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test tuesday
| Question | Answer |
|---|---|
| Barriers to entry | restrict the number of firms in an industry. |
| In a perfectly competitive market, the demand curve faced by an individual firm is: | perfectly elastic. |
| Spam (junk e-mail) is a major annoyance for many people who use the Internet. However, spammers sometimes have to send thousands of messages to get just one response that pays money. Given this information: | spamming can be profitable even with a very low number of buyers because the marginal cost of sending spam is virtually zero. |
| A perfectly competitive firm facing a price of $50 decides to produce 500 widgets. Its marginal cost of producing the last widget is $50. If the firm's goal is maximize profit, it should: | continue producing 500 widgets. |
| Refer to the graph shown. The marginal cost of producing the 60th unit is: | $6.50 |
| Refer to the graph shown. A perfectly competitive firm would never operate if the price dropped to which segment of the marginal cost curve? | AC |
| Refer to the graph shown. If market price decreases from $7.00 per unit to $6.00 per unit, a profit-maximizing perfectly competitive firm will: | decrease output from 850 to 750. |
| Refer to the table shown. The maximum profit that the perfectly competitive firm represented by the above data could earn is: | $45 |
| Refer to the graph shown. What distance represents average profits? | AB |
| Refer to the graph shown. If the market price is P2, the firm will produce: | Q3 and break even. |
| Refer to the graph shown. Suppose the market price is $3. At this price, a perfectly competitive firm should: | Shut down immediatly |
| A perfectly competitive firm in the long run earns: | positive normal profits but zero economic profits. |
| Suppose that the firms in the perfectly competitive oat industry currently are receiving a price of $2 per bushel for their product. The minimum possible average total cost of producing oats in the long run is $1 per bushel. It follows that: | new firms will enter the oat industry. |
| Which graph depicts a perfectly competitive firm in long-run equilibrium? | graph ii |
| Refer to the graph shown, which depicts a perfectly competitive firm. If the price of the product is $3: | the firm may continue to operate in the short run but will exit the industry in the long run. |
| Suppose the dry cleaning industry is initially in long-run equilibrium but then experiences a sharp increase in the price of its inputs. Assuming that the industry is perfectly competitive, the increase in costs should: | decrease the number of firms in the industry in the long run and raise the market price. |
| Refer to the graphs shown, which depict a perfectly competitive market and firm. If market demand is D0: | this market is in long-run equilibrium because the firm is earning zero economic profit. |
| Refer to the graphs shown, which depict a perfectly competitive market and firm in a constant-cost industry. If market demand decreases from D0 to D1, in the long run: | some firms will exit this market and the price will return to P0. |
| Refer to the graphs shown, which depict a perfectly competitive market and firm. If market demand is D0, the: | firm shown in the graph will produce q0, but all the firms in the market will produce a total of Q0. |
| In a perfectly competitive decreasing-cost industry, a decrease in market demand in the long run causes: | a decrease in quantity, an increase in price, and no change in profit. |
| If market demand increases in a perfectly competitive increasing-cost industry: | new firms will enter the industry, factor prices will rise, and the price at which each firm earns zero economic profit will increase. |
| An assumption of a competitive market is that both buyers and sellers are price takers. When we go to the mall to shop for clothing or to the grocery to buy food, what do we usually observe? | Buyers are often price takers, but sellers are usually price makers. |
| Refer to the graph shown. If the firm is producing 120 units of output, profit is equal to: | -$38 |
| eBay.com is a vast auction site that is similar to a competitive market in some ways but differs from it in others. Which of the following describes how eBay resembles a competitive market? | It is easy to enter and easy to leave eBay. |
| The supply curve of a perfectly competitive firm is: | the marginal cost curve only if price exceeds average variable cost. |
| Refer to the graph shown, which depicts a perfectly competitive firm. When maximizing profit, the firm represented will earn per-unit profit roughly equal to: | $2.00 |
| A monopoly firm is different from a competitive firm in that: | a monopolist can influence market price whereas a competitive firm cannot. |
| Monopoly is a market structure in which: | one firm makes up the entire market. |
| A monopoly firm selling textbooks to students in a small town is currently maximizing profits by charging a price of $50 per book. It follows that the marginal cost of textbooks is: | less than $50. |
| Refer to the table shown, which shows the demand schedule for a firm that has a monopoly on the sale of personal computers in the country of Oz. If the firm were to set the price of computers at $2,000: | marginal revenue would be negative. |
| Refer to the graph shown. If this monopolist produces 700 units of output per day, it: | can increase profit by producing less. |
| Refer to the graph shown. Areas C and D represent: | the loss of surplus by consumers resulting from a monopoly. |
| Refer to the graph shown. The welfare cost of monopoly is given by: | areas A and B. |
| Microsoft has a special version of its Windows operating system that it sells at a low price in countries where cheap pirated software is widespread. The cost of producing another copy of this software is the same as the cost of producing another copy of | price discrimination. |
| A price-discriminating monopolist will charge a higher price to: | individuals with a more inelastic demand. |
| Refer to the graph shown. If the government set the selling price equal to the marginal cost, the firm in the graph would be: | sustaining losses and eventually would go out of business. |
| Refer to the graph shown of average costs for a typical firm. If this industry consisted of one firm producing 1,000 units and one firm producing 500 units: | the smaller firm probably would be forced out through price competition. |
| Refer to the graph shown. If this monopolist were forced to set price equal to average cost, it would charge a price of: | $3. |
| Refer to the graph shown. If this monopolist were allowed to choose the profit-maximizing level of output, it would produce: | 200 units of output. |
| If there were no barriers to entry: | firms would compete away monopoly profits. |
| If MC = Q/15 represents marginal cost for a monopolist and market demand is given by Qd = 500 - 10P, the equation for marginal revenue is: | MR = 50 - (1/5)Q. |
| Refer to the graph shown. The equation for this market demand curve is: | Qd = 1,000 - 50P. |
| If a monopolist increases output from 14 to 15 by lowering its price from $32 to $31, marginal revenue is: | $17. |
| For a monopolist, the price of the product: | exceeds the marginal revenue. |
| At the socially optimum quantity of production, price equals: | marginal cost. |
| Refer to the graph shown. Assuming that the monopoly maximizes profit, the social cost of monopoly will be: | $20,000 per day. |
| Refer to the graph shown. If this monopolist sets the price to maximize profit, it will earn economic profit of: | $2,400 per day. |
| If MR > MC, a monopolist should: | increase production. |
| All of the following can be barriers to entry except: | price discrimination. |
| The DeBeers Company is a profit-maximizing monopolist that exercises monopoly power in the distribution of diamonds. If the company earns positive economic profits this year, the price of diamonds will: | exceed both the marginal cost and the average total cost of diamonds. |
| iTunes charges British customers 20 percent more than customers in France and Germany. Apple defended the price differential, saying that the "underlying economic model in each country has an impact on how we price our track downloads." An economist would | price discrimination. |
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