A firm's marginal cost is greater than its marginal revenue. The price is higher than the average total cost. Based on this, which of the following statements is true? (1 point)

	An increase in output will increase the firm's existing economic losses.
	A decrease in output will decrease the firm's existing economic losses.
	A decrease in output will increase profits.
	An increase in output will increase profits.
	A decrease in output will leave profits unchanged.

32.

(03.06 HC) A price-taking firm evaluates its production costs and revenue and decides it will operate in the short run and can stay in the market in the long run without conditions changing. Which of the following must describe the firm's short-run production? (1 point)

	Average variable cost > Price < Average total cost
	Average variable cost = Price = Average total cost
	Average variable cost < Price < Average total cost
	Price Average total cost
	Price > Average total cost

33.

(03.06 MC) The following information is available for a company that operates in a perfectly competitive market.

Current output	5000 units
Current market price	$5
Total cost	$25,000
Marginal cost	$4
Total variable cost	$20,000

What is the best action for this firm? (1 point)

	Increase output in the short run and stay in the market the long run
	Increase output in the short run and decrease output in the long run
	Shut down in the short run and exit in the long run
	Shut down in the short run and produce in the long run
	Reduce output in the short run and increase output in the long run

34.

(03.07 MC) Which of the following statements is true of a perfectly competitive market in the long run? (1 point)

	No firms can enter or exit.
	All firms earn normal profits, and there is both productive and allocative efficiency.
	Individual firms produce where average variable cost equals marginal cost and marginal revenue.
	It is allocatively efficient but may or may not be productively efficient.
	Consumer surplus will always equal producer surplus.

35.

(03.07 MC) Use the graph to answer the question below. The quantity is measured in thousands of units. (1 point) Assume the graph represents a perfectly competitive firm. What will this firm do in the short run and in the long run?

	It will operate in the short run but will leave the market in the long run.
	It will shut down in the short run and leave the market in the long run.
	It will operate in the short run and stay in the market in the long run.
	It will shut down in the short run and stay in the market in the long run.
	Insufficient data to determine

36.

(03.07 MC) Farm2U produces its product in a perfectly competitive market that is producing where MR = MC and price is higher than average variable costs. Farm2U is earning economic losses. What should the Farm2U do? (1 point)

	Increase output to reduce economic losses
	Shut down immediately
	Reduce output below minimum efficient scale
	Decrease price to increase revenue
	Leave the market in the long run

37.

(04.01 MC) If barriers to entry ________ or product differentiation ________, competition in a market will ________. (1 point)

	increase; increases; decrease
	increase; increases; increase
	increase; decreases; increase
	decrease; increases; increase
	decrease; decreases; decrease

38.

(04.02 MC) The defining trait of a natural monopoly is (1 point)

	diseconomies of scale at the profit-maximizing quantity
	a patent preventing competitors from entering the market
	a low minimum efficient scale on the product's long-run average total cost curve
	persistent economies of scale across the full market demand
	allocative and productive inefficiency at the profit-maximizing quantity

39.

(04.02 MC) Use the graph to answer the question that follows. (1 point) What area would represent the consumer surplus if this firm maximizes its profit?

	There would be no consumer surplus because of the monopolist's market power
	The area between average revenue and marginal revenue all the way to the price axis
	The area between the marginal cost curve and the marginal revenue curve
	The area above P1 up to the average revenue curve
	The area between P3 up to the marginal revenue curve

40.

(04.03 MC) A monopolist engages in perfect price discrimination. What will happen to the consumer surplus? (1 point)

	It significantly increases as it absorbs the producer surplus.
	It disappears and becomes deadweight loss.
	It decreases based on the elasticity of demand.
	It is unchanged.
	It is entirely converted to producer surplus.

41.

(04.04MC) At 120 units of output, a monopolistically competitive firm's demand is $12, marginal revenue is $8, its marginal cost is $8, and its average total cost is $12. Based on this, which of the following is true? (1 point)

	The firm will produce more than 120 units of output.
	The firm will produce fewer than 120 units of output.
	The firm is earning normal profit at its profit-maximizing quantity.
	The firm will earn $960 in profit.
	The firm will earn $480 in profit.

42.

(04.05 MC) Which of the following characterizes a cartel? (1 point)

	Price discrimination
	Price collusion and output quotas
	Productive efficiency but allocative inefficiency
	A more competitive oligopoly
	Persistent normal profit

43.

(04.05 HC) Company A and Company B are competing oligopolists. Both companies are considering increasing or maintaining their prices. The payoff matrix shows the profits of the companies in millions based on their possible actions.

	Company B
Company A		Increase Price	Maintain Price
Increase Price	$50, $40	$35, $30
Maintain Price	$55, $45	$60, $35

The government offers a $5 million subsidy to maintain current pricing. What is the expected outcome of the new payoff matrix, given the subsidy? (1 point)

	The Nash equilibrium changes, and both companies will maintain their prices.
	The Nash equilibrium changes, and both companies will increase their prices.
	The Nash equilibrium remains the same, and both companies will increase their prices.
	Company A will increase its price, while Company B maintains its price.
	Company A will maintain its price, while Company B increases its price.

44.

(05.01 MC) Use the graph to answer the question that follows. (1 point) Assume that the first unit of labor in the graph above produces 23 units of output. What would the total output be if this firm employed three units of labor?

	23 units
	25 units
	30 units
	78 units
	158 units

45.

(05.02 MC) Assume that all cell phone company workers are less productive because of a decline in human capital. How does this affect the demand for labor in the telecommunications industry? (1 point)

	The market labor demand curve shifts to the left.
	The quantity demanded of labor shifts to the left.
	The market labor demand curve shifts to the right.
	The slope of the market labor demand curve increases.
	The slope of the market labor demand curve decreases.

46.

(05.03 MC) If the wage in a perfectly competitive labor market is $16 and the firm can sell all the output it wants at $2 per unit, then the marginal product of the last worker employed must be (1 point)

	8 units
	14 units
	18 units
	32 units
	indeterminate

47.

(05.03 MC) Use the table to answer the question that follows.

Quantity of Labor	MP of Labor	Quantity of Capital	MP of Capital
1	40	1	50
2	45	2	40
3	35	3	35
4	20	4	15
5	5	5	5

What combination of labor and capital would satisfy the input hiring rule that minimizes the cost of production, if the price of labor is $10 and the price of capital is $20? (1 point)

	1 unit of labor; 3 units of capital
	2 units of labor; 1 unit of capital
	3 units of labor; 2 units of capital
	3 units of labor; 3 units of capital
	4 units of labor; 2 units of capital

48.

(05.04 MC) Which of the following is correct about a monopsonistic factor market? (1 point)

	Resources are efficiently allocated.
	There is one seller and many buyers.
	The monopsony has the same quantity transacted as in a perfectly competitive input market.
	The supply curve is upward sloping and below the marginal factor cost curve.
	Purchase of an additional item decreases the price of the item and of the existing items being purchased.

49.

(06.01 MC) Which of the following describes a situation where the marginal social cost is greater than the marginal private cost at equilibrium? (1 point)

	Oligopoly
	Monopoly
	Positive externality
	Allocative efficiency
	Market inefficiency

50.

(06.01 MC) A market in which private consumers are not the only beneficiaries of their purchase represents a ________ and will result in ________ than the socially optimal quantity. (1 point)

	negative externality; less
	negative externality; more
	positive externality; more
	positive externality; less
	natural monopoly; less

51.

(06.01 MC) Use the graph to answer the question that follows. (1 point) Which of the following can cause the relationship shown between MSC and MPC?

	A decrease in financial instability from unlawful investing
	An increase in investment to support educational funding
	A decrease in fish population caused by overfishing a lake
	A decrease in air pollution caused by a nuclear energy plant
	An increase in research and development funding of a product

52.

(06.01 MC) In long-run equilibrium, the marginal social cost equals the marginal private cost, and the marginal social benefit equals the marginal private benefit. This describes which of the following markets? (1 point)

	Oligopoly with no externalities
	Monopoly with perfect information
	Perfect competition with externalities
	Perfect competition with asymmetric information
	Perfect competition with no externalities

53.

(06.02 MC) A market has a cost or benefit not internalized, unclear property rights, and high transaction costs. This describes (1 point)

	monopolistic competition
	a natural monopoly
	an externality
	an oligopoly
	a monopsony

54.

(06.02 MC) Review the table below, which shows the quantity supplied and quantity demanded for a private good.

Price	Quantity Supplied	Quantity Demanded
$1	10	25
$3	20	20
$5	30	15
$7	40	5

If the good in the market above is non-excludable, the maximum quantity transacted in the market will be (1 point)

	10 units
	20 units
	30 units
	40 units
	Indeterminate

55.

(06.02 MC) Use the graph to answer the question that follows. (1 point) Without government intervention, this market will charge a price

	lower than optimal by Pc
	higher than optimal by Pc
	lower than optimal by Pc Pe
	higher than optimal by Pc Pe
	lower than optimal by Pc Pp

56.

(06.03 MC) Private investors complain that the "free rider problem" makes investment in public goods and services inefficient and less profitable. Which of the following statements explains why? (1 point)

	Public goods are rivalrous.
	Public goods are excludable.
	Public goods are non-rivalrous.
	Public goods are non-affordable.
	Public goods are non-excludable.

57.

(06.04 MC) What is the most likely goal of a government that enacts a lump-sum subsidy? (1 point)

	To increase market competition
	To decrease market competition
	To correct for a negative externality
	To discourage production
	To encourage production

58.

(06.04 MC) Use the graph to answer the question that follows. (1 point) What is the seller's price after the tax?

	Above $5
	$5
	$4
	$3
	$2

59.

(06.05 MC) Use the graph to answer the question that follows. (1 point) In 2020, what percentage of income in this economy did 60 percent of the households earn?

	20 percent
	30 percent
	50 percent
	75 percent
	80 percent

60.

(06.05 MC) Which of the following policies will most likely help a government to achieve a goal of reducing the wealth gap between those with great wealth and those with no wealth? (1 point)

	Increasing the interest rate on bank loans
	Increasing taxes on income from interest earned on investments
	Increasing the nation's per capita income
	Encouraging actions that yield increased returns to entrepreneurs
	Switching from a progressive tax system to a regressive tax system

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