and Consumer Choice

Price Ceilings and Price Floors

Entrepreneurship and Business Ownership

Costs of Production

Maximizing Profit

Identifying Markets and Market Structures

Price and Output Determination Under Oligopoly

Antitrust and Regulation

Externalities, Market Failure, and Public Choice

Wage Rates in Competitive Labor Markets

Wages and Employment: Monopsony and Labor Unions

Interest, Rent, and Profit

Income Distribution and Poverty

International Trade

Exchange Rates, Balance of Payments, and International Debt

The Economic Problems of Less-Developed Economies

Filters

Exam 11: Price and Output in Monopoly, Monopolistic Competition, and Perfect Competition

-According to the information provided in Exhibit K-11, the marginal revenue of the 12th unit of output equals

-In Exhibit K-5, which represents a monopoly, an economist would argue that

Unlike firms in perfect competition, monopolists have control over

Distinct from any other market structure, the firm in long-run perfect competition ends up producing where

Monopolistically competitive firms sell goods that are

A monopoly can charge any price it wishes, and chooses the

The market price in a perfectly competitive industry is $13. A firm is considering increasing its output from 30 units to 40 units. The marginal revenue of each of these extra units equals

The demand curve facing a firm in monopolistic competition is elastic.

If a firm makes normal profit, the entrepreneur must earn a wage that

A firm in a perfectly competitive market

The entry of new firms into a monopolistically competitive market makes the demand curves for the existing firms more elastic.

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

For a monopolist, MR can never be negative.

According to George Stigler, the monopolist is distinguished from other entrepreneurs because of his or her

When all perfectly competitive firms in a market or all monopolistically competitive firms in a market make zero economic profit,

A meatball sandwich vendor finds that when he charges a price of $6, he sells 100 meatball sandwiches. When he charges a price of $4, he sells 200 meatball sandwiches. The marginal revenue for each of the additional 100 meatball sandwiches he sells is

If a firm in a perfectly competitive industry maximizes profit by producing 100 units and the marginal cost of the 100th unit is $23, the price is

Show, or explain, why a monopolist with positive marginal costs charges a price on the elastic range ofhis/her demand curve.

Introduction

Production Possibilities and Opportunity Costs

Demand and Supply

Elasticity

Happiness, Utility, and Consumer Choice

Price Ceilings and Price Floors

Entrepreneurship and Business Ownership

Costs of Production

Maximizing Profit

Identifying Markets and Market Structures

Price and Output Determination Under Oligopoly

Antitrust and Regulation

Externalities, Market Failure, and Public Choice

Wage Rates in Competitive Labor Markets

Wages and Employment: Monopsony and Labor Unions

Interest, Rent, and Profit

Income Distribution and Poverty

International Trade

Exchange Rates, Balance of Payments, and International Debt

The Economic Problems of Less-Developed Economies

Filters