Question 1

Suppose a firm in a competitive market is earning zero economic profits. As a result, what will it do in the long run?

It will leave the market

It will not leave the market but will temporarily stop production

It will remain in the market but keep production unchanged

It will boost its production

Question 2

Which of the following might explain why a competitive market is considered more theoretical?

A competitive market is made up of identical firms

A competitive market consists of only a few firms

A competitive market has barriers to entry

A competitive market consists of many firms

Question 3

Suppose we have the following information for a firm in the competitive market:

P=$110; q=100;

TC=$10,000 for q=0;

AVC=$20 for q=100;

Which of the following is true for q=100?

The price above represents the long run equilibrium

Firms will enter in the long run

All firms will exit in the long run

Some firms will exit in the long run

Question 4

Using the numbers from the previous problem, we know which of the following?

The firm will shut down even in the short run

The firm will produce in the short run

The firm will have a FC of zero in the short run

The firm will have no sunk costs in the short run

Question 5

Consider a firm in the competitive market. No matter whether the market's demand curve shifts left or right, we know in the long run itseconomicprofit will be 0.

True

False

Question 6

Which of the following is true concerning the Prize Linked Savings Accounts (PLSAs)?

PLSAs do not actually exist but were only made up by your instructor to bore you even more

They are far worse than regular savings accounts in every possible way which explains why no one uses PLSAs

They are legal in only one state in the US because of how damaging they are to a state's poorer population

They were often blocked by states which had a monopoly on lotteries

Question 7

In a monopoly...

A firm has annual profits of at least $500 million

A firm has less ability to determine the market price than a firm in the competitive market

Its prices do not adjust to changes in demand

There is some barrier to entry

Question 28

How many firms are there in a monopoly?

1

50

100

1,000

Question 9

Which of the following equations will definitely apply for a monopoly and a competitive firm in terms of the quantity it chooses to produce?

MR=MC

P=ATC

P=MC

Both MR=MC and P=MC

Question 30

According to this class, what is the main constraint on a monopoly?

A monopoly has no constraints on its ability to charge higher prices

The firm's willingness to sell

The market demand curve

The firm's PES

Question 11

Supposethe firmfaces a horizontal demand curve. Which of the following is true?

The firm is a competitive firm

The firm is a monopoly

The firm has too much market power

None of the above

Question 12

In terms of which of the following is the competitive market NOT the exact opposite of a monopoly?

The price charged

Degree of market power

The quantity produced in the market

Prevalence

Question 13

Recall the company called Jorge B. Inc. that is selling a product known as "Peter's Giant Birthday Candles". Again, the company has the following table:

qPTRTCProfitMRMCProfit

0124---------

1117

2108

393

485

5731

What is the change in profit when q = 5?

-7

-5

-2

Not enough information

Question 14

Suppose a competitive firm for hardwood floors is at a point where economic profits are zero. Suddenly there is a decrease in tastes and preferences for these floors.

In the short run, what happens to the P and q?

P increases; q decreases

P is unchanged; q is unchanged

P and q both decrease

P is unclear; q decreases

Question 15

From the previous problem, suppose a competitive firm for hardwood floors is at a point where profits are zero. As stated, there is a sudden decrease in tastes and preferences for these floors.

In the long run, what happens to its profit (relative to the initial equilibrium)?

Increases

Decreases

Unchanged

Unclear

Question 16

The diamond industry convinced men (and most women) it was essential to use a diamond to propose to a woman. Which of the following elasticities for diamonds demonstrates such a belief by men (and most women)?

PES = 1.5

PES = 0.1

PED = -3.5

PED = -0.4

Question 37

Suppose the company Intel is making positive profits initially. It has a monopoly on microprocessors - what are used as the brain for desktops and for laptops.

Due to the rise of smart phones and tablets, the tastes and preferences for microprocessors has been decreasing. In the long run, what happens to the P and q?

P and q both decrease

P increases; q decreases

P is unchanged; q is unchanged

P unclear; q decreases

Question 18

Again, suppose the company Intel is making positive profits initially. It has a monopoly on microprocessors - what are used as the brain for a desktop and laptop.

As stated, due to the rise of smart phones and tablets, the tastes and preferences for microprocessors has been decreasing. In the long run, what happens to its profit?

Increases

Decreases

Unchanged

Unclear

Question 19

If a firm produces only one good but has a monopoly for that good, the firm will always be profitable.

True

False

Question 20

Suppose a market is initially a monopoly. Then, due to government intervention, the firm is unable to block hundreds of new entrants that compete with the original firm. As a result of what will happen to the market price and the quantity, the market will become less efficient and consumers will be worse off.

True

False