Question 1

total fixed cost for this firm is

Accepted Answer

$200

Question 2

the shape of the total cost curve reflects

Accepted Answer

increasing and diminishing returns

Question 3

the profit-maximizing output for this firm is

Accepted Answer

320 units

Question 4

which of the following is correct

Accepted Answer

any level of output between 100 and 440 units will yield an economic profit

Question 5

when a firm is maximizing profit it will necessarily be

Accepted Answer

maximizing the difference between total revenue and total cost

Question 6

the MR=MC rule can be restated for a purely competitive seller as P = MC because

Accepted Answer

each additional unit of output adds exactly its price to total revenue

Question 7

in the short run the individual competitive firms supply curve is that segment of the

Accepted Answer

marginal cost curve lying above the average variable cost curve

Question 8

which of the following is not a valid generalization concerning the relationship between price and costs for a purely competitive seller in the short run

Accepted Answer

price must be equal to or greater than minimum average variable cost for the firm to continue producing

Question 9

XYZ is producing 20 units of output, its selling it in a purely competitive market at $10, total fixed cost are $100, AVC is $3 at 20 units. this corporation:

Accepted Answer

is realizing a loss of $60

Question 10

Suppose you find that the price of your product is less than minimum AVC. you should

Accepted Answer

close down because by producing your losses will exceed your total fixed costs

Question 11

if a purely competitive firm shuts down in the short run

Accepted Answer

it will realize a loss equal to its total fixed costs

Question 12

a purely competitive firm should produce in the short run if its total revenue is sufficient to cover its

Accepted Answer

total variable costs

Question 13

the lowest price at which the firm can produce is

Accepted Answer

P2

Question 14

the firm will produce at a loss at all prices

Accepted Answer

between P2 and P3

Question 15

If product price is P3

Accepted Answer

economic profits will be zero

Question 16

the firms short run supply curve is

Accepted Answer

the bcd segment of the MC curve

Question 17

barriers to entering an industry

Accepted Answer

are the basis for monopoly

Question 18

patents

Accepted Answer

are a source of monopoly

Question 19

a natural monopoly occurs when

Accepted Answer

long run average costs decline continuously through the range of demand

Question 20

Large minimum efficient scale of plant combined with limited market demand may lead to

Accepted Answer

natural monopoly

Question 21

For an imperfectly competitive firm:

Accepted Answer

the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.

Question 22

A nondiscriminating pure monopolist\'s demand curve:

Accepted Answer

lies above its marginal revenue curve.

Question 23

Because the monopolist\'s demand curve is downsloping:

Accepted Answer

price must be lowered to sell more output.

Question 24

The MR = MC rule

Accepted Answer

applies both to pure monopoly and pure competition.

Question 25

In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is 
equal to:

Accepted Answer

marginal revenue.

Question 26

A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3. This firm is 
realizing:

Accepted Answer

an economic profit that could be increased by producing more output.

Question 27

Which of the following statements is incorrect?

Accepted Answer

A monopolist\'s 100 percent market share ensures economic profits.

Question 28

In the short run a pure monopolist\'s profit:

Accepted Answer

may be positive, zero, or negative.

Question 29

Purely competitive firms and pure monopolists are similar in that:

Accepted Answer

both maximize profit where MR = MC.

Question 30

In the short run, a monopolist\'s economic profits:

Accepted Answer

may be positive or negative depending on market demand and cost.

Question 31

A profit-maximizing monopolist will set its price:

Accepted Answer

where the marginal cost curve intersects the demand curve

Question 32

Under which of the following situations would a monopolist increase profits by lowering price (and 
increasing output):

Accepted Answer

if it discovered that it was producing where MC

Question 33

Which of the following statements is correct?

Accepted Answer

In seeking the profit-maximizing output the pure monopolist underallocates resources to its production.

Question 34

An unregulated pure monopolist will maximize profits by producing that output at which:

Accepted Answer

MR=MC

Question 35

If a monopolist\'s marginal revenue is $3.00 and its marginal cost is $4.50, it will increase its profits by:

Accepted Answer

reducing output and raising price.

Question 36

Nonprice competition refers to:

Accepted Answer

advertising, product promotion, and changes in the real or perceived characteristics of a product.

Question 37

Which of the following is not characteristic of monopolistic competition?

Accepted Answer

production at minimum ATC in the long-run

Question 38

If the number of firms in a monopolistically competitive industry increases and the degree of product 
differentiation diminishes:

Accepted Answer

the industry would more closely approximate pure competition.

Question 39

Economic analysis of a monopolistically competitive industry is more complicated than that of pure 
competition because:

Accepted Answer

combat rivals

Question 40

The monopolistically competitive seller maximizes profit by producing at the point where:

Accepted Answer

marginal revenue equals marginal cost.

Question 41

In long-run equilibrium a monopolistically competitive firm\'s price will:

Accepted Answer

exceed both MC and ATC

Question 42

Which of the following is correct for a monopolistically competitive firm in long-run equilibrium?

Accepted Answer

P exceeds minimum ATC

Question 43

In long-run equilibrium a monopolistically competitive firm will:

Accepted Answer

have excess production capacity

Question 44

Excess capacity refers to the:

Accepted Answer

fact that monopolistically competitive firms encounter

Question 45

In long-run equilibrium the firm shown in the diagram above will:

Accepted Answer

earn a normal profit.

Question 46

In long-run equilibrium, production for the firm shown in the diagram above is:

Accepted Answer

greater than would occur under our competition

Question 47

Oligopoly is difficult to analyze primarily because:

Accepted Answer

the number of firms is too large

Question 48

Oligopoly is more difficult to analyze than other market models because:

Accepted Answer

of mutual interdependence and the fact that oligopoly outcomes are less certain than in other market 
models.

Question 49

which of the following is an illustration of differentiated oligopoly

Accepted Answer

the soft drink industry

Question 50

Which of the following industries is an illustration of homogeneous oligopoly?

Accepted Answer

aluminum

Question 51

differentiated oligopoly exists where a small number of firms are

Accepted Answer

producing goods that differ in terms of quality and design

Question 52

oligopolistic industries

Accepted Answer

may produce either standardized or differentiated products

Question 53

homogeneous oligopoly exists where a small number of firms are

Accepted Answer

producing virtually identical products

Question 54

the book publishing furniture and clothing industries are each illustrations of

Accepted Answer

monopolistic competition

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