Marginal cost is the: (Points : 2)<\/p>\n
rate of change in total fixed cost that results from producing one more unit of output.<\/p>\n
change in total cost that results from producing one more unit of output.<\/p>\n
change in average variable cost that results from producing one more unit of output.<\/p>\n
change in average total cost that results from producing one more unit of output.<\/p>\n
2. <\/b>(Last Word) Which of the following is an example of a sunk cost, as it relates to a firm? (Points : 2)<\/p>\n
an expenditure on raw materials used in the production process.<\/p>\n
an expenditure on a nonrefundable, nontransferable airline ticket.<\/p>\n
an expenditure to buy a delivery van.<\/p>\n
an expenditure for a new factory.<\/p>\n
3. <\/b>Required payments to parties injured by firms found to have violated the Sherman Act are known as: (Points : 2)<\/p>\n
antitrust fines.<\/p>\n
treble damages.<\/p>\n
economic reparations.<\/p>\n
loss carry-forwards.<\/p>\n
4. <\/b>Suppose that a firm introduces a highly profitable new product. If this new product is priced higher than existing substitute products, then the: (Points : 2)<\/p>\n
new product has greater marginal utility than the existing products.<\/p>\n
laws of economics have been violated.<\/p>\n
new product must have increasing, not diminishing, marginal utility.<\/p>\n
existing products were unprofitable to produce.<\/p>\n
5. <\/b>A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3. This firm is realizing: (Points : 2)<\/p>\n
a loss that could be reduced by producing more output.<\/p>\n
a loss that could be reduced by producing less output.<\/p>\n
an economic profit that could be increased by producing more output.<\/p>\n
an economic profit that could be increased by producing less output.<\/p>\n
6. <\/b>False advertising and the misrepresentation of products were made illegal by the: (Points : 2)<\/p>\n
Federal Trade Commission Act.<\/p>\n
Wheeler-Lea Act.<\/p>\n
Sherman Act.<\/p>\n
Clayton Act.<\/p>\n
7. <\/b>Barriers to entering an industry: (Points : 2)<\/p>\n
are justified because they result in allocative efficiency.<\/p>\n
are justified because they result in productive efficiency.<\/p>\n
are the basis for monopoly.<\/p>\n
apply only to purely monopolistic industries.<\/p>\n
8. <\/b>Average fixed costs can be determined graphically by: (Points : 2)<\/p>\n
summing the marginal costs of any number of units of output and dividing the sum by that output.<\/p>\n
the vertical distance between TC and TVC.<\/p>\n
the vertical distance between AVC and MC.<\/p>\n
the vertical distance between ATC and AVC.<\/p>\n
9. <\/b>(Last Word) When patents on new medications expire, the market for those drugs: (Points : 2)<\/p>\n
change from being monopolistic to being competitive.<\/p>\n
change from being competitive to being monopolistic.<\/p>\n
collapse.<\/p>\n
encourage firms to leave the market.<\/p>\n
10. <\/b>Marginal cost: (Points : 2)<\/p>\n
equals both average variable cost and average total cost at their respective minimums.<\/p>\n
is the difference between total cost and total variable cost.<\/p>\n
rises for a time, but then begins to decline when diminishing returns set in.<\/p>\n
declines continuously as output increases.<\/p>\n
11. <\/b>Assuming no change in product demand, a pure monopolist: (Points : 2)<\/p>\n
can increase price and increase sales simultaneously because it dominates the market.<\/p>\n
adds an amount to total revenue which is equal to the price of incremental sales.<\/p>\n
should produce in the range where marginal revenue is negative.<\/p>\n
must lower price to increase sales.<\/p>\n
12. <\/b>Technological advance improves allocative efficiency by: (Points : 2)<\/p>\n
enhancing monopoly power.<\/p>\n
reducing income inequality.<\/p>\n
giving society a more-preferred mix of goods and services.<\/p>\n
encouraging saving.<\/p>\n
13. <\/b>For an imperfectly competitive firm: (Points : 2)<\/p>\n
total revenue is a straight, upsloping line because a firm’s sales are independent of product price.<\/p>\n
the marginal revenue curve lies above the demand curve because any reduction in price applies to all units sold.<\/p>\n
the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.<\/p>\n
the marginal revenue curve lies below the demand curve because any reduction in price applies only to the extra unit sold.<\/p>\n
14. <\/b>A natural monopoly occurs when: (Points : 2)<\/p>\n
long-run average costs decline continuously through the range of demand.<\/p>\n
a firm owns or controls some resource essential to production.<\/p>\n
long-run average costs rise continuously as output is increased.<\/p>\n
economies of scale are obtained at relatively low levels of output.<\/p>\n
15. <\/b>We would expect an industry to expand if firms in that industry are: (Points : 2)<\/p>\n
earning normal profits.<\/p>\n
earning economic profits.<\/p>\n
incurring economic losses.<\/p>\n
earning accounting profits.<\/p>\n
16. <\/b>Economies and diseconomies of scale explain: (Points : 2)<\/p>\n
the profit-maximizing level of production.<\/p>\n
why the firm’s long-run average total cost curve is U-shaped.<\/p>\n
why the firm’s short-run marginal cost curve cuts the short-run average variable cost curve at its minimum point.<\/p>\n
the distinction between fixed and variable costs.<\/p>\n
17. <\/b>If a profit-seeking competitive firm is producing its profit-maximizing output and its total fixed costs fall by 25 percent, the firm should: (Points : 2)<\/p>\n
use more labor and less capital to produce a larger output.<\/p>\n
not change its output.<\/p>\n
reduce its output.<\/p>\n
increase its output.<\/p>\n
18. <\/b>A nondiscriminating pure monopolist’s demand curve: (Points : 2)<\/p>\n
is perfectly inelastic.<\/p>\n
coincides with its marginal revenue curve.<\/p>\n
lies above its marginal revenue curve.<\/p>\n
lies below its marginal revenue curve.<\/p>\n
19. <\/b>If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing: (Points : 2)<\/p>\n
marginal revenue and marginal cost.<\/p>\n
price and minimum average variable cost.<\/p>\n
total revenue and total cost.<\/p>\n
total revenue and total fixed cost.<\/p>\n
20. <\/b>The short-run supply curve of a purely competitive producer is based on its: (Points : 2)<\/p>\n
AVC curve.<\/p>\n
ATC curve.<\/p>\n
AFC curve.<\/p>\n
MC curve.<\/p>\n
21. <\/b>The MR = MC rule applies: (Points : 2)<\/p>\n
to firms in all types of industries.<\/p>\n
only when the firm is a “price taker.”<\/p>\n
only to monopolies.<\/p>\n
only to purely competitive firms.<\/p>\n
22. <\/b>The marginal revenue curve for a monopolist: (Points : 2)<\/p>\n
is a straight, upward sloping curve.<\/p>\n
rises at first, reaches a maximum, and then declines.<\/p>\n
becomes negative when output increases beyond some particular level.<\/p>\n
is a straight line, parallel to the horizontal axis.<\/p>\n
23. <\/b>Which of the following represents a long-run adjustment? (Points : 2)<\/p>\n
a farmer uses an extra dose of fertilizer on his corn crop<\/p>\n
unable to meet foreign competition, a U.S. watch manufacturer sells one of its branch plants<\/p>\n
a steel manufacturer cuts back on its purchases of coke and iron ore<\/p>\n
a supermarket hires four additional clerks<\/p>\n
24. <\/b>Price is constant or given to the individual firm selling in a purely competitive market because: (Points : 2)<\/p>\n
the firm’s demand curve is downsloping.<\/p>\n
of product differentiation reinforced by extensive advertising.<\/p>\n
each seller supplies a negligible fraction of total supply.<\/p>\n
there are no good substitutes for its product.<\/p>\n
25. <\/b>Firms seek to maximize: (Points : 2)<\/p>\n
per unit profit.<\/p>\n
total revenue.<\/p>\n
total profit.<\/p>\n
market share.<\/p>\n
26. <\/b>Those who contend that oligopolists are less likely than more competitive firms to engage in R&D say that: (Points : 2)<\/p>\n
Oligopolists have little incentive to introduce costly new technology and produce new products when they currently are earning large economic profit using existing technology and selling existing products.<\/p>\n
the undistributed profits of oligopolists give them a source of readily available, relatively low cost funds for financing R &D.<\/p>\n
entry barriers enable oligopolists to sustain the profits they gain from innovation.<\/p>\n
the large size of oligopolists’ R&D departments allow them to use very specialized, expensive R&D equipment and employ teams of specialized researchers.<\/p>\n
27. <\/b>Technological advance improves productive efficiency by: (Points : 2)<\/p>\n
lowering average total cost.<\/p>\n
increasing marginal utility.<\/p>\n
enhancing monopoly power.<\/p>\n
decreasing a nation’s exports.<\/p>\n
28. <\/b>Innovation: (Points : 2)<\/p>\n
is the first discovery of a product or process, rather than its first successful commercial introduction.<\/p>\n
includes new products, but not new production methods.<\/p>\n
is also known as diffusion.<\/p>\n
can either increase or decrease the market share of a large firm, depending on whether it is introduced by the large firm or one of its competitors.<\/p>\n
29. <\/b>In the short run the individual competitive firm’s supply curve is that segment of the: (Points : 2)<\/p>\n
average variable cost curve lying below the marginal cost curve.<\/p>\n
marginal cost curve lying above the average variable cost curve.<\/p>\n
marginal revenue curve lying below the demand curve.<\/p>\n
marginal cost curve lying between the average total cost and average variable cost curves.<\/p>\n
30. <\/b>The monopolistic competition model predicts that: (Points : 2)<\/p>\n
allocative efficiency will be achieved.<\/p>\n
productive efficiency will be achieved.<\/p>\n
firms will engage in nonprice competition.<\/p>\n
firms will realize economic profits in the long run.<\/p>\n
31. <\/b>The kinked-demand curve of an oligopolist is based on the assumption that: (Points : 2)<\/p>\n
competitors will follow a price cut but ignore a price increase.<\/p>\n
competitors will match both price cuts and price increases.<\/p>\n
competitors will ignore a price cut but follow a price increase.<\/p>\n
there is no product differentiation.<\/p>\n
32. <\/b>Which of the following is not a barrier to entry? (Points : 2)<\/p>\n
patents<\/p>\n
X-inefficiency<\/p>\n
economies of scale<\/p>\n
ownership of essential resources<\/p>\n
33. <\/b>In the United States cartels are: (Points : 2)<\/p>\n
quite common in industries that produce nondurable goods.<\/p>\n
in violation of the antitrust laws.<\/p>\n
concentrated in monopolistically competitive industries.<\/p>\n
encouraged by government policy so firms can achieve economies of scale.<\/p>\n
34. <\/b>The amount of calendar time associated with the long run: (Points : 2)<\/p>\n
is less than that associated with the immediate market period.<\/p>\n
varies from industry to industry.<\/p>\n
is the same for all firms.<\/p>\n
is one year by definition.<\/p>\n
35. <\/b>In the short run: (Points : 2)<\/p>\n
TVC will increase for a time at a diminishing rate, but then beyond some point will increase at an increasing rate.<\/p>\n
TVC will increase for a time at an increasing rate, but then beyond some point will increase at a diminishing rate.<\/p>\n
TVC will increase by the same absolute amount for each additional unit of output produced.<\/p>\n
one cannot generalize concerning the behavior of TVC as output increases.<\/p>\n
36. <\/b>Economic profit in the long run is: (Points : 2)<\/p>\n
possible for both a pure monopoly and a pure competitor.<\/p>\n
possible for a pure monopoly, but not for a pure competitor.<\/p>\n
impossible for both a pure monopolist and a pure competitor.<\/p>\n
only possible when barriers to entry are nonexistent.<\/p>\n
37. <\/b>A pure monopolist is: (Points : 2)<\/p>\n
any firm realizing all existing economies of scale.<\/p>\n
any firm whose demand curve is downsloping.<\/p>\n
any firm which can engage in price discrimination.<\/p>\n
a one-firm industry.<\/p>\n
38. <\/b>A purely competitive firm’s short-run supply curve is: (Points : 2)<\/p>\n
perfectly elastic at the minimum average total cost.<\/p>\n
upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve.<\/p>\n
upsloping and equal to the portion of the marginal cost curve that lies above the average total cost curve.<\/p>\n
upsloping only when the industry has constant costs.<\/p>\n
39. <\/b>An industry comprised of 40 firms, none of which has more than 3 percent of the total market for a differentiated product is an example of: (Points : 2)<\/p>\n
monopolistic competition.<\/p>\n
oligopoly.<\/p>\n
pure monopoly.<\/p>\n
pure competition.<\/p>\n
40. <\/b>Long-run competitive equilibrium: (Points : 2)<\/p>\n
is realized only in constant-cost industries.<\/p>\n
will never change once it is realized.<\/p>\n
is not economically efficient.<\/p>\n
results in zero economic profits.<\/p>\n
41. <\/b>Fixed costs are associated with: (Points : 2)<\/p>\n
highly adjustable inputs such as labor.<\/p>\n
both the short run and the long run.<\/p>\n
the short run only.<\/p>\n
the long run only.<\/p>\n
42. <\/b>If a pure monopolist is operating in a range of output where demand is elastic: (Points : 2)<\/p>\n
it cannot possibly be maximizing profits.<\/p>\n
marginal revenue will be positive but declining.<\/p>\n
marginal revenue will be positive and rising.<\/p>\n
total revenue will be declining.<\/p>\n
43. <\/b>The law of diminishing returns indicates that: (Points : 2)<\/p>\n
as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.<\/p>\n
because of economies and diseconomies of scale a competitive firm’s long-run average total cost curve will be U-shaped.<\/p>\n
the demand for goods produced by purely competitive industries is downsloping.<\/p>\n
beyond some point the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.<\/p>\n
44. <\/b>The basic difference between the short run and the long run is that: (Points : 2)<\/p>\n
all costs are fixed in the short run, but all costs are variable in the long run.<\/p>\n
the law of diminishing returns applies in the long run, but not in the short run.<\/p>\n
at least one resource is fixed in the short run, while all resources are variable in the long run.<\/p>\n
economies of scale may be present in the short run, but not in the long run.<\/p>\n
45. <\/b>Large minimum efficient scale of plant combined with limited market demand may lead to: (Points : 2)<\/p>\n
natural monopoly.<\/p>\n
patent monopoly.<\/p>\n
government franchise monopoly.<\/p>\n
shared monopoly.<\/p>\n
46. <\/b>If the price of product Y is $25 and its marginal cost is $18: (Points : 2)<\/p>\n
Y is being produced with the least-cost combination of resources.<\/p>\n
society will realize a net gain if less of Y is produced.<\/p>\n
resources are being underallocated to Y.<\/p>\n
resources are being overallocated to Y.<\/p>\n
47. <\/b>The spread of innovation through imitation refers to: (Points : 2)<\/p>\n
invention.<\/p>\n
diffusion.<\/p>\n
duplication.<\/p>\n
diversification.<\/p>\n
48. <\/b>A purely competitive seller is: (Points : 2)<\/p>\n
both a “price maker” and a “price taker.”<\/p>\n
neither a “price maker” nor a “price taker.”<\/p>\n
a “price taker.”<\/p>\n
a “price maker.”<\/p>\n
49. <\/b>A major source of funding of R&D in large, established corporations is: (Points : 2)<\/p>\n
venture capital.<\/p>\n
dividends.<\/p>\n
mutual funds.<\/p>\n
retained earnings.<\/p>\n
50. <\/b>Which of the following statements is correct? (Points : 2)<\/p>\n
Economic profits induce firms to enter an industry; losses encourage firms to leave.<\/p>\n
Economic profits induce firms to leave an industry; profits encourage firms to leave.<\/p>\n
Economic profits and losses have no significant impact on the growth or decline of an industry.<\/p>\n
Normal profits will cause an industry to expand.<\/p>\n","protected":false},"excerpt":{"rendered":"
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