Question 1

-Exhibit K-11 represents a firm's demand curve. It is clear that the firm

Accepted Answer

A)  is a monopolist 
B)  is a monopolistic competitor 
C)  is perfectly competitive 
D)  is either a monopolist or a monopolistic competitor 
E)  could be either perfectly competitive or a monopolist 
A)  is a monopolist 
B)  is a monopolistic competitor 
C)  is perfectly competitive 
D)  is either a monopolist or a monopolistic competitor 
E)  could be either perfectly competitive or a monopolist

Question 2

For all perfectly competitive firms in the short run and in the long run,

Accepted Answer

A)  price equals marginal revenue 
B)  demand is perfectly inelastic 
C)  only economic profit is earned 
D)  only normal profit is earned 
E)  the market demand curve is horizontal 
A)  price equals marginal revenue 
B)  demand is perfectly inelastic 
C)  only economic profit is earned 
D)  only normal profit is earned 
E)  the market demand curve is horizontal

Question 3

If we sum all the firms' MC curves above their ATC curves, we would derive the perfectly competitive

Accepted Answer

A)  long run cost curve 
B)  short run cost curve 
C)  horizontal cost curves 
D)  short-run market supply curve 
E)  long-run market supply curve 
A)  long run cost curve 
B)  short run cost curve 
C)  horizontal cost curves 
D)  short-run market supply curve 
E)  long-run market supply curve

Question 4

A monopolist's goal is to maximize

Accepted Answer

A)  costs 
B)  sales 
C)  profit 
D)  market power 
E)  price 
A)  costs 
B)  sales 
C)  profit 
D)  market power 
E)  price

Question 5

One reason why a monopolist might be able to provide greater output at lower costs than other market structures is that some monopolists

Accepted Answer

A)  earn exceptional profit which allows them to lower price and costs 
B)  produce high volume output which allows them to capture economies of scale so that their ATCs are lower 
C)  have high market share which allows them to raise price and lower cost at the same time 
D)  exploit their labor force by offering low wage rates so that costs are lower 
E)  do not advertise, thereby reducing costs 
A)  earn exceptional profit which allows them to lower price and costs 
B)  produce high volume output which allows them to capture economies of scale so that their ATCs are lower 
C)  have high market share which allows them to raise price and lower cost at the same time 
D)  exploit their labor force by offering low wage rates so that costs are lower 
E)  do not advertise, thereby reducing costs

Question 6

The "Bubbles, Bubbles"soap bubble firm's price and cost data are: price = $10;MR = $10; MC = $10; ATC = $10. This firm is

Accepted Answer

A)  making an economic profit of $10 
B)  in monopolistic competition and in short-run equilibrium 
C)  about to shut down because economic profit is zero 
D)  a monopolist with a relatively inelastic demand 
E)  in a perfectly competitive market and in long-run equilibrium 
A)  making an economic profit of $10 
B)  in monopolistic competition and in short-run equilibrium 
C)  about to shut down because economic profit is zero 
D)  a monopolist with a relatively inelastic demand 
E)  in a perfectly competitive market and in long-run equilibrium

Question 7

For the past three years, you have earned economic profits of $5,000 per year by being the only vendor selling bottled tap water at your town's Fourth of July celebration. When you go to city hall to apply for a vending permit for this year's celebration, the city clerk mentions that fifty new firms have received permits to sell tap water this year.
-What can you do to protect your economic profit in the long run?

Accepted Answer

There is nothing you can do to

Question 8

Ed Van Zaig is considering opening a sushi bar. To do so, he would have to quit his current job, which pays $20,000 a year, and use a building that he owns and currentlyrents to his brother for $6,000 a year. His costs at the sushi bar would be $50,000 for food and $2,000 for gas and electricity. What are his implicit costs?

Accepted Answer

A)  $26,000 
B)  $66,000 
C)  $78,000 
D)  $52,000 
E)  $72,000 
A)  $26,000 
B)  $66,000 
C)  $78,000 
D)  $52,000 
E)  $72,000

Question 9

Economic profit is the same as normal profit.

Accepted Answer

A) True 
 B)False

Question 10

As new firms enter a monopolistically competitive market, product differentiation becomes less pronounced.

Accepted Answer

A) True 
 B)False

Question 11

If you were in the donut-making business, which of the following would most likely not be an explicit cost?

Accepted Answer

A)  salaries 
B)  sales taxes 
C)  utilities, such as gas and electricity 
D)  insurance 
E)  the time you put into running the business 
A)  salaries 
B)  sales taxes 
C)  utilities, such as gas and electricity 
D)  insurance 
E)  the time you put into running the business

Question 12

Picture the graph. When new firms enter a monopolistically competitive market, the result is a(n)

Accepted Answer

A)  shift to the left of the existing firms' demand curves 
B)  shift to the right of the existing firms' demand curves 
C)  more inelastic set of demand curves for the existing firms 
D)  decrease in market output (the sum of all firms' output) 
E)  increase in price and decrease in firm's economic profit 
A)  shift to the left of the existing firms' demand curves 
B)  shift to the right of the existing firms' demand curves 
C)  more inelastic set of demand curves for the existing firms 
D)  decrease in market output (the sum of all firms' output) 
E)  increase in price and decrease in firm's economic profit

Question 13

Economic profit is measured by

Accepted Answer

A)  MR = MC 
B)  TR - explicit costs - implicit costs 
C)  TR - explicit costs 
D)  TR - implicit costs 
E)  P - MC 
A)  MR = MC 
B)  TR - explicit costs - implicit costs 
C)  TR - explicit costs 
D)  TR - implicit costs 
E)  P - MC

Question 14

-The maximum profit in Exhibit K-7 is

Accepted Answer

A)  $40 
B)  $30 
C)  $20 
D)  $15 
E)  $0 
A)  $40 
B)  $30 
C)  $20 
D)  $15 
E)  $0

Question 15

Which statement is not consistent with Joseph Schumpeter's hypothesis?

Accepted Answer

A)  Monopolies use profit to invest in research and development. 
B)  Monopolies end up being more efficient than competitive firms. 
C)  Monopoly prices end up being lower than prices generated in perfect competition. 
D)  Perfect competition is more conducive to innovation than monopoly. 
E)  Perfect competition is more efficient than monopoly. 
A)  Monopolies use profit to invest in research and development. 
B)  Monopolies end up being more efficient than competitive firms. 
C)  Monopoly prices end up being lower than prices generated in perfect competition. 
D)  Perfect competition is more conducive to innovation than monopoly. 
E)  Perfect competition is more efficient than monopoly.

Question 16

If marginal revenue exceeds marginal cost, the firm should increase output to maximize profit.

Accepted Answer

A) True 
 B)False

Question 17

If the short-run equilibrium position for a monopolistically competitive firm is P = $28.47, ATC = $22.13, and MC = MR = $17.47, which of the following statementsis true?

Accepted Answer

A)  The firm's economic profit is $11. 
B)  Additional firms will be attracted into the industry. 
C)  The firm could raise price and increase profit. 
D)  The firm could lower price and increase profit. 
E)  The firm is producing on the upward-sloping segment of its ATC curve. 
A)  The firm's economic profit is $11. 
B)  Additional firms will be attracted into the industry. 
C)  The firm could raise price and increase profit. 
D)  The firm could lower price and increase profit. 
E)  The firm is producing on the upward-sloping segment of its ATC curve.

Question 18

Tombstones are produced in a market that is monopolistic competition. One producer, Rolling Stones, sells 20 tombstones a week at a price of $500 each. Its average total cost is $600. Its total variable cost is $2,000. Its demand curve is downward sloping. Given this information, we know that

Accepted Answer

A)  new firms will enter the market 
B)  Rolling Stones loses $2,000 a week 
C)  Rolling Stones makes an economic profit of $400 
D)  Rolling Stones makes an accounting profit of $100 
E)  Rolling Stones should increase production because with a downward-sloping demand curve, it will increase its economic profit 
A)  new firms will enter the market 
B)  Rolling Stones loses $2,000 a week 
C)  Rolling Stones makes an economic profit of $400 
D)  Rolling Stones makes an accounting profit of $100 
E)  Rolling Stones should increase production because with a downward-sloping demand curve, it will increase its economic profit

Question 19

The reason why firms in perfect competition end up with no economic profit in the long run is that

Accepted Answer

A)  they do not have the knowledge to run the firm correctly 
B)  in the long run, firms lose competitiveness 
C)  in the long run, costs rise to equal prices 
D)  if they make an economic profit, new firms will enter the industry, driving the price down, and this continues until economic profit is zero 
E)  in the long run, the losses of firms who leave the industry equals the economic profit of those who remain 
A)  they do not have the knowledge to run the firm correctly 
B)  in the long run, firms lose competitiveness 
C)  in the long run, costs rise to equal prices 
D)  if they make an economic profit, new firms will enter the industry, driving the price down, and this continues until economic profit is zero 
E)  in the long run, the losses of firms who leave the industry equals the economic profit of those who remain

Question 20

When an innovation is created by one firm in a perfectly competitive market,

Accepted Answer

A)  the market price will rise 
B)  less output will be produced by its competitors 
C)  the long-run equilibrium price remains the same but the economic profit of its competitors falls 
D)  some firms leave because the price will fall 
E)  other firms will imitate the innovator 
A)  the market price will rise 
B)  less output will be produced by its competitors 
C)  the long-run equilibrium price remains the same but the economic profit of its competitors falls 
D)  some firms leave because the price will fall 
E)  other firms will imitate the innovator

-Exhibit K-11 represents a firm's demand curve. It is clear that the firm

For all perfectly competitive firms in the short run and in the long run,

If we sum all the firms' MC curves above their ATC curves, we would derive the perfectly competitive

A monopolist's goal is to maximize

One reason why a monopolist might be able to provide greater output at lower costs than other market structures is that some monopolists

The "Bubbles, Bubbles"soap bubble firm's price and cost data are: price = $10;MR = $10; MC = $10; ATC = $10. This firm is

Economic profit is the same as normal profit.

As new firms enter a monopolistically competitive market, product differentiation becomes less pronounced.

If you were in the donut-making business, which of the following would most likely not be an explicit cost?

Picture the graph. When new firms enter a monopolistically competitive market, the result is a(n)

Economic profit is measured by

-The maximum profit in Exhibit K-7 is

Which statement is not consistent with Joseph Schumpeter's hypothesis?

If marginal revenue exceeds marginal cost, the firm should increase output to maximize profit.

If the short-run equilibrium position for a monopolistically competitive firm is P = $28.47, ATC = $22.13, and MC = MR = $17.47, which of the following statementsis true?

Tombstones are produced in a market that is monopolistic competition. One producer, Rolling Stones, sells 20 tombstones a week at a price of $500 each. Its average total cost is $600. Its total variable cost is $2,000. Its demand curve is downward sloping. Given this information, we know that

The reason why firms in perfect competition end up with no economic profit in the long run is that

When an innovation is created by one firm in a perfectly competitive market,

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

-Exhibit K-11 represents a firm's demand curve. It is clear that the firm

For all perfectly competitive firms in the short run and in the long run,

If we sum all the firms' MC curves above their ATC curves, we would derive the perfectly competitive

A monopolist's goal is to maximize

One reason why a monopolist might be able to provide greater output at lower costs than other market structures is that some monopolists

The "Bubbles, Bubbles"soap bubble firm's price and cost data are: price = $10;MR = $10; MC = $10; ATC = $10. This firm is

Economic profit is the same as normal profit.

As new firms enter a monopolistically competitive market, product differentiation becomes less pronounced.

If you were in the donut-making business, which of the following would most likely not be an explicit cost?

Picture the graph. When new firms enter a monopolistically competitive market, the result is a(n)

Economic profit is measured by

-The maximum profit in Exhibit K-7 is

Which statement is not consistent with Joseph Schumpeter's hypothesis?

If marginal revenue exceeds marginal cost, the firm should increase output to maximize profit.

If the short-run equilibrium position for a monopolistically competitive firm is P = $28.47, ATC = $22.13, and MC = MR = $17.47, which of the following statementsis true?

Tombstones are produced in a market that is monopolistic competition. One producer, Rolling Stones, sells 20 tombstones a week at a price of $500 each. Its average total cost is $600. Its total variable cost is $2,000. Its demand curve is downward sloping. Given this information, we know that

The reason why firms in perfect competition end up with no economic profit in the long run is that

When an innovation is created by one firm in a perfectly competitive market,

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