Question 1(1 point)

At a product price of "0h", this firm would maximize profit by producing at an output of

a	"0n"
b	"0p"
c	"0r"
d	"0s"
e	"0t"

Question 2(1 point)

Because the perfectly competitive firm is a price-taker, its demand curve is

a	downward-sloping
b	horizontal
c	dependent on the marginal cost
d	upward-sloping
e	vertical

Question 3(1 point)

This firm has set its price at $162.00. If this firm were to maximize its profit, it should

a	decrease price and increase quantity, given that the price elasticity of demand is inelastic
b	decrease price and hold quantity constant, given that the price elasticity of demand is elastic
c	decrease price and increase quantity, given that the price elasticity of demand is elastic
d	increase price and decrease quantity, given that the price elasticity of demand is inelastic
e	increase price and decrease quantity, given that the price elasticity of demand is elastic

Question 4(1 point)

Why are monopoly firms price makers?

a	Monopolies face a perfectly elastic demand curve.
b	Monopolies produce goods that competitive firms cannot produce.
c	Monopolies are more efficient than perfectly competitive firms.
d	Monopolies produce at a lower cost than perfectly competitive firms.
e	Monopolies enjoy barriers to entry.

Question 5(1 point)

Purely competitive industries have which of the following characteristics?

I. Resources will be transferred from firms generating economic losses.

II. Firms will earn zero economic profit in the long run.

III. Firms will be able to operate in the short run as long as revenues cover variable costs.

IV. Firms will shut down in the long run if market price is less than average total cost.

a	I only
b	II only
c	III only
d	I, II, and IV only
e	I, II, III, and IV

Question 6(1 point)

At a market price of $93, this firm

a	has positive economic profit as it can cover its explicit and implicit costs
b	has normal profit, but is unable to fully cover the explicit and implicit costs it faces
c	has positive accounting profit but negative economic profit, being unable to cover all implicit costs
d	has normal profit, but is just able to cover all of its explicit and implicit costs
e	has normal profit and is able to cover only its accounting costs

Question 7(1 point)

If the market price is $71, this competitive firm will

a	produce in the short run, as it can cover its explicit costs but not its implicit costs
b	produce in the short run, but if price does not rise to $93, it will shut down in the long run
c	produce in the short run, as it can just cover all of its variable costs but none of fixed costs
d	produce in the short run, as it can cover all variable costs and some of its fixed costs
e	cease production and sell what it has already produced to minimize losses

Question 8(1 point)

Which of the following characteristics correctly describe a monopoly?

I. The firm is the single seller in the industry.

II. Barriers to entry exist in the industry.

III. Unregulated monopolies are illegal under United States law.

IV. The firm determines its price and output.

a	I and II only
b	I and III only
c	I, Ii, and III only
d	I, II, and IV only
e	I, II, III, and IV

Question 9(1 point)

At a particular output, a perfectly competitive firm's price is $10, marginal cost is $11, average total cost is $12, and average variable cost is $8. The firm should

a	increase output to maximize profit
b	decrease output to minimize loss, but keep producing in the short run
c	raise the product price to $11 to maximize profit
d	shut down
e	continue production at its current level of output to maximize output

Question 10(1 point)

At what output would this firm achieve productive efficiency?

a	Q1
b	Q2
c	Q3
d	Q4
e	Monopolies cannot achieve productive efficiency.

Question 11(1 point)

The monopolist's marginal revenue curve is lower than the demand curve because the firm

a	must lower the price of all of its products in order to sell more
b	faces constantly increasing costs of production as output increases
c	achieves efficiency when revenues are lower than prices
d	must accept the price set by the industry
e	becomes less efficient as output increases

Question 12(1 point)

In the graph above, the long-run supply curve reflects an industry in which

a	expansion will increase resource prices
b	contraction will increase resource prices
c	expansion will decrease resource prices
d	expansion will increase resource prices but contraction will not impact resource prices
e	expansion and contraction will not affect resource prices

Question 13(1 point)

What would the fair return price and quantity be for a regulated monopoly?

a	P4, Q3
b	P3, Q2
c	P1, Q1
d	P5, Q1
e	P2, Q1

Question 14(1 point)

In the long run, which of the following are true in a competitive industry?

I. Firms can expand or contract productive capacity.

II. Firms face substantial fixed costs.

III. Firms can freely enter and exit.

IV. Firms are driven by incentives based on profits and losses.

a	I only
b	II only
c	I and III only
d	I, III, and IV only
e	II, III, and IV only

Question 15(1 point)

In order to maximize profit, the firm should produce where

a	Average Revenue = Price
b	Marginal Cost = Average Variable Cost
c	Marginal Cost = Marginal Revenue
d	Price = Average Variable Cost
e	Marginal Revenue = Price

Question 16(1 point)

At price "0f", which of the following is true?

I. The firm has a positive economic profit of "feug" and a total fixed cost of "guvj".

II. The firm has a total cost of "gut0" and a fixed cost of "guvj".

III. The firm is in a short-run position.

a	I only
b	II only
c	III only
d	I and II only
e	I, II, and III

Question 17(1 point)

In a competitive, constant-cost industry, the industry long-run supply curve is

a	inelastic but not perfectly inelastic
b	unit elastic
c	elastic but not perfectly elastic
d	perfectly inelastic
e	perfectly elastic

Question 18(1 point)

Which of the following statements best describes a perfectly competitive market?

I. A large number of firms exist in the industry.

II. Products are differentiated.

III. Firms can easily enter or exit the industry.

a	I only
b	II only
c	I and III only
d	II and III only
e	I, II, and III

Question 19(1 point)

A profit-maximizing natural monopoly with positive economic profits has which of the following characteristics?

I. Price is set higher than marginal revenue.

II. Marginal cost equals marginal revenue.

III. Average total cost equals average revenue.

IV. Market demand intersects ATC where ATC is declining.

a	I and II only
b	I and III only
c	I, II, and III only
d	I, II, and IV only
e	I, II, III, and IV

Question 20(1 point)

Between three and four units of total product, the marginal cost and marginal revenue are

Marginal Cost /// Marginal Revenue

(A) Rising and greater than ATC /// Rising

(B) Falling and less than ATC /// Falling

(C) Less than ATC /// Constant

(D) Greater than ATC /// Constant

(E) Minimum /// Maximum

a	A
b	B
c	C
d	D
e	E

Question 21(1 point)

Allocative efficiency is identified as the output where

a	Average Total Cost = Marginal Cost
b	Price = Marginal Cost
c	Marginal Revenue = Demand
d	Average Total Cost = Average Variable Cost
e	Average Variable Cost = Price

Question 22(1 point)

The deadweight loss associated with reducing output for the monopoly is the

a	triangle below MC = D, on the P3 line from Q2 to Q4
b	triangle below the demand curve, on the P3 line from Q1 to Q4
c	rectangle between P1 and P3, from the left axis to the Q1 line
d	rectangle between P1 and P4, from the left axis to the Q1 line
e	triangle to the left of MC = D, on the Q1 line from P1 to P4

Question 23(1 point)

In the long run, a purely competitive firm will only operate at a point where

a	average variable cost is at a minimum
b	negative economic profit is generated
c	only accounting profit is generated
d	positive economic profit is generated
e	average total cost is at a minimum

Question 24(1 point)

Why do monopolies not produce at the point of productive efficiency?

a	The firm maximizes profit by producing where ATC = D.
b	The firm reduces output in order to raise the price.
c	The monopoly focuses on minimizing the marginal cost.
d	The monopoly focuses on achieving allocative efficiency.
e	Monopolies cannot achieve productive efficiency.

Question 25(1 point)

At zero units of total product, the total fixed cost for this firm is

a	0
b	90
c	100
d	190
e	indeterminable

Question 26(1 point)

In pure competition, which of the following are true in the long run?

I. Individual firms have the freedom to enter or exit the industry.

II. Individual firms have control over the market price of their product.

III. Individual firms' output decisions are based on their costs and the market price.

IV. Individual firms' profits attract entry, while losses prompt exit.

a	I only
b	II only
c	I, II, and IV only
d	I, III, and IV only
e	I, II, III, and IV

Question 27(1 point)

If competitive firms in the short run have positive economic profit where marginal cost equals marginal revenue

I. optimal allocative efficiency has been achieved

II. optimal productive efficiency has been achieved

III. the sum of consumer and producer surplus is maximized

IV. long-run adjustments will create optimal efficiency with the sum of consumer and producer surplus maximized

a	I only
b	I and II only
c	I and III only
d	II and III only
e	IV only

Question 28(1 point)

Assume firms in constant-cost industries are engaged in pure competition. Each firm will have

a	marginal revenue that equals marginal cost above average total cost minimum
b	marginal revenue that equals marginal cost at average total cost minimum
c	marginal cost that equals marginal revenue at a level below market price
d	marginal cost that equals marginal revenue at average fixed cost minimum
e	marginal revenue that equals marginal cost at average variable cost minimum

Question 29(1 point)

Assume that this firm is an unregulated monopoly. At what price and quantity would this firm produce to maximize profit?

a	P1, Q1
b	P5, Q1
c	P4, Q3
d	P4, Q2
e	P3, Q2

Question 30(1 point)

If firms in a competitive, constant-cost industry are earning positive economic profits in the short run, then in the long run

Firms /// Industry Demand /// Industry Supply /// Market Price

(A) Enter /// Constant /// Increases /// Decreases

(B) Enter /// Increases /// Increases /// Uncertain

(C) Enter /// Decreases /// Increases /// Decreases

(D) Exit /// Decreases /// Decreases /// Increases

(E) Exit /// Constant /// Decreases /// Increases

a	A
b	B
c	C
d	D
e	E

Question 31(1 point)

A natural monopoly's barrier to entry is

a	a government license to operate
b	a copyright
c	a patent
d	heavy use of advertising
e	economies of scale

Question 32(1 point)

At long-run equilibrium for the perfectly competitive firm, the marginal cost is equal to all of the following EXCEPT

a	average total cost
b	marginal revenue
c	average variable cost
d	average revenue
e	price

Question 33(1 point)

To reach allocative efficiency, government would set a price ceiling at

a	P1
b	P2
c	P3
d	P4
e	MR = ATC

Question 34(1 point)

Assume Kenny is a farmer who sells soybeans in a perfectly competitive industry. If the industry equilibrium price for soybeans is $14 per bushel and Kenny sets his price at $15 per bushel, Kenny's

a	marginal revenue will increase
b	total revenue will decrease
c	total revenue will increase
d	economic profit will increase
e	accounting profit will increase

Question 35(1 point)

In a perfectly competitive industry in which firms are achieving short-run economic profit

a	firms will exit the industry
b	the government will increase taxes
c	firms will increase the product price
d	industry output will decrease
e	firms will enter the industry

Question 36(1 point)

In a perfectly competitive market, what is the slope of the demand curves for the industry and the individual firm?

Industry Demand /// Individual Firm Demand

(A) Horizontal /// Horizontal

(B) Vertical /// Vertical

(C) Downward-Sloping /// Horizontal

(D) Horizontal /// Downward-Sloping

(E) Downward-Sloping /// Downward-Sloping

a	A
b	B
c	C
d	D
e	E

Question 37(1 point)

Assuming a competitive, increasing-cost industry, an increase in market demand in the long run will result in

Market Price /// Resource Prices // Average Total Costs

(A) Constant /// Increase /// Increase

(B) Increase /// Increase /// Constant

(C) Increase /// Increase /// Increase

(D) Decrease /// Decrease /// Decrease

(E) Uncertain /// Increase /// Increase

a	A
b	B
c	C
d	D
e	E

Question 38(1 point)

Given the graph above, a contraction in the industry would

I. help the industry and the firms

II. decrease costs per unit for the industry and the firms

III. increase costs per unit for the industry and the firms

a	I only
b	III only
c	I and II only
d	I and III only
e	i, II, and III

Question 39(1 point)

Assuming units of output are not divisible, the shutdown point for this firm in the short run occurs where

a	total output is 8 units, where MR
b	total output is 5 units, where MC=AVC at AVC minimum
c	total output is 7 units, where MC>ATC
d	total output is 7 units, where MC=ATC at ATC minimum
e	total output is 6 units, where MR=MC at ATC minimum

Question 40(1 point)

The efficiency loss generated by this profit-maximizing monopolist is area bounded by the points

a	P1, b, a, P3
b	P1, b, c, a, P3
c	b, a, c
d	d, a, c
e	b, d, c

Question 41(1 point)

If a perfectly competitive firm's variable cost increases, all of the following occur in the short run EXCEPT

a	the firm's marginal cost will increase
b	the firm's output will decrease
c	the firm will experience a short-run loss
d	the firm's average fixed cost will increase
e	the firm's average total cost will increase

Question 42(1 point)

This monopoly firm is

a	earning short-run profit, but will earn no economic profit in the long run
b	experiencing a loss, but should remain in business in the short run
c	earning a normal profit, but not an economic profit
d	earning an economic profit
e	experiencing a loss and should shut down