Question 1

Demand facing an individual,perfectly competitive firm is

Accepted Answer

A) perfectly inelastic at the quantity the firm chooses to produce. 
B) perfectly inelastic at the quantity determined by market forces. 
C) perfectly elastic at the price the firm chooses to charge. 
D) perfectly elastic at the price determined by market forces. 
A) perfectly inelastic at the quantity the firm chooses to produce. 
B) perfectly inelastic at the quantity determined by market forces. 
C) perfectly elastic at the price the firm chooses to charge. 
D) perfectly elastic at the price determined by market forces. D

Question 2

A perfectly competitive firm sells 15 units of output at the going market price of $10.Suppose its average fixed cost is $15 and its average variable cost is $8.Its contribution margin (i.e.,contribution to fixed cost)is

Accepted Answer

A) $30. 
B) $150. 
C) $105. 
D) Cannot be determined from the above information 
A) $30. 
B) $150. 
C) $105. 
D) Cannot be determined from the above information A

Question 3

Explain the difference between economic and normal profits.

Accepted Answer

Normal profit is the amount of profit necessary to insure that a firm continues to operate in the long run,and it is based on the profit that could be earned in its next best alternative activity.It is equal to the sum of its accounting cost and opportunity cost.Economic profit is the amount of profit above normal profit: profit in excess of what could be earned in its next best alternative activity.

Question 4

Which is a required characteristic of a perfectly competitive industry?

Accepted Answer

A) There are few firms so that none can influence market price. 
B) Products are highly differentiated. 
C) Barriers to entry are high. 
D) None of the above 
A) There are few firms so that none can influence market price. 
B) Products are highly differentiated. 
C) Barriers to entry are high. 
D) None of the above

Question 5

Describe the difference in market structure between monopoly and oligopoly.

Accepted Answer

Monopoly has only one producer because t

Question 6

A normal profit is

Accepted Answer

A) revenues minus opportunity cost of zero. 
B) revenues minus accounting cost of zero. 
C) a zero accounting profit. 
D) revenues minus accounting and opportunity cost of zero. 
A) revenues minus opportunity cost of zero. 
B) revenues minus accounting cost of zero. 
C) a zero accounting profit. 
D) revenues minus accounting and opportunity cost of zero.

Question 7

A feature of perfect competition is

Accepted Answer

A) use of non-price competition by firms. 
B) mutual interdependence among firms. 
C) unique products. 
D) standardized products. 
A) use of non-price competition by firms. 
B) mutual interdependence among firms. 
C) unique products. 
D) standardized products.

Question 8

True,false,or uncertain? Any firm that is not covering fixed costs should shut down in the short run.

Accepted Answer

False.Fixed costs are sunk and

Question 9

If an industry could be organized either perfectly competitively or as monopoly,a monopoly would

Accepted Answer

A) produce less output. 
B) produce where P > MC. 
C) charge higher prices. 
D) All of the above 
A) produce less output. 
B) produce where P > MC. 
C) charge higher prices. 
D) All of the above

Question 10

Monopoly is characterized by

Accepted Answer

A) unique products. 
B) market entry and exit are difficult or impossible. 
C) non-price competition not necessary. 
D) All of the above 
A) unique products. 
B) market entry and exit are difficult or impossible. 
C) non-price competition not necessary. 
D) All of the above

Question 11

In perfect competition

Accepted Answer

A) the firm's demand curve is relatively elastic. 
B) the firm's demand curve is relatively inelastic. 
C) the firm's demand curve is perfectly elastic. 
D) the firm's demand curve is perfectly inelastic. 
A) the firm's demand curve is relatively elastic. 
B) the firm's demand curve is relatively inelastic. 
C) the firm's demand curve is perfectly elastic. 
D) the firm's demand curve is perfectly inelastic.

Question 12

Which of the following is true for a monopoly?

Accepted Answer

A) P = MC B) P = MR C) P > MR D) P < MR A) P = MC B) P = MR C) P > MR D) P < MR

Question 13

When a firm has the power to establish its price

Accepted Answer

A) P = MR. B) P = MC. C) P > MR. D) P < MR. A) P = MR. B) P = MC. C) P > MR. D) P < MR.

Question 14

When the slope of the total revenue curve is equal to the slope of the total cost curve

Accepted Answer

A) profit is maximized. 
B) marginal revenue equals marginal cost. 
C) the marginal cost curve intersects the total average cost curve. 
D) the total cost curve is at its minimum. 
E) Both A and B 
A) profit is maximized. 
B) marginal revenue equals marginal cost. 
C) the marginal cost curve intersects the total average cost curve. 
D) the total cost curve is at its minimum. 
E) Both A and B

Question 15

Market price is $50.The firm's marginal cost curve is given by MC = 10 + 2Q.
a.Find the profit-maximizing output for the firm.
b.At this output,is the firm making a profit? Explain your answer.

Accepted Answer

a.50 = 10 + 2Q Q* = 20 b.It is impossibl

Question 16

Which of the following conditions would definitely cause a perfectly competitive company to shut down in the short run?

Accepted Answer

A) P < MC 
B) P = MC < AC 
C) P < AVC 
D) P = MR 
A) P < MC 
B) P = MC < AC 
C) P < AVC 
D) P = MR

Question 17

In economic analysis,any amount of profit earned above zero is considered "above normal" because

Accepted Answer

A) normally firms are supposed to earn zero profit. 
B) this would indicate that the firm's revenue exceeded both its accounting and opportunity cost. 
C) this would indicate that the firm was at least earning a profit equal to its opportunity cost. 
D) this would indicate that the firm's revenue exceeded its accounting cost. 
A) normally firms are supposed to earn zero profit. 
B) this would indicate that the firm's revenue exceeded both its accounting and opportunity cost. 
C) this would indicate that the firm was at least earning a profit equal to its opportunity cost. 
D) this would indicate that the firm's revenue exceeded its accounting cost.

Question 18

A monopolist has demand and cost curves given by:
QD = 1000 - 2P
TC = 5,000 + 50Q
a.Find the monopolist's profit-maximizing quantity and price.
b.Find the monopolist's profit.

Accepted Answer

a.MR = 500 - Q MC = 50 50 = 50

Question 19

Which of the following markets comes closes to the model of perfect competition?

Accepted Answer

A) automobile industry 
B) information technology industry 
C) aerospace industry 
D) agriculture 
A) automobile industry 
B) information technology industry 
C) aerospace industry 
D) agriculture

Question 20

A monopolist's demand function is P = 1624 - 4Q,and its total cost function is
TC = 22,000 + 24Q -4Q2 + 1/3 Q3,where Q is output produced and sold.
a.At what level of output and sales (Q)and price (P)will total profits be maximized?
b.At what level of output and sales (Q)and price (P)will total revenue be maximized?
c.At what price (P)should the monopolist shut down?

Accepted Answer

a.Total Profits are maximized where MR =

Demand facing an individual,perfectly competitive firm is

A perfectly competitive firm sells 15 units of output at the going market price of $10.Suppose its average fixed cost is $15 and its average variable cost is $8.Its contribution margin (i.e.,contribution to fixed cost)is

Explain the difference between economic and normal profits.

Which is a required characteristic of a perfectly competitive industry?

Describe the difference in market structure between monopoly and oligopoly.

A normal profit is

A feature of perfect competition is

True,false,or uncertain? Any firm that is not covering fixed costs should shut down in the short run.

If an industry could be organized either perfectly competitively or as monopoly,a monopoly would

Monopoly is characterized by

In perfect competition

Which of the following is true for a monopoly?

When a firm has the power to establish its price

When the slope of the total revenue curve is equal to the slope of the total cost curve

Market price is $50.The firm's marginal cost curve is given by MC = 10 + 2Q. a.Find the profit-maximizing output for the firm. b.At this output,is the firm making a profit? Explain your answer.

Which of the following conditions would definitely cause a perfectly competitive company to shut down in the short run?

In economic analysis,any amount of profit earned above zero is considered "above normal" because

A monopolist has demand and cost curves given by: Q_D = 1000 - 2P TC = 5,000 + 50Q a.Find the monopolist's profit-maximizing quantity and price. b.Find the monopolist's profit.

Which of the following markets comes closes to the model of perfect competition?

Introduction

The Firm and Its Goals

Supply and Demand

Demand Elasticity

Demand Estimation and Forecasting Appendices 5A and 5B

The Theory and Estimation of Production Appendices 6A,6B,and 6C

The Theory and Estimation of Cost Appendices 7A,7B,and 7C

Pricing and Output Decisions: Monopolistic Competition and Oligopoly

Special Pricing Practices

Game Theory and Asymmetric Information

Capital Budgeting and Risk

The Multinational Corporation in a Global Setting

Government and Industry: Challenges and Opportunities for Todays Manager

The Global Soft Drink Industry

Filters

Exam 8: Pricing and Output Decisions: Perfect Competition and Monopoly Appendices 8A and 8B

Demand facing an individual,perfectly competitive firm is

A perfectly competitive firm sells 15 units of output at the going market price of $10.Suppose its average fixed cost is $15 and its average variable cost is $8.Its contribution margin (i.e.,contribution to fixed cost)is

Explain the difference between economic and normal profits.

Which is a required characteristic of a perfectly competitive industry?

Describe the difference in market structure between monopoly and oligopoly.

A normal profit is

A feature of perfect competition is

True,false,or uncertain? Any firm that is not covering fixed costs should shut down in the short run.

If an industry could be organized either perfectly competitively or as monopoly,a monopoly would

Monopoly is characterized by

In perfect competition

Which of the following is true for a monopoly?

When a firm has the power to establish its price

When the slope of the total revenue curve is equal to the slope of the total cost curve

Market price is $50.The firm's marginal cost curve is given by MC = 10 + 2Q. a.Find the profit-maximizing output for the firm. b.At this output,is the firm making a profit? Explain your answer.

Which of the following conditions would definitely cause a perfectly competitive company to shut down in the short run?

In economic analysis,any amount of profit earned above zero is considered "above normal" because

A monopolist has demand and cost curves given by: QD = 1000 - 2P TC = 5,000 + 50Q a.Find the monopolist's profit-maximizing quantity and price. b.Find the monopolist's profit.

Which of the following markets comes closes to the model of perfect competition?

Introduction

The Firm and Its Goals

Supply and Demand

Demand Elasticity

Demand Estimation and Forecasting Appendices 5A and 5B

The Theory and Estimation of Production Appendices 6A,6B,and 6C

The Theory and Estimation of Cost Appendices 7A,7B,and 7C

Pricing and Output Decisions: Monopolistic Competition and Oligopoly

Special Pricing Practices

Game Theory and Asymmetric Information

Capital Budgeting and Risk

The Multinational Corporation in a Global Setting

Government and Industry: Challenges and Opportunities for Todays Manager

The Global Soft Drink Industry

Filters

A monopolist has demand and cost curves given by: Q_D = 1000 - 2P TC = 5,000 + 50Q a.Find the monopolist's profit-maximizing quantity and price. b.Find the monopolist's profit.