Question 1

-A technological improvement in the hamburger industry will cause Sam's hamburgershop (Exhibit K-1) to

Accepted Answer

A)  face increased competition 
B)  experience a rightward shift in demand for its product 
C)  decrease its output 
D)  continue as in the past 
E)  have lower profits 
A)  face increased competition 
B)  experience a rightward shift in demand for its product 
C)  decrease its output 
D)  continue as in the past 
E)  have lower profits

Question 2

-To maximize profit, the monopolist in Exhibit K-7 produces _____ units.

Accepted Answer

A)  0 
B)  1 
C)  2 
D)  3 
E)  4 
A)  0 
B)  1 
C)  2 
D)  3 
E)  4

Question 3

Suppose your accountant told you that the $50,000 you made last year was your normal profit. When you asked him what your accounting profit was he replied that it was precisely the same as your normal profit. You wouldn't have to ask what your economic profit was because you know it must be

Accepted Answer

A)  0 
B)  $50,000 
C)  $100,000 
D)  $50,000 loss 
E)  $100,000 loss 
A)  0 
B)  $50,000 
C)  $100,000 
D)  $50,000 loss 
E)  $100,000 loss

Question 4

If a perfectly competitive firm made an economic profit in the short run, but not in the long run, it must be true that

Accepted Answer

A)  prices for inputs increased 
B)  demand declined 
C)  new firms entered, supply increased, and price fell 
D)  accounting profit exceeds economic profit 
E)  labor costs are increasing 
A)  prices for inputs increased 
B)  demand declined 
C)  new firms entered, supply increased, and price fell 
D)  accounting profit exceeds economic profit 
E)  labor costs are increasing

Question 5

Schumpeter hypothesized that monopolies

Accepted Answer

A)  do not maximize profits 
B)  advertise extensively to keep out new entrants 
C)  may charge a lower price than the price generated in a perfectly competitive market 
D)  usually experience constant returns to scale 
E)  have higher costs than smaller firms 
A)  do not maximize profits 
B)  advertise extensively to keep out new entrants 
C)  may charge a lower price than the price generated in a perfectly competitive market 
D)  usually experience constant returns to scale 
E)  have higher costs than smaller firms

Question 6

In which of the following industries are the firms price-takers?

Accepted Answer

A)  monopoly 
B)  monopolistically competitive 
C)  monopoly and monopolistically competitive 
D)  perfectly competitive 
E)  perfectly competitive and monopolistically competitive 
A)  monopoly 
B)  monopolistically competitive 
C)  monopoly and monopolistically competitive 
D)  perfectly competitive 
E)  perfectly competitive and monopolistically competitive

Question 7

Implicit costs will be zero in the long run.

Accepted Answer

A) True 
 B)False

Question 8

Economic profit always equals

Accepted Answer

A)  zero for a perfect competitor 
B)  zero for a monopolist 
C)  total revenue - total cost 
D)  total revenue - explicit costs 
E)  total revenue - implicit costs 
A)  zero for a perfect competitor 
B)  zero for a monopolist 
C)  total revenue - total cost 
D)  total revenue - explicit costs 
E)  total revenue - implicit costs

Question 9

Many economists consider perfect competition to be the most desirable market structure because they believe it generates the

Accepted Answer

A)  highest average cost 
B)  lowest prices and output 
C)  greatest economic profit 
D)  lowest prices and greatest output 
E)  greatest normal profit 
A)  highest average cost 
B)  lowest prices and output 
C)  greatest economic profit 
D)  lowest prices and greatest output 
E)  greatest normal profit

Question 10

In which situation would a monopolist be maximizing profit when it produces at an output where MR > MC?

Accepted Answer

A)  none because when MR > MC, profit is not maximized 
B)  when the barriers of entry are overcome so that other firms enter 
C)  when costs keep falling as output increases 
D)  when price increases as output increases 
E)  when economic profit is greater than normal profit 
A)  none because when MR > MC, profit is not maximized 
B)  when the barriers of entry are overcome so that other firms enter 
C)  when costs keep falling as output increases 
D)  when price increases as output increases 
E)  when economic profit is greater than normal profit

Question 11

The MR = MC rule for profit maximization applies to monopolists, as well as to firms in perfect competition

Accepted Answer

A) True 
 B)False

Question 12

If you, as sole proprietor of a corner grocery store, work 15 hours per day, six days a week but do not take a money wage payment, then the cost to your firm of your labor is your

Accepted Answer

A)  opportunity cost and is considered an explicit cost 
B)  opportunity cost and is considered an accounting cost 
C)  opportunity cost and is considered an implicit cost 
D)  explicit cost and is considered an opportunity cost 
E)  implicit cost even though it is considered an explicit cost 
A)  opportunity cost and is considered an explicit cost 
B)  opportunity cost and is considered an accounting cost 
C)  opportunity cost and is considered an implicit cost 
D)  explicit cost and is considered an opportunity cost 
E)  implicit cost even though it is considered an explicit cost

Question 13

Explain why monopolists do not achieve efficiency.

Accepted Answer

Efficiency would be achieved by producin

Question 14

Which of the following is an implicit cost of going to college?

Accepted Answer

A)  tuition and fees 
B)  books, computer equipment 
C)  income lost from not being able to work full time 
D)  future income 
E)  room and board 
A)  tuition and fees 
B)  books, computer equipment 
C)  income lost from not being able to work full time 
D)  future income 
E)  room and board

Question 15

What will happen to the demand for Nabisco brand Chips Ahoy! chocolate chip cookies if Pillsbury introduces ready-to-eat chocolate macadamia nut cookies?

Accepted Answer

If Pillsbury enters the market

Question 16

Who will lose more customers by raising their price, a firm operating in a perfectly competitive market or a monopolistic competitor? Explain.

Accepted Answer

The firm operating in a perfectly compet

Question 17

-Ralph's Ski Shop is a local monopoly in a regional market. This type of situation can result from all of the following except:

Accepted Answer

A)  small population relative to output needed for scale economies 
B)  patent protection 
C)  control of local zoning or limited operation permits 
D)  long distance to alternative ski shops 
E)  multiple products 
A)  small population relative to output needed for scale economies 
B)  patent protection 
C)  control of local zoning or limited operation permits 
D)  long distance to alternative ski shops 
E)  multiple products

Question 18

Many economists criticize monopolists because they produce at output levels that are not efficient, that is to say, monopolists

Accepted Answer

A)  charge too high a price 
B)  don't innovate 
C)  produce a large quantity of waste 
D)  usually don't produce at their minimum ATC 
E)  may be profit conscious but they don't realize that maximum profit means maximum efficiency 
A)  charge too high a price 
B)  don't innovate 
C)  produce a large quantity of waste 
D)  usually don't produce at their minimum ATC 
E)  may be profit conscious but they don't realize that maximum profit means maximum efficiency

Question 19

If total revenue is increased, which of the following must have been true?

Accepted Answer

A) MR = 0 B) MR > 0 C) MR = AR D) MR < 0 E) MR < MC A) MR = 0 B) MR > 0 C) MR = AR D) MR < 0 E) MR < MC

Question 20

Product differentiation forms the basic rationale for advertising expenditures and monopolistic competition.

Accepted Answer

A) True 
 B)False

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

-A technological improvement in the hamburger industry will cause Sam's hamburgershop (Exhibit K-1) to

-To maximize profit, the monopolist in Exhibit K-7 produces _____ units.

Suppose your accountant told you that the $50,000 you made last year was your normal profit. When you asked him what your accounting profit was he replied that it was precisely the same as your normal profit. You wouldn't have to ask what your economic profit was because you know it must be

If a perfectly competitive firm made an economic profit in the short run, but not in the long run, it must be true that

Schumpeter hypothesized that monopolies

In which of the following industries are the firms price-takers?

Implicit costs will be zero in the long run.

Economic profit always equals

Many economists consider perfect competition to be the most desirable market structure because they believe it generates the

In which situation would a monopolist be maximizing profit when it produces at an output where MR > MC?

The MR = MC rule for profit maximization applies to monopolists, as well as to firms in perfect competition

If you, as sole proprietor of a corner grocery store, work 15 hours per day, six days a week but do not take a money wage payment, then the cost to your firm of your labor is your

Explain why monopolists do not achieve efficiency.

Which of the following is an implicit cost of going to college?

What will happen to the demand for Nabisco brand Chips Ahoy! chocolate chip cookies if Pillsbury introduces ready-to-eat chocolate macadamia nut cookies?

Who will lose more customers by raising their price, a firm operating in a perfectly competitive market or a monopolistic competitor? Explain.

-Ralph's Ski Shop is a local monopoly in a regional market. This type of situation can result from all of the following except:

Many economists criticize monopolists because they produce at output levels that are not efficient, that is to say, monopolists

If total revenue is increased, which of the following must have been true?

Product differentiation forms the basic rationale for advertising expenditures and monopolistic competition.

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

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