Question 1

Perfect competition

Accepted Answer

A) has many sellers. 
B) homogenous products. 
C) free entry and exit. 
D) all of these choices. 
A) has many sellers. 
B) homogenous products. 
C) free entry and exit. 
D) all of these choices. D

Question 2

In an oligopoly

Accepted Answer

A) there are many firms. 
B) there is one firm. 
C) there are few firms. 
D) firms openly collude. 
A) there are many firms. 
B) there is one firm. 
C) there are few firms. 
D) firms openly collude. C

Question 3

If marginal revenue is less than marginal costs

Accepted Answer

A) production should be decreased. 
B) production should be decreased and profits will grow. 
C) production should be decreased and losses will decrease. 
D) all of these choices are possible. 
A) production should be decreased. 
B) production should be decreased and profits will grow. 
C) production should be decreased and losses will decrease. 
D) all of these choices are possible. D

Question 4

The market demand curve is ____ and the demand curve for a single firm in a competitive market is ____.

Accepted Answer

A) horizontal, horizontal 
B) downward sloping, horizontal 
C) downward sloping, downward sloping 
D) horizontal, downward sloping 
A) horizontal, horizontal 
B) downward sloping, horizontal 
C) downward sloping, downward sloping 
D) horizontal, downward sloping

Question 5

Over the long run, monopolies can earn

Accepted Answer

A) economic profit. 
B) normal profit only. 
C) accounting profit only. 
D) no economic profit. 
A) economic profit. 
B) normal profit only. 
C) accounting profit only. 
D) no economic profit.

Question 6

Entry into a competitive market will continue until

Accepted Answer

A) economic profits are zero. 
B) normal profits are zero. 
C) when accounting losses are zero. 
D) a.and b.are true 
A) economic profits are zero. 
B) normal profits are zero. 
C) when accounting losses are zero. 
D) a.and b.are true

Question 7

For a competitive firm

Accepted Answer

A) price is equal to marginal revenue. 
B) price is less than marginal revenue. 
C) demand is less than marginal revenue. 
D) demand is less than average revenue but equal to marginal revenue. 
A) price is equal to marginal revenue. 
B) price is less than marginal revenue. 
C) demand is less than marginal revenue. 
D) demand is less than average revenue but equal to marginal revenue.

Question 8

In a monopoly, producer surplus is

Accepted Answer

A) larger than under perfect competition. 
B) is equal to that under perfect competition. 
C) smaller than under perfect competition. 
D) None of these choices is true. 
A) larger than under perfect competition. 
B) is equal to that under perfect competition. 
C) smaller than under perfect competition. 
D) None of these choices is true.

Question 9

Entry causes ____ to increase and a firm's demand curve to ____.

Accepted Answer

A) quantity supplied, fall. 
B) supply, rise 
C) supply, fall. 
D) demand, rise. 
A) quantity supplied, fall. 
B) supply, rise 
C) supply, fall. 
D) demand, rise.

Question 10

Monopolies exist due to

Accepted Answer

A) patents. 
B) government franchises. 
C) cost factors. 
D) all of these choices contribute to the power of a monopoly. 
A) patents. 
B) government franchises. 
C) cost factors. 
D) all of these choices contribute to the power of a monopoly.

Question 11

In a monopoly, consumer surplus is

Accepted Answer

A) larger than under perfect competition. 
B) is equal to that under perfect competition. 
C) smaller than under perfect competition. 
D) None of these choices is true. 
A) larger than under perfect competition. 
B) is equal to that under perfect competition. 
C) smaller than under perfect competition. 
D) None of these choices is true.

Question 12

A market that mainly stresses product differentiation is called

Accepted Answer

A) perfectly competitive. 
B) monopolistically competitive. 
C) a monopoly. 
D) an oligopoly. 
A) perfectly competitive. 
B) monopolistically competitive. 
C) a monopoly. 
D) an oligopoly.

Question 13

If the average cost of flying the next flight is zero and one passenger is on the plane and has paid $50, should the next flight be flown?

Accepted Answer

A) Yes. 
B) No. 
C) Can't tell from the data provided. 
D) The plane should wait for at least one more passenger. 
A) Yes. 
B) No. 
C) Can't tell from the data provided. 
D) The plane should wait for at least one more passenger.

Question 14

A market of price takers is called

Accepted Answer

A) perfectly competitive. 
B) monopolistically competitive. 
C) a monopoly. 
D) an oligopoly. 
A) perfectly competitive. 
B) monopolistically competitive. 
C) a monopoly. 
D) an oligopoly.

Question 15

Entry drives economic profits to zero.

Accepted Answer

A) True 
 B)False

Question 16

In order to maximize profits

Accepted Answer

A) the derivative of total revenue with respect to quantity must be less than the derivative of total cost with respect to quantity. 
B) the derivative of total revenue with respect to quantity must be greater than the derivative of total cost with respect to quantity. 
C) the derivative of total revenue with respect to quantity must equal the derivative of total cost with respect to quantity. 
D) none of these choices. 
A) the derivative of total revenue with respect to quantity must be less than the derivative of total cost with respect to quantity. 
B) the derivative of total revenue with respect to quantity must be greater than the derivative of total cost with respect to quantity. 
C) the derivative of total revenue with respect to quantity must equal the derivative of total cost with respect to quantity. 
D) none of these choices.

Question 17

Strategic behavior is a result of the interdependence in decision making between firms.

Accepted Answer

A) True 
 B)False

Question 18

When a firm is a price maker

Accepted Answer

A) price is equal to marginal revenue. 
B) price is greater than marginal revenue. 
C) price is less than marginal revenue. 
D) price is equal to marginal cost. 
A) price is equal to marginal revenue. 
B) price is greater than marginal revenue. 
C) price is less than marginal revenue. 
D) price is equal to marginal cost.

Question 19

Firms make a profit when they equate marginal revenue with marginal cost.

Accepted Answer

A) True 
 B)False

Question 20

If the marginal cost of flying the next flight is zero and one passenger is on the plane and has paid $50,

Accepted Answer

A) fixed cost would still be covered. 
B) the passenger should be given a bus ticket. 
C) losses would get bigger. 
D) the next flight should be flown. 
A) fixed cost would still be covered. 
B) the passenger should be given a bus ticket. 
C) losses would get bigger. 
D) the next flight should be flown.

Exam 14: The Mechanics of Profit Maximization

Perfect competition

In an oligopoly

If marginal revenue is less than marginal costs

The market demand curve is ____ and the demand curve for a single firm in a competitive market is ____.

Over the long run, monopolies can earn

Entry into a competitive market will continue until

For a competitive firm

In a monopoly, producer surplus is

Entry causes ____ to increase and a firm's demand curve to ____.

Monopolies exist due to

In a monopoly, consumer surplus is

A market that mainly stresses product differentiation is called

If the average cost of flying the next flight is zero and one passenger is on the plane and has paid $50, should the next flight be flown?

A market of price takers is called

Entry drives economic profits to zero.

In order to maximize profits

Strategic behavior is a result of the interdependence in decision making between firms.

When a firm is a price maker

Firms make a profit when they equate marginal revenue with marginal cost.

If the marginal cost of flying the next flight is zero and one passenger is on the plane and has paid $50,

Economics and Management

The Power of Markets and the Wealth of Nations

Spontaneous Order, Markets, and Market Failure

Spontaneous Order and the Firm

Organization of the Firm

Market Failures and Incentive Issues Inside the Firm

When Other Firms Dont Respond

When Other Firms React

The Entrepreneur and the Market Process

Strategies With Respect to Government

What Should the Firm Do

Demand and Revenue Management

Costs

Pricing

The Knowledge Economy

The Corporate Form and the Cost of Capital

Internal Markets

Measuring Economic Profit

The Firm in a National and a Global Setting

Strategy Myths

Filters

The market demand curve is and the demand curve for a single firm in a competitive market is .

Entry causes to increase and a firm's demand curve to .