QUESTION 1

1. A flat firm-level demand curve means:

		A. full market pricing power.
		B. limited market pricing power.
		C.no market pricing power.
		D. seasonal market pricing power.

10 points

QUESTION 2

1. In their calculation of profit, accountants typically do not take into account:

		A.variable costs.
		B. fixed costs.
		C. opportunity costs.
		D. explicit costs.

10 points

QUESTION 3

1. Above-normal profits are eliminated by _____, and below-normal profits are eliminated by _____.

		A.entry; entry
		B. exit; exit
		C. entry; exit
		D. exit; entry

10 points

QUESTION 4

1. Which of the following is the MOST likely to be a cartel?

		A. a group of restaurants that join together to create a delivery service
		B. two brick producers who agree to raise the price of bricks in a city
		C. an office supply store that buys its only competitor
		D. an automobile manufacturer that purchases the tire producer from which it gets tires

10 points

QUESTION 5

1. Which of the following best describes a competitive industry?

		A. Its firms sell similar products and have little control over their prices; there are many buyers and sellers and each is relatively small compared with the overall market.
		B. Its firms sell similar products and have direct control over their prices; there are many buyers and sellers and each is relatively small compared with the overall market.
		C. Its firms have little control over the price of their product; the demand curve for each firm's product is downward sloping; there are many firms.
		D. Its firms sell differentiated products and there are few potential sellers. They have little control over the price of their product; there are many relatively small buyers.

10 points

QUESTION 6

1. In the long run, firms will enter industries where price is:

		A. greater than average cost.
		B. equal to average cost.
		C. less than average cost.
		D. positive.

10 points

QUESTION 7

1. In the small town of Wellsville, there is only one grocery store. Given that everyone needs food, we would expect that this grocery store:

		A. is a monopoly and hence highly profitable.
		B. charges exorbitant prices.
		C. prices competitively.
		D. faces a perfectly inelastic demand.

10 points

QUESTION 8

1. In a competitive market, firms acting in their own interest will _____ total industry costs of production.

		A. maximize
		B. minimize
		C. eliminate
		D. exaggerate

10 points

QUESTION 9

1. In the long run, demand is _____ the short run.

		A. more elastic than in
		B. less elastic than in
		C. equally elastic as in
		D. indeterminately different in elasticity as compared with

10 points

QUESTION 10

1. When producers engage in cartel-like behavior, they attempt to mimic the behavior of:

		A. a competitive firm.
		B. a small firm in a competitive industry.
		C. a monopoly.
		D. buyers.

10 points

QUESTION 11

1. If a single supplier produces a good with many good substitutes, then:

		A. it will have little control over the market price.
		B. the demand curve for its output will be downward sloping.
		C. the price it chooses to set must be less than the market price in order to sell additional output.
		D. the market demand will be perfectly elastic.

10 points

QUESTION 12

1. A market becomes more competitive as the product becomes _____ homogeneous and there are _____ potential sellers.

		A. more and more; more
		B. less and less; more
		C. more and more; fewer
		D. less and less; fewer

10 points

QUESTION 13

1. When all members of a cartel cheat, the cartel:

		A. earns monopoly profits.
		B. fails to earn monopoly profits.
		C. cannot profit.
		D. may or may not earn monopoly profits.

10 points

QUESTION 14

1. In a perfectly competitive market, each firm produces:

		A. the same quantity.
		B. a potentially different quantity.
		C. as much quantity as possible.
		D. as little quantity as possible.

10 points

QUESTION 15

1. The term "accidents of history" describes:

		A. actual equilibrium outcomes in a coordination game.
		B. good equilibrium outcomes in a coordination game.
		C. all equilibrium outcomes in a coordination game.
		D.no equilibrium outcomes in a coordination game.