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Potential final exam
questions
| Question | Answer |
|---|---|
| Which of the following expressions is correct? | accounting profit = economic profit + implicit costs |
| Refer to Figure 13-4. Which of the figures represents the total cost curve for a typical firm? | Figure 2 |
| An example of an explicit cost of production would be the | lease payments for the land on which a firm's factory stands. |
| Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's | implicit costs. |
| Marginal cost is equal to average total cost when | average total cost is at its minimum. |
| When marginal cost is less than average total cost, | average total cost is falling. |
| Which of the following is an example of an implicit cost? | The owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm |
| When firms are said to be price takers, it implies that if a firm raises its price, | buyers will go elsewhere. |
| When new firms enter a perfectly competitive market, | existing firms may see their costs rise if more firms compete for limited resources. |
| The long-run market supply curve in a competitive market will | typically be more elastic than the short-run supply curve. |
| When some resources used in production are only available in limited quantities, it is likely that the long-run supply curve in a competitive market is | upward sloping. |
| Refer to Figure 14-3. In the short run, if the market price is P4, individual firms in a competitive industry will earn | 0 profits |
| Raiman's Shoe Repair produces custom-made shoes. When Mr. Raiman produces 12 pairs per week, the marginal cost of the 12th pair is $84, and the marginal revenue of the 12th pair is $70. What would you advise Mr. Raiman to do? | Produce fewer custom-made shoes |
| Which of the following governmental actions would eliminate some or all of the inefficiency that results from monopoly pricing? | Policymakers can regulate prices that the monopoly charges. |
| Antitrust laws have economic benefits that outweigh the costs if they | prevent mergers that would decrease competition and raise the costs of production. |
| Bob's Butcher Shop is the only place within 100 miles that sells bison burgers. Assuming that Bob is a monopolist and maximizing his profit, which of the following statements is true? | The price of Bob's bison burgers will exceed Bob's marginal cost. |
| In a natural monopoly, | if the government requires marginal cost pricing, it will likely have to subsidize the firm. |
| A natural monopoly occurs when | there are economies of scale over the relevant range of output. |
| For a firm to price discriminate, | it must have some market power. |
| When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly | will experience a loss. |
| Price discrimination | can maximize profits if the seller can prevent the resale of goods between customers. |
| Which of the following can defeat the profit-maximizing strategy of price discrimination? | Arbitrage |
| The collection of statutes aimed at curbing monopoly power is called | antitrust law. |
| Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has | less market power than it would otherwise have. |
| Delish, a moderately priced restaurant, has recently announced intentions to open a restaurant in Boston, MA. Assume that the restaurant market in Boston is characterized by monopolistic competition. | Refer to Scenario 16-2. As a result of the new restaurant, consumers in Boston are likely to experience a product-variety externality, which is a positive externality. |
| A market structure with only a few sellers, each offering similar or identical products, is known as | oligopoly. |
| The figure is drawn for a monopolistically competitive firm. The quantity of output at which the MC and ATC curves cross is the | efficient scale of the firm. |
| The product-variety externality is associated with the | consumer surplus that is generated from the introduction of a new product. |
| When a monopolistically competitive firm raises its price, | quantity demanded declines but not to zero. |
| In a long-run equilibrium | only a perfectly competitive firm operates at its efficient scale. |
| A monopolistically competitive firm chooses | the quantity of output to produce, but the price of its output is determined by demand. |
| In the short run, a firm operating in a monopolistically competitive market | produces an output where marginal revenue equals marginal cost, and the price is determined by demand. |
| Whenever a cartel in a duopoly breaks down, | total output in the market will rise. |
| Suppose that Thierry and Abdul are duopolists. Thierry is producing 700 units of output, and Abdul is producing 500 units of output. When Abdul produces 500 units, | Thierry maximizes profit by producing 700 units. When Thierry produces 700 units of output, Abdul maximizes profit by producing 500 units. Thierry and Abdul are at a Nash equilibrium. |
| Cartels are difficult to maintain because | each firm has an incentive to deviate from its agreed output level. |
| Which of the following statements about oligopolies is not correct? | Unlike monopolies and monopolistically competitive markets, oligopolies prices do not exceed their marginal costs. |
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