Economics test chapter 5 quiz (2016)

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Quiz

Note: It is recommended that you save your response as you complete each question.

Question 1 (1 point)

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If a perfectly competitive firm increases production from 10 units to 11 units, and the market price is $20 per unit, total revenue for 11 units is:

Question 1 options:

 

$10.
 

$20.
 

$200.
 

$220.

Question 2 (1 point)

 Question 2 Unsaved

Which of the following is not an assumption economists make when using the model of perfect competition?

Question 2 options:

 

Firms seek to maximize profits.
 

The products of each firm in a particular market are identical.
 

Each firm sets it price equal to its average total cost.
 

There is easy entry and exit.

Question 3 (1 point)

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If a perfectly competitive firm sells 300 units of output at a market price of $1 per unit, its marginal revenue is:

Question 3 options:

 

less than $1.
 

$1.
 

more than $1 but less than $300.
 

$300.

Question 4 (1 point)

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If this is a perfectly competitive market, when the demand is D1 and the supply is S, any firm could enter and sell carrots for:

Question 4 options:

 

20 cents a pound.
 

25 cents a pound.
 

30 cents a pound.
 

any price above 20 cents a pound.

Question 5 (1 point)

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If this is a perfectly competitive market, which of the following is true?

Question 5 options:

 

The supply curve is linear and is determined by average total cost.
 

The equilibrium price and output are determined by demand and supply.
 

Each firm in this market is a price setter.
 

The price is too high.

Question 6 (1 point)

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An assumption of the model of perfect competition is:

Question 6 options:

 

discrimination.
 

ease of entry and exit.
 

few buyers and sellers.
 

limited information.

Question 7 (1 point)

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If this is a perfectly competitive market, each firm:

Question 7 options:

 

will be a price setter.
 

can sell all it wants to sell at the price determined by demand and supply.
 

has an incentive to sell at a price lower than the market price.
 

will attempt to maximize its total revenue.

Question 8 (1 point)

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An assumption of the model of perfect competition is:

Question 8 options:

 

difficult entry and exit.
 

few buyers and sellers.
 

complete information.
 

different goods.

Question 9 (1 point)

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For a firm producing at any level of output greater than the most profitable one, a reduction in output decreases total:

Question 9 options:

 

cost more than total revenue.
 

revenue more than total cost.
 

revenue by the same amount as total cost.
 

revenue but not total cost.

Question 10 (1 point)

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In the short run, a perfectly competitive firm does not produce output and earns a negative economic profit if:

Question 10 options:

 

P = ATC.
 

P < AVC.
 

AVC > P > ATC.
 

AVC < P < ATC.

Question 11 (1 point)

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In perfectly competitive markets, if the price is _______ , the firm will _______ .

Question 11 options:

 

greater than ATC; make an economic profit
 

less than the minimum AVC; shut down
 

greater than the minimum AVC but less than ATC; continue to produce and incur a loss.
 

all of the above are true.

Question 12 (1 point)

 Question 12 Unsaved

A firm’s shut-down point is the minimum value of:

Question 12 options:

 

total cost.
 

average variable cost.
 

average total cost.
 

marginal cost.

Question 13 (1 point)

 Question 13 Unsaved

In the short run, if AVC < P < ATC, a perfectly competitive firm:

Question 13 options:

 

produces output and earns an economic profit.
 

produces output and incurs an economic loss.
 

does not produce output and earns an economic profit.
 

does not produce output and earns zero economic profit.

Question 14 (1 point)

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Economic profit is maximized when:

Question 14 options:

 

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

marginal revenue is more than marginal cost.
 

an additional unit of output yields a benefit to the firm greater than the additional cost.
 

no more output can be sold at the market price.

Question 15 (1 point)

 Question 15 Unsaved

The profit-maximizing level of output for a perfectly competitive firm in the short run occurs where:

Question 15 options:

 

marginal cost equals price.
 

marginal revenue equals price.
 

total revenue equals total cost.
 

average revenue equals average total cost.

Question 16 (1 point)

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The most profitable level of output occurs at quantity:

Question 16 options:

Question 17 (1 point)

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Which of the following is (are) true?

Question 17 options:

 

Total revenue and total cost are equal at approximately 8,300 pounds of output.
 

Marginal cost and marginal revenue are equal at approximately 8,300 pounds of output.
 

At approximately 4,500 pounds of output, marginal cost is zero and increasing returns sets in.
 

All of the above are true.

Question 18 (1 point)

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To maximize economic profit, this firm should produce quantity ________ where _______ = _______ .

Question 18 options:

 

q1; MR ; MC
 

q2; price; MC
 

q2; MR; TR
 

q1; TR; TC

Question 19 (1 point)

 Question 19 Unsaved

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The exhibit shows cost curves for a firm operating in a perfectly competitive market. Which of the following statements is true?

Question 19 options:

 

AFC is represented in this exhibit by the vertical distance between Curve M and Curve N at any level of output.
 

AFC is represented in this exhibit by the vertical distance between Curve N and Curve O at any level of output.
 

This exhibit illustrates the long run because all costs are variable.
 

Quantity q2 is to the left of the shutdown point.

Question 20 (1 point)

 Question 20 Unsaved

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At zero level of output, total costs are ________ and total revenue is _______ .

Question 20 options:

 

0; 0
 

300; 0
 

800; 300
 

0; 300

Question 21 (1 point)

 Question 21 Unsaved

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The firm maximizes economic profit when the _______ of the total revenue and total cost curves are _______ and when _______ and ________ are equal.

Question 21 options:

 

slopes; as far apart as possible; marginal revenue; marginal cost
 

quantities; equal; marginal product; marginal cost
 

slopes; equal; marginal revenue; marginal cost
 

slopes; equal; marginal revenue; marginal product

Question 22 (1 point)

 Question 22 Unsaved

A perfectly competitive firm will continue producing in the short run as long as it can cover its:

Question 22 options:

 

total cost.
 

average total cost.
 

average variable cost.
 

average fixed cost.

Question 23 (1 point)

 Question 23 Unsaved

If all firms in a perfectly competitive industry earn zero economic profits, in the long run, the:

Question 23 options:

 

industry supply curve will not shift.
 

industry supply curve will shift to the right.
 

number of firms in the industry will decrease.
 

number of firms in the industry will increase.

Question 24 (1 point)

 Question 24 Unsaved

Charges that are paid for factors of production are called:

Question 24 options:

 

implicit costs.
 

opportunity costs.
 

fixed costs.
 

explicit costs.

Question 25 (1 point)

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In a perfectly competitive industry, economic profit:

Question 25 options:

 

is total revenue minus marginal cost.
 

is found by using cost in the economic sense of opportunity cost.
 

will be negative if TC > TR in long-run equilibrium.
 

will generally be positive in long-run equilibrium.

Question 26 (1 point)

 Question 26 Unsaved

When a perfectly competitive firm is in long-run equilibrium, the firm is:

Question 26 options:

 

producing at maximum average total cost.
 

producing at maximum average variable cost.
 

producing at minimum marginal cost.
 

producing at minimum long-run average total cost.

Question 27 (1 point)

 Question 27 Unsaved

Suppose that a monopolist increases production from 10 units to 11 units. If the market price declines from $30 per unit to $29 per unit, marginal revenue for the eleventh unit is:

Question 27 options:

Question 28 (1 point)

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Most electric, gas, and water companies are examples of:

Question 28 options:

 

unregulated monopolies.
 

natural monopolies.
 

restricted-input monopolies.
 

sunk-cost monopolies.

Question 29 (1 point)

 Question 29 Unsaved

A demand curve that is downward sloping will ensure that:

Question 29 options:

 

P = MR.
 

P > MR.
 

P < MR.
 

P = MC.

Question 30 (1 point)

 Question 30 Unsaved

The monopoly firm’s profit-maximizing price is:

Question 30 options:

 

given by the point on the ATC curve for the profit-maximizing quantity.
 

given by the point on the demand curve for the profit-maximizing quantity.
 

determined for the quantity of output where MR > MC by the greatest amount.
 

described by B and C.

Question 31 (1 point)

 Question 31 Unsaved

By adhering to the MC = MR principle, a monopoly will assure itself:

Question 31 options:

 

either maximum profits or minimum losses.
 

large profits.
 

economic profits.
 

no losses.

Question 32 (1 point)

 Question 32 Unsaved

A downward-sloping demand curve exists for:

Question 32 options:

 

a monopoly, but not for a perfectly competitive firm.
 

a perfectly competitive firm, but not for a monopoly.
 

both a monopoly and a perfectly competitive firm.
 

either a monopoly or a perfectly competitive firm, depending on the costs of production.

Question 33 (1 point)

 Question 33 Unsaved

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This profit-maximizing monopoly firm’s price per unit is:

Question 33 options:

Question 34 (1 point)

 Question 34 Unsaved

A _______ price charged by a monopoly than would be the case if P = MC _______ consumer surplus.

Question 34 options:

 

lower; decreases
 

higher; reduces
 

higher; increases
 

None of the above is true.

Question 35 (1 point)

 Question 35 Unsaved

Compared to perfect competition:

Question 35 options:

 

monopoly produces less at a higher price.
 

monopoly produces where MR = MC, and a perfectly competitively firm produces where P = MC.
 

monopoly may have economic profits in the long run, but in perfect competition in the long run economic profits are zero.
 

all of the above are true.

Question 36 (1 point)

 Question 36 Unsaved

Public policies towards monopoly in the United States consists of:

Question 36 options:

 

laws outlawing all of them.
 

regulation of natural monopolies.
 

government takeover if monopoly profit exceeds a certain level.
 

forcing monopoly industries to become perfectly competitive.

Question 37 (1 point)

 Question 37 Unsaved

Because of monopoly, consumers typically have:

Question 37 options:

 

fewer choices.
 

higher costs.
 

lower quality.
 

all of the above.

Question 38 (1 point)

 Question 38 Unsaved

The profit-maximizing rule P = MC is:

Question 38 options:

 

followed by a monopoly.
 

followed by a perfectly competitive firm.
 

a rule for any firm that wants to maximize profits.
 

false for all of the above.

Question 39 (1 point)

 Question 39 Unsaved

An oligopoly is an industry dominated by a few firms.

Question 39 options:

Question 40 (1 point)

 Question 40 Unsaved

An analytical framework used in the analysis of strategic choices is:

Question 40 options:

 

the tacit supply curve model.
 

game theory.
 

perfect competition.
 

risk assessment.

Question 41 (1 point)

 Question 41 Unsaved

Oligopoly is a market structure characterized by:

Question 41 options:

 

a horizontal demand curve.
 

a large number of small firms.
 

interdependence in decisionmaking.
 

relatively easy entry and exit.

Question 42 (1 point)

 Question 42 Unsaved

On the spectrum of market structures, oligopoly lies:

Question 42 options:

 

between perfect competition and monopoly.
 

to the left of both perfect competition and monopoly.
 

to the right of both perfect competition and monopoly.
 

at the same location as monopoly.

Question 43 (1 point)

 Question 43 Unsaved

The main characteristic that distinguishes monopolistic competition from perfect competition is:

Question 43 options:

 

easy entry and exit.
 

many firms.
 

differentiated products.
 

that in perfect competition to maximize profits, a firm will produce where MR = MC.

Question 44 (1 point)

 Question 44 Unsaved

One benefit of advertising is that it provides information to consumers.

Question 44 options:

Question 45 (1 point)

 Question 45 Unsaved

For an oligopoly to maximize profits it need not make MR = MC.

Question 45 options:

Question 46 (1 point)

 Question 46 Unsaved

The profit-maximizing rule MC = MR is followed by firms under:

Question 46 options:

 

monopolistic competition, but not perfect competition.
 

perfect competition, but not monopolistic competition.
 

either monopolistic competition or perfect competition, depending on the costs of production.
 

both monopolistic competition and perfect competition.

Question 47 (1 point)

 Question 47 Unsaved

A restaurant:

Question 47 options:

 

is a price taker.
 

can set its own price.
 

will lose all of its customers if it raises its prices.
 

is described by both B and C.

Question 48 (1 point)

 Question 48 Unsaved

The profit-maximizing rule MC = P is followed by firms under:

Question 48 options:

 

monopolistic competition, but not perfect competition.
 

perfect competition, but not monopolistic competition.
 

both monopolistic competition and perfect competition.
 

either monopolistic competition or perfect competition, depending on the costs of production.

Question 49 (1 point)

 Question 49 Unsaved

Monopolistic competition is an industry characterized by:

Question 49 options:

 

a product with no close substitutes.
 

a horizontal demand curve.
 

a small number of firms.
 

relatively easy entry and exit.

Question 50 (1 point)

 Question 50 Unsaved

A firm in monopolistic competition maximizes its profit by producing at the level at which:

Question 50 options:

 

MC = ATC.
 

MC = AR.
 

MC = MR.
 

MC = P.