Question 1

2pts

As production increases,

Group of answer choices

average fixed cost will fall.

average fixed cost will increase.

average fixed cost will stay constant.

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Question 2

2pts

If a solar panel manufacturer wants to look at its total costs of production in the short run, which of the following would provide a useful starting point?

Group of answer choices

Divide the variable costs of production by the quantity of output.

Divide total costs into two categories: fixed costs that can't be changed in the short run and variable costs that can be.

Divide the total costs of production by the quantity of output.

Divide total costs into two categories: variable costs that can't be changed in the short run and fixed costs that can be.

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Question 3

2pts

A business produces 10 units of output. Its average variable cost (AVC) = $25, average fixed cost (AFC) = $5, and marginal cost (MC) = $30. The firm's average total cost (ATC) is ________.

Group of answer choices

$250

$30

$300

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Question 4

2pts

What happens to marginal cost if a business's average total cost is decreasing?

Group of answer choices

Marginal cost must be lower than average total cost.

Marginal cost must be higher than average total cost.

Marginal cost must be lower than total cost.

Marginal cost must be higher than total cost.

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Question 5

2pts

When the Long Run Average Cost (LRAC) curve is horizontal, it implies that there are ________.

Group of answer choices

diseconomies of scale

constant returns to scale

economies of scale

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Question 6

2pts

How do economists distinguish between the long run and the short run?

Group of answer choices

There are diminishing returns in the short run, but increasing returns in the long run.

Resources have higher costs in the short run than in the long run.

In the short run, at least one resource is fixed; in the long run, all resources are variable.

In the long run, all resources are variable; in the short run, all resources are fixed.

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Question 7

2pts

Economies of scale may arise from which of the following activities?

Group of answer choices

Government economic subsidies protect firms from competition to avoid losses.

Doubling promotional expenses to expand sales more than proportionately.

Having a smaller retail space can expand sales more than proportionately.

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Question 8

2pts

If a firm is a price taker, then the demand curve for a single firm is

Group of answer choices

perfectly elastic.

the same slope as market demand.

perfectly inelastic.

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Question 9

2pts

If a perfectly competitive firm is producing output at a point where marginal revenue is equal to marginal cost, then it should

Group of answer choices

stick with that level of production in order to maximize profits.

decrease output in order to maximize profits.

increase output in order to maximize profits.

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Question 10

2pts

The long-term result of entry and exit in a perfectly competitive market is that all firms end up selling at the price level determined by the lowest point on the

Group of answer choices

marginal cost curve

industry supply curve.

average variable cost curve.

average cost curve.

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Question 11

2pts

A profit maximizing firm in a competitive industry should ________ when marginal costs are falling.

Group of answer choices

reduce prices

raise output until marginal costs are equal to marginal revenue

maintain output levels on the downwards sloping portion of the marginal cost curve

reduce output

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Question 12

2pts

Which of the following is most likely to be a monopoly?

Group of answer choices

local fast-food restaurant

local bathroom fixtures shop

local television broadcaster

local electricity distributor

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Question 13

2pts

What is an example of a natural monopoly?

Group of answer choices

Market size

Diseconomies of scale

Economies of scale

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Question 14

2pts

The slope of the demand curve for a monopoly firm is

Group of answer choices

upward-sloping.

downward-sloping.

horizontal, parallel to the x-axis.

vertical, parallel to the y-axis.

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Question 15

2pts

A monopoly sees the demand curve as ________ while a perfectly competitive firm perceives its demand curve as ________.

Group of answer choices

horizontal; upward-sloping

flat; downward-sloping

upward-sloping; flat

downward-sloping; horizontal

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Question 16

2pts

Monopolists will earn the most profit by producing

Group of answer choices

where total revenue is farthest above total cost.

where total cost in the lowest.

where total revenue is highest.

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Question 17

2pts

When does price discrimination take place?

Group of answer choices

A business charges different prices to different customers based on their willingness to pay.

A business conceals its pricing policies.

A monopoly enters a market with high-income customers.

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Question 18

2pts

A utility for water is a natural monopoly in the local market. What is the optimal action to take when looking at keeping a competition policy for a the water utility?

Group of answer choices

Set the price at the breakeven point.

Set the price where AC crosses the demand curve.

Set the price below the average cost of production.

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Question 19

2pts

In a monopolistically competitive market, the rule for maximizing profit is to set MR = MC, which means

Group of answer choices

price is lower than marginal revenue.

price is higher than marginal revenue.

price is equal to marginal cost.

price is equal to marginal revenue.

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Question 20

2pts

When a new firm enters a monopolistically competitive industry,

Group of answer choices

the perceived demand and marginal revenue curves for each incumbent firm will shift to the left.

the marginal revenue curves for each incumbent firm will shift to the right.

the perceived demand and marginal revenue curves for each incumbent firm will shift to the right.

the perceived demand curve for each incumbent firm will shift to the right.

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Question 21

2pts

Within a monopolistically competitive industry, it would be expected that

Group of answer choices

in the long-run, a typical firm's price is greater than their average cost.

firms make zero economic profit in the long-run.

firms will make a positive economic profit in the long-run.

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Question 22

2pts

How are perfect competition and monopolistic competition different?

Group of answer choices

Items sold within monopolistic competition have more variation in their characteristics.

Economic profit is more than zero for perfectly competitive firm, but is zero for monopolistic competitors.

Economic profit is not positive for perfect competitors, but it is for monopolistic competitive firms.

The resources in a society are under-allocated to production within a perfectly competitive industry.

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Question 23

2pts

________ is firms' ability to make the same pricing decisions without consulting each other.

Group of answer choices

Implicit collusion

Malfeasance

Price fixing

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Question 24

2pts

If oligopoly firms decide to work together, either formally or informally, and honor the agreement then profits can be ________ by ________ output and ________ the price of goods and services.

Group of answer choices

maximized; reducing; increasing

maximized; increasing; increasing

minimized; reducing; increasing

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Question 25

2pts

Why do economists use game theory to explain oligopolies?

Group of answer choices

Oligopolies are complex and varied and game theory allows economists to model different variations of competition and cooperation.

Game theory allows economists to mimic the same simplicity of oligopolies.

Game theory allows economists to study consumer reaction to product choices in an economy.

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Question 26

2pts

A positive externality arises when a third party, outside the transaction, ________.

Group of answer choices

benefits from a market transaction

fails to allocate resources efficiently

pays a pollution tax to balance social costs

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Question 27

2pts

Which of the following are examples of economic activities with negative externalities?

Group of answer choices

A manufacturing company contracting with a landfill to collect its waste products.

A gold mine discharging arsenic into a natural lake that it's using for a tailings pond.

A paper mill paying for lumber to make paper.

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Question 28

2pts

The supply curve in the market is higher than optimum if

Group of answer choices

There are external costs not accounted by the market.

There are external benefits not accounted by the market.

This is a public good market.

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Question 29

2pts

Externalities lead to greater

Group of answer choices

efficiency in markets because the market includes only cost and benefits imposed directly on the businesses only.

inefficiency in markets because a market will include cost or benefits imposed on third parties by activity in that market.

inefficiency because a market will ignore cost or benefits imposed on third parties by activity in that market.

efficiency in markets because a market will include cost or benefits imposed on third parties by activity in that market.

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Question 30

2pts

A public good is a good that is ________, and thus is difficult for market producers to sell to individual consumers.

Group of answer choices

excludable or rivalrous

excludable and rivalrous

nonexcludable and nonrivalrous

unexcludable or unrivaled

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Question 31

2pts

What typically happens with common goods?

Group of answer choices

Usually the government does a poor job of efficiently managing them so they are exploited.

They are usually poorly managed and overused because property rights lack clarity and removes incentives for efficient management of the goods.

They are usually efficiently managed because distinctly understood property rights incentivises efficient management of the goods.