Assignment
Question 1
A factor of production whose quantity can be changed during a particular period is a:
marginal factor of production.
fixed factor of production.
incremental factor of production.
variable factor of production.
Question 2
Assuming that all other factors of production are held constant, marginal product is the change in ________ output resulting from a 1-unit change in _______ .
total; a variable input
total; a fixed input
total; average product
per unit; a fixed input
Question 3
Average variable cost is the ratio of:
total cost to the marginal cost.
total cost to the amount of variable input.
variable cost to the quantity of output.
marginal cost to the quantity of output.
Question 4
The curve labeled V represents the firm's _______ curve.
total cost
average total cost
marginal cost
average variable cost
Question 5
When an increase in the firm's output reduces its long-run average cost, it experiences:
economies of scale.
diseconomies of scale.
constant returns to scale.
variable returns to scale.
Question 6
A firm that is able to more efficiently utilize by-products as it increases production in the long run is an example of:
economies of scale.
diseconomies of scale.
labor-intensive production.
capital-intensive production.
Question 7
If your plant is operating in the positively-sloped portion of a long-run average cost curve, this could be the result of:
decreased input prices.
improved utilization of by-products.
specialization of resources.
limited decision-making capacity.
Question 8
Perfect competition is a model of the market that assumes all of the following EXCEPT:
a large number of firms.
firms face downward-sloping demand curves.
firms produce identical goods.
many buyers.
Question 9
The Case in Point on the Burkha Industry suggested that this industry:
might be an example of perfect competition although it did not feature easy entry and exit.
might be an example of perfect competition because it did feature easy entry and exit.
might not be an example of perfect competition although it did feature easy entry and exit.
might not be an example of perfect competition because it did not feature easy entry and exit.
Question 10
If a perfectly competitive firm sells 30 units of output at a price of $10 per unit, its marginal revenue is:
$10.
more than $10.
less than $10.
$300.
Question 11
The difference between total revenue and total cost is:
economic profit.
nominal revenue.
average revenue.
marginal revenue.
Question 12
If a perfectly competitive firm is producing a quantity that generates MC < MR, then profit:
is maximized.
can be increased by increasing production.
can be increased by decreasing production.
can be increased by increasing the price.
Question 13
In the short run, a perfectly competitive firm does not produce output and earns a negative economic profit if:
P = ATC.
P < AVC.
AVC > P > ATC.
AVC < P < ATC.
Question 14
If all firms in a perfectly competitive industry earn zero economic profits, in the long run, the:
industry supply curve will shift to the right.
number of firms in the industry will decrease.
number of firms in the industry will increase.
industry is in long-run equilibrium.
Question 15
Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the short run, we expect that the market price will _______ and the output of a typical firm will _______ .
rise; rise
rise; fall
fall; rise
fall; fall
Question 16
Which of the following is (are) true concerning monopoly?
It is at the opposite end of the spectrum from a perfectly competitive firm.
A monopoly has no rivals.
A monopoly does not need to worry about other firms entering the industry.
All of the above are true.
Question 17
A natural monopoly exists whenever a single firm:
is owned and operated by the federal or local government.
is investor owned but granted the exclusive right by the government to operate in a market.
confronts economies of scale over the entire range of production that is relevant to its market.
has gained control over a strategic input of an important production process.
Question 18
If your local government gives you the exclusive right to sell breakfast bagels in your community, your monopoly would result from:
sunk costs.
location.
economies of scale.
government restrictions.
Question 19
In 1999, a judge declared that Microsoft was a monopolist. Assuming that it was maximizing its profits at its chosen level of output, we may conclude that the absolute value of the price elasticity of demand for its systems was:
less than 1.
equal to 1.
greater than 1.
There is insufficient information upon which to make a determination.
Question 20
The profit-maximizing price is _______ and will generate total economic profit of _______ .
P2; EF
P3; the rectangle P1P2FG
P3; the rectangle P2P3EF
P2; EF
Question 21
The profit-maximizing rule MR = MC is:
followed by a monopoly, but not a perfectly competitive firm.
followed by a perfectly competitive firm but not by a monopoly.
followed by any firm.
not followed by a monopoly, because it would reduce economic profit to zero.
Question 22
A statement that best reflects an evaluation of monopoly firms is that:
they are economically efficient.
they have little or no market power.
consumers are given more choices, lower costs, and higher quality.
none of the above is true.
Question 23
An industry with more than one firm and in which at least one firm is a price setter is:
perfect competition.
imperfect competition.
monopoly.
perfect monopolistic.
Question 24
A(n) _______ is a single firm with _______ , whereas _______ implies an industry with ________ firm(s) who have (has) _______ .
oligopoly; no barriers to entry; monopoly; many; easy entry and exit
monopoly; barriers to entry; monopolistic competition; many; easy entry and exit
monopoly; barriers to entry; oligopoly; few; no barriers to entry
monopolistic competitor; barriers to entry; monopoly; one; barriers to entry
Question 25
The exhibit shows curves facing a typical restaurant in a community. Assume that the market is characterized by many firms, differentiated products, easy entry and easy exit. The restaurant shown here will maximize profits at a quantity of:
Q1.
Q2.
Q3.
There is not enough information given to answer the question.
Question 26
Oligopoly is a market structure characterized by:
a horizontal demand curve.
a large number of small firms.
interdependence in decisionmaking.
relatively easy entry and exit.
Question 27
When firms openly agree on price, output, and other decisions aimed at achieving monopoly profits, those firms are practicing:
overt collusion.
tacit collusion.
leadership price.
competitive game.
Question 28
An unwritten, unspoken agreement through which firms limit competition among themselves is:
satisficing.
tacit collusion.
overt collusion.
a cartel.
Question 29
A decision based on the recognition that the actions of others will affect the outcome of the choice, and that takes these actions into account, is a:
tacit supply curve model.
playoff payoff.
perfect competition.
strategic choice.
Question 30
Which of the following is (are) true?
There is no role for advertising in perfect competition.
Firms in monopolistic competition and oligopoly use advertising in expectation of increasing profit.
Advertising has costs but few, if any, benefits.
A and B are true.