Economics103Spri

ng2012:Mult
ipl
echoicerev
iewquest
ionsf
orfi
nalexam.Exam wi
l
lcov
erchapt
erson
perf
ectcompeti
ti
on,monopol
y,monopol
isti
ccompeti
ti
onandoli
gopol
yupt ot
heNashequi
li
bri
um

MULTI
PLECHOI
CE.Chooset
heoneal
ter
nat
ivet
hatbestcompl
etest
hest
atementoranswer
sthequest
ion.

1)Whatisthedi f
ferencebetweenper fectcompet i
ti
onandmonopol i
sti
ccompet i
tion? 1)
A)Per fectcompet it
ionhasal ar genumberofsmal lf
irmswhilemonopol i
sti
ccompet it
iondoes
not.
B)Inmonopol isti
ccompet i
ti
on, fi
rmspr oduceident
icalgoods,whil
einperfectcompet i
ti
on,
fi
rmspr oducesl i
ghtlydiff
erentgoods.
C)Per fectcompet it
ionhasnobar r i
erstoentr
y ,
whil
emonopol ist
iccompet i
ti
ondoes.
D)Inper fectcompet it
ion,fi
rmspr oduceident
icalgoods,whil
einmonopol i
st i
ccompet i
ti
on,
fi
rmspr oducesl i
ghtlydiff
erentgoods.
E)Per fectcompet it
ionhasbar rierstoentrywhilemonopolist
iccompet i
ti
ondoesnot .
2)
2)I
naper f
ect l
ycompet i
ti
vemar ket,thet ypeofdecisi
onaf i
rm hastomakei sdiff
er enti
ntheshort
r
unthani nthelongr un.Whi chofthef ollowi
ngisanexampl eofaper fect
lycompet it
ivef
ir
m'sshort
-
rundecision?
A)theprof
it-
maximizingl
evelofoutput
B)whetherornottochangeitsplantsize
C)howmucht ospendonadv er
tisi
ngandsal espr
omot
ion
D)whatpricetochargebuyer
sf ortheproduct
E)whetherornottoenterorexi
tani ndustr
y

3)
3)Thef
ir
m'sover-
ri
dingobjectivei
sto
A)maximizeeconomi cprofi
t.
B)avoidaneconomi closs.
C)maximizetotalr
evenue.
D)maximizenormal profi
t.
E)earnanormal pr
ofit
.

4)
4)Thepri
cechar gedbyaperfectl
ycompet i
ti
vefi
rmis
A)higherthemor ethef
irm produces.
B)dif
ferentthanthepr
icechar gedbycompet
ingf
ir
ms.
C)thesameast hemarketprice.
D)i
ndetermi nat
e.
E)l
owert hemor ethef
irm produces.

5)Aprofi
t-
maxi
mizi
ngout
putf
orasingl
e-pr
icemonopol
yisdet
ermi
nedbytheint
ersect
ionoft
he 5)
_
___
_ _
__cur
vesandt
heprof
it
-maxi
mizi
ngpr i
cei
sfoundonthe__
___
___cur
ve.
A)tot
alr
evenueandtot
alcost,totalrev
enue
B)margi
nalcostandmarginal
rev enue;margi
nalrev
enue
C)demandandsupply;
supply
D)margi
nalcostandmarginal
rev enue;demand
E)margi
nalcostandaver
agetot alcost;demand

6)Asingl
e-pr
icemonopol
yhasmargi
nalr
evenueandmargi
nalcostequalt
o$19at15uni
tsof 6)
out
putwher et
hepri
ceonthedemandcur
veis$38.Att
hisoutput
,aver
aget
otal
costi
s$15.
Whatisthetot
alpr
ofi
tear
ned?

1
 A)$225B)$570C)$19 D)$285E)$345
7)Rat
eofretur
nregul
ationisdesignedt oall
owanatur
almonopol
ytoA) 7)
under
esti
mateit
sav eragecost .
B)earnzeronormal profi
t.
C)earnaneconomi cpr of
it.
D)earnanormal profi
t.
E)compet ewit
hanyf i
rm enter
ingthemar
ket.
8)
8)Whichofthefoll
owingistrueaboutmonopolist
iccompet i
ti
onbutfal
seaboutper
fect
competi
ti
on?
A)Firmscanear naneconomi cprofi
tintheshortrun.
B)Ther earealargenumberofindependentl
yactingsell
ers.
C)Ther earenobarri
erstoentry.
D)Firmscompet eont heirpr
oduct'
spri
ceaswel lasitsqual
it
yandmarketi
ng.
E)Firmscannotear naneconomi cprof
itint
helongr un.

9)
9)Whatdoesmonopol i
sti
ccompeti
ti
onhaveincommonwi
thmonopol
y?
A)mut uali
nterdependence
B)theabil
it
yt ocolludewit
hrespectt
opri
ce
C)alargenumberoff i
rms
D)adownwar d-sl
opingdemandcurve
E)barri
erstoent r
y

10)Fi
rmsi
nmonopol isti
ccompet
it
ionhav
edemandcur
vest
hatar
e 10)
A)U-shaped.
B)hori
zontal.
C)downwar dsl opi
ng.
D)vert
ical.
E)upwar dsloping.

2
11)Kev i
nownsapersonalt
rai
ninggymnasi
um inOr
lando.Theabovef
igur
eshowsthedemandand 11)
costcur
vesforhi
sfir
m,whichcompetesinamonopolist
ical
l
ycompeti
ti
vemar
ket.Kev
inwi
ll
tr
ainhowmanyclient
sperday?
A)between2and4
B)6
C)10
D)4
E)Noneoftheaboveanswersiscor
rect
.
12)
12)Kev i
nownsapersonalt
raininggy
mnasium i
nOr
lando.Theabovef
igur
eshowsthedemandand
costcurvesf
orhi
sfir
m, whichcompet
esinamonopolist
ical
l
ycompeti
ti
vemar
ket.Whatpr
ice
wil
lKevinchar
gepersessi
on?
A)$20 B)$80 C)$60 D)$100E)$40

13)
13)I
nmonopol i
sticcompet i
ti
on,theproductsofdif
ferentsel
l
ersar
e
A)si
mi l
arbutslightlydif
ferent
.
B)uniquewi thoutanycl oseorperfectsubst
itutes.
C)per f
ectsubst i
tutes.
D)identical
.
E)eitheridenti
cal ordif
ferent
iat
ed.

14)Whenamonopol i
sti
call
ycompet it
ivefirm'
sdemandcur v
eshif
tsl
eft
ward,
whathappenst
oits 14)
marginalrevenuecur ve?A)
Itdisappear s.
B)Not hing, t
hemar ginalr
evenuecur veisunchanged.
C)Itshiftsleftward.
D)Itshiftsr i
ghtward.
E)Noneoft heabov eiscorr
ectbecauset heeffectonthemar
ginal
rev
enuecurv
edependson
whethert hedemandwasi niti
all
yelasti
corinelast
ic.
15)Fi
rmsi nanol igopoly 15)
i
. ar eindependentofeachot hers'acti
ons.
i
i. caneachi nf l
uencethemar ketpr i
ce.
i
ii
. char geapr i
ceequal tomarginal r
evenue.
A)i only
B)i andiii
C)iionly
D)iiionl
y
E)i,ii
,andi ii
16)Whenol
i
gopol
i
esseekt
ooper
ateasasi
ngl
e-pr
icemonopol
y,t
hef
ir
mspr
oduceatt nt16)
hepoi
wher
e:
A)MR=MC.
B)P=MR.
C)P<ATC.
D)P=MC.
E)MC=ATC.

3
 17)
17)Acart
elisacoll
usiveagreementamonganumberoff i
rmsthati
sdesi
gnedt
o
A)expandoutputandl owerpri
cesbutnottoapredat
oryl
evel
.
B)expandout putandl owerpr
icest
oapr edat
oryl
evel
.
C)restri
ctout
putandr ai
sepri
ces.
D)expandout putandr ai
sepri
ces.
E)restri
ctout
putandl owerpricest
oapr edat
oryl
evel
.

18)Whenol
i
gopol
i
esoper
atel
i
kef
ir
msi
nper
fectcompet
it
ion,t
hef
ir
mspr
oduceatt
hepoi e18)
ntwher
t
he
A)pr
iceexceedstheaver
agetotalcostbythegreat
estamount
.
B)pr
iceexceedsthemarginal
costbyt hegreat
estamount
.
C)margi
nalcostequal
stheav er
agetotalcost.
D)pr
icei
slessthanthemar gi
nalcost.
E)margi
nalcostequal
stheprice.
19)
19)I
fonefir
mi naduopolyincreasesitsproduct
ionbyoneunitbeyondthemonopol
youtput
,that
f
ir
m'sprofi
t_____
___,
theot herf
irm'sprofi
t__
_ _
___
_,andthetot
alprofi
toft
heduopol
y_______
_.
A)increases;
incr
eases; i
ncreases
B)increases;
decreases;decreases
C)doesnotchange; doesnotchange; doesnotchange
D)increases;
doesnotchange; i
ncr
eases
E)increases;
decreases;doesnotchange

20)ANashequi l
i
bri
um isdefinedas 20)
A)eachpl ay
ertakingtheactionthatisbestforallt
heplayers.
B)for
mi ngacar t
el wi
thstr
ongpenal ti
esforcheaters.
C)earningzeroeconomi cprofi
tinthelongrun.
D)rel
yingonot hergamepl ayer
st oreal
izethebenefitofcooperat
ion.
E)eachpl ay
ertakingthebestpossibleacti
ongi v
ent heacti
onoftheot herpl
ayer
.

4
21)I
naprisoners'di l
emmagame, intheNashequi l
ibr
ium A) 21)
nei
therplayerget shi
sorherbestoutcome.
B)bot hplay ersgett
hei
rbestoutcome.
C)onepl ay ergetshi
sorherbestout comeandt heotherpl
ayerdoesnot.
D)col l
usionwoul dnotal
tertheoutcome.
E)Ei t
heranswerAorCmi ghtbecorrectdependingonwhetherthepl
ayer
scommuni
cat
ewi
th
eachot herordonotcommuni catewi t
heachot her
.
22)
22)I
nthepri
soners'di
lemma, eachplay
eris__
______r
egar
dlessoft
heot
herpl
ayer
'sact
ions.
A)bet
teroffconfessi
ngB)f or
cedtoconfess
C)betterof
fdeny i
ng
D)for
cedt odeny
E)goingtogof ree

23)I
nanoli
gopoly, out
putis 23)
A)great
ert hantheout puti
nperfectcompeti
ti
on.
B)somewher ebetweent heout
putinmonopolyandthatinperf
ectcompet
it
ionout
comes.
C)i
nal l
circumst ancesthesameast heout
putinper
fectcompeti
ti
on.
D)l
esst hant heoutputinmonopol y
.
E)i
nal l
circumst ancesthesameast heout
putinmonopoly.

24)Whichoft
hefol
lowingistr
ue?I ntheabovefi
gur
e,i
fthemarketi
s 24)
A) amonopoly,outputwilbeQ3andpr
l i
cewil
lbeP3.
B) per
fectcompeti
tion,outputwi
lbeQ3andpr
l i
cewil
lbe
P3.C)per
fectcompet
it
ion,
out
putwi
l
lbeQ1andpr
icewi
l
lbe
P1.
D)amonopoly,
outputwil
lbeQ1andpr
icewi
l
lbeP3.
E)per
fectcompet
it
ion,out
putwi
l
lbeQ2andpri
cewi
lbeP2.
l

5
25)I
ntheabov
efi
gur
e,t
heout
putofanol
i
gopol
ywi
l
lrangebet
weenA) 25
Q2andQ3. )
B) 0and
Q1.
C) Q1and
Q2.D)Q1and
Q3.
E)0andQ2.
26
26)ANashequili
bri
um intheduopolygame )
A)meanst hatoneplayerhasgreatermarketpower .
B)willal
waysleadtoequili
bri
um inwhichthefir
ms' tot
alpr
ofi
tisthel
argest
.
C)canoccuronlyiffi
rmscooper at
ewi t
heachot her.
D)meanst hatafir
m mustbeabl etodetermineitsactonsandt
i heact
ionsofit
scompet i
tor
.
E)occurswheneachpl ayertakesthebestpossibleact
ionr
egardl
essofthestr
ategychosenby
otherfi
rms.

27) Themaj ordil

emmaf acingBoei ngandAi r
busi sthe27)
A)factthatneitherwillrespondt ot hebehavioroftheother.
B)factthatifeachf ir
m separ atelytri
estomaxi mizeitsprof
it
,itmightwindupwi t
hlessprof
itthat
otherwise.
C)factthatwhent heycol ludetomaxi mizetheirprof
it
,theotherfi
rm'sprofi
tmightbelar
gerthan
it
spr ofi
t.
D)certai
ntysurroundi ngt hereactionofeachf i
rmt othebehavioroftheotherf
irm.
E)compet it
ionf r
om ot herf i
rmst hatdri
vestheireconomicprofitt
ozero.

6
28) Theabov efi
gureshowsthemar ketdemandcur veforlong-dist
ancetelephonecall
s.Suppose
28)themarginalcostofalong-di
stancet el
ephonecallis2¢ami nuteforacallnomat t
erhowmany
minutesofcall
sar emadeandt hereare3f ir
msi ntheindustr
y.Ifthef i
rmsi
nt heindustr
yoperateas
perf
ectcompet i
tors,
thereare___
__ _
__mi nutesofcall
smadeperhour .
A)between0and3mi l
l
ion
B)mor ethan3mi l
li
onandl essthanorequal to5mi l
li
on
C)mor ethan5mi l
li
onandl essthanorequal to7mi l
li
on
D)mor ethan9mi l
li
on
E)mor ethan7mi l
li
onandl essthanorequal to9mi l
li
on

7
29)Thef i
gureabov eshowsthemarketdemandcurveandtheATCcurv
ef orafi
r m.I
fallf
ir
msin 29)
t
hemar kethavethesameATCcur ve,t
helowestpr
iceatwhi
chafi
rm couldstayinbusi
nessi
n
t
hel ongrunis__ _
____
_peruni
tandt hequant
it
ydemandedinthemarketatthatpri
ceis
__
___ _
__unitsperhour.
A)$20; 2,
000
B)$10; 4,
000
C)$20; 8,
000
D)$10; 8,
000E)$20; 4,
000

30)
30)Thef i
gureaboveshowsthemar
ketdemandcurveandtheATCcurv
ef oraf
irm.I
fal
lfi
rmsin
themar kethavethesameATC cur
ve,t
heeffi
ci
entscaleforonefi
rmi s_
_____
__uni
tsper
hour.A)2,000
B)4,000
C)8,000
D)10,000
E)mor ethan10,
000

31)Whi
choft hefol
lowi ngi
scor rect? 31)
A)Inthelongr un,afir
mi nmonopol i
sti
ccompeti
ti
onearnszer oeconomi cprofi
tanditspri
ceis
equal t
othemi ni
mum av er
agetot
alcost
.
B)Inthelongr un,afir
mi nmonopol i
sti
ccompeti
ti
oncanear naneconomi cprof
itbecauseof
productdifferent
iat
ion.
C)Af i
rmi nperfectcompet iti
onoper
atesatmaxi
mum av er
aget otalcostinthelongr un.
D)Inthelongr un,afir
mi nmonopol i
sti
ccompeti
ti
onmaxi mizesitspr of
itatapointwherepriceis
equal t
oav eragetotalcostbuttheaver
agetot
alcosti
snotmi ni
mi zed.

8
 E)Afir
mi nmonopoli
sticcompet it
iondoesnothav eexcesscapaci tyint
helongr
un.
32)Acar
teli
smostli
kelytooccuri n 32)
A)perf
ectcompeti
ti
onasf i
rmscompet ebyr educingcost .
B)ol
igopol
yasfir
mscompet etolowerpri
ceandi ncreaset hei
rownpr of
it
s.
C)monopoli
sti
ccompet it
ionwher efi
rmscolludetoincr easeprofi
ts.
D)monopolybecauseitfacesnocompet i
ti
on.
E)ol
igopol
yasfir
msactt ogethertorai
sepri
cesandi ncreaseprof
its.
33)
33)Whenfir
msi nmonopol isti
ccompeti
ti
onaremaki nganeconomi cprofi
t,f
irmswi
l
l
A)entertheindustr
y,anddemandwi l
ldecreasef ort heori
ginal f
ir
ms.
B)exittheindustry
,anddemandwi ll
incr
easef ort hef i
rmst hatremain.
C)ent ertheindust
ryandthenwil
lexitt
hei ndustry.
D)ent ertheindust
ry,anddemandwilli
ncreasef ort heori
ginal f
ir
ms.
E)exittheindustry
,anddemandwi ll
decreasef ort hefir
mst hatremain.
34)
34)Her
b'sInc.hasal argeshareofit
smar ketandist
empt
edt
ocol
l
udewi
tht
hef
ewf
ir
mst
hatar
ein
i
tsmarket.Her b'
soper atesin
A)aper fect l
ycompet i
ti
vemarket.
B)collusivelyprotectedmarket.
C)amonopol ymar ket.
D)amonopol ist
ical
lycompetit
ivemarket.
E)anol igopoly .
35)
35)Acar
teli
s
A)amar ketst
ruct
urewit
hal ar
genumberofsmal lfi
rms.
B)amar ketwi
thonlyt
wof i
rms.
C)agroupoffirmsact
ingtogethertor
aisepr
ice,decr
easeout
put
,andi
ncr
easeeconomi
c
prof
it.
D)amar ketst
ruct
urewit
hasmal l
numberoflargefi
rms.
E)anothernameforanoli
gopoly.

36)
36)Foraf i
rminmonopol ist
iccompet
it
ion,
theef
fi
ci
entscal
eist
heamountofout
putatwhi
ch
__
__ _
___isami nimum.
A)mar ginal
cost
B)fixedcost
C)av er
agetotalcost
D)av er
agev ari
abl
ecost
E)av er
agefixedcost

37)Afi
rminmonopoli
st i
ccompet
it
ion_
___
___
_inf
luencei
tspr
iceand_
___
___
_inf
luencet
he 37)
mar
ketaver
ageprice.
A)cannot
;cannot

9
 B)can;onlyintheshortr
uncan
C)can;cannot
D)cannot;can
E)can;can
38)Atal
ong-r
unequi l
i
brium i
nmonopoli
sti
ccompet
it
ion,
pri
ceequal
sA) 38
margi
nalcostbutnotmar gi
nal
rev
enue. )
B)averaget
otalcost
.
C)mar gi
nal
revenueandmargi
nalcost.
D)mar gi
nal
revenuebutnotmar
ginalcost
.
E)zero.
39)Inmonopolisti
ccompet i
tionther
eare___
___
__barr
ierst
oentry
,sotherefor
einthel
ongr
un, 39
economicprofit________
. )
A) no; is
subst
antial
B) many ;equals
zeroC)no;equal szero
D)many ;issubst ant
ial
E)many ;mi ghtbeear neddependi
ngonthedegreeofpr
oductdi
fferent
iat
ion
40
40)Themaj
ordif
ferencebetweenmonopol i
sti
ccompet i
ti
onandmonopol yi
s
)
A)monopolyisapricesetterandafi
rmi nmonopolisti
ccompetit
ionisapricet
aker.
B)howthequantit
yofout putisdet
ermined.
C)onl
yamonopol ycanear naneconomi cprof
iti
nt helongr
un.
D)onl
yafirmi nmonopolisti
ccompetit
ioncanearnaneconomi cprofi
tintheshor
trun.
E)onl
yfi
rmsi nmonopolisticcompeti
ti
onareprotectedbybarr
ier
st oentr
y.

41
41)I
famonopoli
sti
cal
lycompetit
ivesel
ler'
smar gi
nal
costi
s$3.
56,
thef
ir
m wi
l
ldecr
easei
tsout
put
i
f )
A)i
tsmarginal
revenueislessthan$3. 56.
B)i
tsmarginal
revenueisequalto$3.56.
C)i
tsmarginal
revenueismor ethan$3. 56.
D)i
tsaver
agetotalcosti
sequal t
o$4. 00.
E)Bot
hanswer sBandDar ecorrect.
42
42)I
nmonopolisticcompetit
ion,pr
ofiti
smaximizedbyproduci
ngsot
hatmar
ginalr
evenueA)
equal
sprice. )
B)equalsav er
agetotalcostbutnotmargi
nalcost
.
C)equalsmar ginal
costandwhi char
elessthanpri
ce.
D)equalsmar ginal
costandequalspri
ce.
E)isnegative.
43
43)Theabsenceofbar
ri
erst
oent
ryi
nmonopol
i
sti
ccompet
it
ionmeanst
hati
nthel
ongr
unf
ir
ms )

10
 A)earnei t
heraneconomi cpr ofitorzeroeconomi cprofi
t.
B)earnzer oeconomi cprof i
t.
C)incuraneconomi cl oss.
D)earnaneconomi cpr of
it.
E)earnei t
herzeroeconomi cpr ofi
torsufferaneconomi closs.
44)Withanav eragecostpricingr ule,t
hequant it
ypr oducedbythenatural
monopol
yis_
___
___
_the 44)
quanti
typroducedwi t
hamar ginalcostprici
ngr ule.
A)lessthan
B)greaterthan
C)notcompar ableto
D)equal to
E)greaterthaninthelongr unandl essthani ntheshortrunthan
45)
45)Becauseoft
henumberoff irmsinmonopol ist
iccompet
it
ion
A)eachfi
rm hasalargemar ketshare.
B)iti
spossibl
efort
hef i
rmst ocoll
ude.
C)onefi
rm hastheabil
i
tyt odict
atemarketcondi
ti
ons.
D)eachfi
rm mustcaref
ullymonitorwhatitscompet
it
orsdo.
E)noonefir
m candomi natethemar ket
.

46)
46)I
falar
genumberoff i
rmsarecompeting,themar
ketcoul
dbe
A)monopol
isti
ccompetit
ionormonopol y.
B)perf
ectcompetit
ionormonopoly.
C)oli
gopol
yormonopol y.
D)perf
ectcompetit
ionormonopolist
iccompet
it
ion.
E)monopolist
iccompeti
tionorol
i
gopol y.

47)
47)Wi
thanatur almonopoly
A)nor egulat
ionisnecessarybecauseitisanatur
almonopoly.
B)regulati
ont akesthefor
m ofbreakingthecompanyintoseveral
compet
ingfi
rms.
C)regulati
ont akesthefor
m offorci
ngt hecompanyoutofbusiness.
D)regulati
oncant aketheform ofaveragecostpr
ici
ngtoall
owcov er
ageofcost
s.
E)r
egul ati
ontakestheform offorci
ngcompet i
ti
onfrom newfir
ms.

48)
48)I
fanatur
almonopolyisregulat
edusing
A)atotalcostpr
ici
ngrule,t
hefirm wil
lexitt
hei ndustr
y.
B)amar ginal
costpri
cingrul
e,thefir
m maximi zesitsprof
it
.
C)anav er
agecostpri
cingrule,
thefirm maximizesitsprofi
t.
D)amar ginal
costpri
cingrul
e,thefir
mi ncursaneconomi closs.
E)anav er
agecostpri
cingrule,
thefirmincursaneconomi closs.

49)
49)Pr
icecapregulati
onisdefinedasr egulati
ont hat
A)imposesapr i
ceceil
ingont her egulatedfirm.
B)isessential
lythesameasr ateofret urnregul
ati
on.
C)usesav eragecostpricingtoensur ecost sarecover
ed.
D)usesmar gi
nalcostpricingtoensureef fi
cientout
put.
E)encouragesf i
rmstoexagger at
ecost stoincr
easeprof
it
s.

11
50)Thepr
ocessofpr icecapr egul
ati
oni
ncl
udeswhi
choft
hef
oll
owi
ng? 50)
i
. apr iceceili
ng.
i
i. marginalcostpricing.
i
ii
.averagecostpr i
cing
A)iandi i
B)i andiii C)i
ionl
y D)i
iandi
i
i E)i
onl
y

12
51)Theabovefi
gurerepresent
sthemar ketforcabl
etelevi
sioninOakland,Fl
ori
da.TimeWarner 51)
Communicat
ions(TWC)i sthesoleprovi
derofcabletel
ev i
siont
other esi
dent
soft hi
sCentr
al
Fl
ori
dacommuni t
y.IfTWCi slef
tunregul
ated,whatisthepr i
ceofcabletel
evi
sioninOakl
and?
A)$10 B)$20 C)$50 D)$30 E)$40
52)
52)Theabovefi
gurerepresent
sthemar ketforcabletelevi
sioninOakland,Fl
ori
da.TimeWar ner
Communicati
ons(TWC)i sthesoleprovi
derofcabl etel
ev i
siont
ot heresi
dentsofthi
sCentral
Fl
ori
dacommuni t
y.IfTWCi slef
tunregul
ated,howmanyhousehol dsinOaklandareser
ved?
A)40,
000 B)50,000 C)10,000 D)30,000 E)20,000

53)
53)I
faregul
atoryagencysetsthepri
ceequal tomarginalcostf
oranatur
almonopoly,
the
A)pri
ceisthesameast heunregulatedmonopol ypri
ce.
B)fir
m earnsaneconomi cprof
it,
thoughnott hemaximum economicprof
it
.
C)fir
m earnsanor malprof
it
.
D)fir
m earnsthemaximum economi cprof
it
.
E)gov er
nmentmi ghthavetoprovideasubsidytothefir
mtokeepitinbusi
ness.

54)
54)Capt
uretheor
yis
A)amodel aboutper f
ectcompet iti
on.
B)atheorythatexplainsbehav i
orofcompet i
ti
vefir
ms.
C)aneconomi ct heor
yofr egul
ation.
D)thetheorythatregulator
scapturefir
ms' at
tent
ionbydi
ctat
ingav
eryl
owpr
ice.
E)thesameast hepubl i
cinter
esttheory.

55)Amonopol
ycreatesadeadweightlossbecausethemonopol
y 55)
A)setsapricethatist
oolow.
B)produceslessthantheeffi
ci
entquanti
ty.
C)producesmor ethantheeffi
ci
entquanti
ty.
D)doesnotmaxi mizeprofi
t.
E)earnsanor malprof
it
.

13
56)Whichofthefoll
owingexplainswhyt hemar ginalcostpri
cingruler esul
tsinaneconomi closs 56)
f
oranaturalmonopoly?
A)TheATCcur veisdownwar dsl
opingthroughoutt herelevantrange,theref
oretheMCi slower
t
hantheATC.
B)TheMCi sconstantandequal t
opr i
ce.
C)Becauseout putisdeterminedbyset tngMCequal
i t
ot heprice,consumersur pl
usis
maximized.
D)Thedemandcur veisdownwar dslopi
ng, theref
orepricefall
sasquant ityi
ncreases.
E)Thef i
rm'sMRi salway slessthanitsprice.
57)___
____
_naturalmonopoliesisacommonl yused, pot
enti
alsoluti
ont othepr obl
emspr esent
ed 57)
bynatur
al monopoli
es.
A)Giv i
ngincent
ivestofir
mst obecome
B)Breaki
ngupf i
rmst hatar
e
C)Regul ati
ng
D)Ref usingtograntpatent
sto
E)Out lawingpri
cediscri
minati
onby
58)
58)Wi
thperf
ectpricedi
scri
minat
ion,t
helevel
ofoutput
A)i
st hesameast heamountproducedbyanymonopol yt
hatpri
cedi
scr
iminat
es.
B)equalstheamountproducedbyasingle-
pri
cemonopoly.
C)i
st hesameast heamountproducedinaperfect
lycompet
it
ivemar
ket.
D)exceedstheeff
ici
entquanti
ty.
E)i
sunknown.

59)Compar
ingaper
fect
lycompet
it
ivemar
kett
oasi
ngl
e-pr
icemonopol
ywi
tht s,we 59)
hesamecost
seet
hat
A)themonopol ymarketalwaysismor eef fi
cientintheuseofr esources.
B)themonopol ymarketachiev
esef fi
ciencyinr esourceusewhi l
eper f
ectl
ycompeti
ti
vemarket
doesnot.
C)bothmarketsareequallyeff
icienti
nt heiruseofr esour
ces.
D)theperf
ectlycompeti
tivemar ketachievesef f
ici
encyinr esour
ceusewhi l
ethemonopol
y
marketdoesnot .
E)Noneoft heaboveanswer siscorrectbecausecompar ingaper f
ectlycompet
it
ivemar
ketto
amonopol yisimpossibl
e.

60)Whenaper fectlycompet it
iveindustryistakenoverbyamonopoly
,someconsumersur
plusi
s 60)
t
ransfer
redt ot hemonopol i
stinthef orm ofA)
taxes.
B)mar gi nal cost .
C)deadwei ghtl oss.
D)economi cpr ofit.
E)av eragev ariablecost.
61)Withpri
cedi scr imination,amonopol y 61)
A)producesl essout putthani fitdoesnotpricediscr
imi
nat
e.
B)conv ertsconsumersur plusintodeadweightloss.
C)conv ertspr oducersur plusintoeconomi cprofi
t.
D)canchar geasi nglepricetoal l
customers.
E)conv ertsconsumersur plusintoeconomi cprof
it.

14
62)Apri
ce-di
scr
iminatingmonopol
yA) 62)
cannotof
ferdiscount
s.
B)cannotcontrol
thepriceofi
tsproduct.
C)sel
lsalargerquanti
tythani
twouldifitwereasi
ngle-
pri
cemonopoly.
D)i
sill
egal.
E)makesasmal l
ereconomicprof
itthanitwoul
difi
twereasingl
e-pr
icemonopol
y.

63)I
ntheabovef
igur
e,aperf
ect
lycompet
it
ivemar
ketwi
l
lhav
eapr
iceof_
___
___
_andasi
ngl
e-pr
ice 63)
monopol
ywil
lhav
eapr i
ceof___
___
__.
A)P1andquant
iyofQ1;
t P2andquant
iyofQ2
t
B)P2andquant
iyofQ2;
t P3andquant
iyofQ1
t
C)P2andquant
iyofQ1;
t P1andquant
iyofQ1
t
D)P2andquant
iyofQ2;
t P1andquant
iyofQ1
t
E)P3andquant
iyofQ3;
t P1andquant
iyofQ1
t

64)Asingl
e-pri
cemonopol yt
ransfers 64)
A) economicprofi
ttothe
government.
B) consumersurplusto
producers.C)pr
oducersurplusto
consumer s.
D)economi cprofi
ttodeadweightloss.
E)economi cprofi
ttoconsumer s.

15
65)Thefi
gureabov
eshowst hedemandcurve,
mar
ginal
rev
enuecur
ve,andmargi
nal
costcur
ve. 65)
Theamountofconsumersur
pluswhenthemar
kethasamonopol
yproduceri
s
A)ace. B)bcefC)bcd.D)abf
. .E)acd.
66)
66)Thefi
gureaboveshowsthedemandcurve,marginal
r ev
enuecurve,andmargi
nalcostcur
ve.
Theamountofconsumersurpl
uswhenthemar kethasamonopol yproduceri
s_ _
____
__andthe
amountofconsumersur
pluswhenthemar keti
sperfectl
ycompetit
ivei
s______
__.
A)abf;ace B)ace;bcd C)ace;abf D)abf
;bcd E)bcd;ace

67)Compar
edtoaperfect
lycompet
it
ivemar
ket
,asi
ngl
e-pr
icemonopol
yset
s 67)
A)ahi
gherpr
ice.
B)alowerpr
ice.
C)t
hesamepr ice.
D)apri
cethatmi ghtbehi
gher,
lower,
ort
hesamedependingonwhethert
hemonopol
y'
s
margi
nalrevenuecurvel
iesabove,
bel
ow,oronit
sdemandcur v
e.
E)apri
cethatmi ghtbehi
gher,
lower,
ort
hesamedependingonwhethert
hemonopol
y'
s
margi
nalcostcurveli
esabove,bel
ow,
oronitsmargi
nalr
evenuecur
ve.

68)Comparedtoaper fectl
ycompet i
ti
veindustr
y,asingle-
pri
cemonopolyproduces 68)
A)thesameout put.
B)mor eoutput.
C)lessoutput.
D)someamountt hatmightbemor e,l
ess,orthesamedependingonwhet hert
hemonopol
y'
s
mar gi
nalrevenuecurveliesabove,bel
ow, oronitsdemandcurve.
E)someamountt hatmightbemor e,l
ess,orthesamedependingonwhet hert
hemonopol
y'
s
mar gi
nalcostcur vel
i
esabov e,bel
ow, oronitsmarginal
rev
enuecurve.

16
69)Mar kownsacat tleranchnearHugo, Okl
ahoma.Mar kiscur
rentl
yproduci
ngbeefatanoutput 69)
l
evelwheremar ginalr evenueexceedsmar gi
nalcost.Inordertomaximizehisprofi
t,Mark
should
A)decreasehisout put.
B)shutdownhi sranch.
C)incr
easehi sout put.
D)notchangehi sout put.
E)probablychangehi soutput,butmoreinfor
mationisneededtodeter
mineifheshoul
d
incr
ease,decr ease, ornotchangeit.
70)Whencomparedtoaper
fect
lycompeti
ti
vemarket
,asingl
e-pr
icemonopol
ywi
tht s 70)
hesamecost
pr
oduces_
___
_ _
__out
putandcharges_
____
___pri
ce.
A)asmall
er;alower
B)alar
ger;alower
C)asmaller
;ahigher
D)asmaller
;thesame
E)thesame;ahigher

´
71)Supposet
heBusyBeeCafei
sthemonopol
ypr
oducerofhambur
ger
sinHugo,
Okl
ahoma.The
71)abovef
igurer
epresent
sthedemand, margi
nalr
evenue,
andmargi
nalcostcur
vesf
ort
his
est
abli
shment.Whatquanti
tywil
ltheBusyBeeproducetomaxi
mizei
tsprofi
t?
A)20hamburgersperhour
B)50hamburgersperhour
C)10hamburgersperhour
D)0hamburgersperhour.
E)30hamburgersperhour

Pr
ice(
dol
l
ars)Quant
it
y(uni
ts)
6 1
5 2
4 3
3 4
2 5

17
 1 6

72)Theabovet
abl
egivesthedemandschedul
eforamonopol
y.Thedemandi
sel
ast
icatal
lpr
ices72)
bet
ween
A)$3and$1.
B)$5and$1.
C)$4and$3.
D)$6and$1.E)$6and$4.

73)

73)Theabovet
ablegivest
hedemandschedul
eforamonopol
y.Thedemandi
sinel
ast
icov
er
t
heenti
repr
icerangebetweenA)$6and$4.
B)$6and$1.
C)$3and$1.
D)$4and$3.E)$5and$1.

74)
74)I
ftheBost onRedSoxbaseballt
eam iscurr
ent
lychar
gingat i
cketpr
icewher
eit
sdemand
i
sinel
asti
c, t
hent heRedSox'
smargi
nalrev
enueisA)posit
ive.
B)zero.
C)undefined.
D)maxi mized.
E)negative.

Quant
ity Pr
ice(
dol
lar
s
(
unit
s) peruni
t)
1 8
2 7
3 6
4 5
5 4
6 3
75)Thetabl
eabovegi
vest
hedemandforamonopol
i
st'
sout
put
.Whati
sthet
otal
rev
enuei
nwhen 75)
3uni
tsofout
putar
eproduced?
A)$18 B)$20 C)$21 D)$6

18
 76)Thetableabovegivesthedemandf oramonopol
ist
'sout
put
.Whati
sthemar
ginal
rev
enue 76)
whenoutputi
sincreasedfrom 5to6units?
A)$18 B)- $2 C)$4 D)$3
77)Thedemandcur v
ef aci
ngasingle-
pri
cemonopolyi
s 77)
A)thesameasonl ythemar gi
nalr
evenuecur
ve.
B)thesameasboththemar ginal
revenuecur
veandt
hemar
ginal
costcur
ve.
C)belowthemar
ginalrev
enuecur ve.
D)abovethemar
ginalrevenuecurve.
E)thesameasonlythemar gi
nalcostcurv
e.
78)
78)Asi
ngl
e-pr
icemonopolycansel
l10uni
tsofi
tspr
oductatapri
ceof$45eachbutt
osell11uni
ts,
t
hemonopolymustcutthepr
icet
o$44.Whatist
hemarginal
revenueoft
heext
rauni
tsold?
A)$484 B)$450C)$34 D)-
$1 E)$44

79)
79)Asingl
e-pr
icemonopol
yfacesalineardemandcur
ve.I
fthemargi
nal
rev
enuef
ort
hesecond
uni
tis$20,thent
hemargi
nalrev
enuef ort
heA)thi
rduni
tisal
so$20.
B)t
hir
duniti
slessthan$20.
C)f
ir
stuni
tislessthan$20.
D)t
hir
duniti
smor ethan$20.
E)morei
nformati
oni sneededtodet
ermi
nei
fthemar
ginal
rev
enuef
ort
het
hir
duni
tismor
e
t
han,l
essthan,orequalto$20.

80)
80)Forasingle-pri
cemonopol y,
pri
cei s
A)gr eaterthanmar gi
nalrevenue.
B)equal tomarginalr
evenue.
C)lesst hanmar ginalr
evenuebecausethef
irm mustloweritspr
icei
nordertosel
lanot
heruni
t
ofout put.
D)lesst hanmar ginalr
evenuebecausethef
irm cannoti
ncreasei
tstot
alrev
enuewhenthe
demandcur veisdownwar dslopi
ng.
E)equal tozerobecausethef i
rmisnotapr
icetaker.

81)
81)Foramonopol y
,marginalrev
enueisequalto
A)thepri
ceofthepr oduct.
B)theamountpeopl ebuybet
weent wopr i
ces.
C)theamountpeopl ebuyatagivenpri
ce.
D)thechangei
nt otalr
evenuebroughtaboutbyaone-
uni
tincr
easei
nquant
it
ysol
d.
E)thepri
cemult
ipliedbythequanti
tysold.

82)Asingl
e-pri
cemonopol y 82)
A)isabletoraiseit
spr i
ceashighasitwantsandconsumer smuststi
llbuyf
rom i
tbecausei
tisa
monopoly.
B)canl oweri
tspr i
ceforonlyafewselectconsumersi
fitwantstoi
ncreasei
tssal
es.
C)mustpr act
icepricediscr
iminat
ion.
D)mustl owerthepr i
ceforall
customersifi
twantstoincr
easeit
ssales.
E)willseti
tspriceequaltoaconsumer '
swill
i
ngnesstopay.

19
83)I
norderf
orahot eltosuccessf ull
ypricediscri
minatesot hatseni
orcit
izensaregi
venadiscount
, 83)
t
hehotel
mustbeabl eto
A) loweri tspri
cest oy oungercustomer stoo.
B) pr eventseniorcit
izensf rom r
eselli
ngtheirroomst oyoungercustomer
s.
C) of fsettheeconomi clossfrom chargi
ngseni orci
ti
zensalowerpricebyloweri
ngthe
margi
nalcostofr ent
ingroomst oseniorciti
zens.D)shifti
tsdemandcur veri
ght
war d.
E)deter
mi nei faseniorcit
izencanpayahi gherprice.

84)
84)Apri
ce-
discr
imi
nati
ngmonopolyisamonopol
ythatA)
hasali
censet
osell
theproduct.
B)sel
lsi
tsout putatasinglepricetoal
lofi
tscustomer s.
C)i
ll
egall
ychar gesdif
ferentcustomersdi
ff
erentpricesforthegoodi
tpr
oduces.
D)sel
lsdif
ferentunit
sofagoodorser vi
ceatdif
ferentprices.
E)hascontrolovertheresourcesusedtoproducethepr oduct.

85)
85)Asi
ngl
e-pri
cemonopol y
A)setsasingl
epriceforal
lconsumers.
B)askseachconsumerwhatsi ngl
epricetheywouldbewi l
l
ingt
opay.
C)setsasingl
e,di
ffer
entpri
ceforeachconsumer .
D)sel
lseachunitofit
soutputfort
hesi ngl
e,hi
ghestpri
cethatt
hebuy
eroft
hatuni
tiswi
l
li
ngt
o
pay.
E)setsasingl
e,di
ffer
entpri
ceforeachoft wodif
ferentgr
oups.

86)Whichofthefollowi
ngstatement si
scorrect
? 86)
A)Becauseamonopol yistheonl
yfir
mi nthemarket,i
tsmarginalrevenuecurv
emustbethe
sameast hemar ketdemandcur v
e.
B)Monopol iesareguaranteedtoearnaneconomicpr ofi
t.
C)Themar ketdemandandt hefi
rm'
sdemandar ethesamef oramonopol y.
D)Monopol ieshaveper f
ectlyi
nel
asti
cdemandfort heproductsold.
E)Becauseamonopol yistheonl
yfir
mi nthemarket,i
tssupplycurveisthesameasthe
marketdemandcur ve.

87)Pat
ents 87)
A)remov elegal barri
erstoentry
.
B)areprohibitedi ntheUnit
edSt at
es.
C)areal egalbar ri
ertoentr
y.
D)decreaset hei ncenti
vetoinnovat
e.
E)createeconomi esofscale.
88)Anatur
almonopol y
'sav er
agecostcur v
e 88)
i
. i
nter
sect
sthedemandcur
vewhi
l
etheav
eragecostcur
vesl
opesdownwar
d.
ii
. reachesitsmi ni
mum bef
orei
tint
ersect
sthedemandcurve.i
i
i. int
ersect
sthe
demandcur v
ebel owthei
nter
sect
ionofthemargi
nalcostcur
veandthedemandcurve.
A)i
,ii
,andiii
.
B)i
ionly.
C)iandii
i.

20
 D)i
i
ionl
y.
E)i
only
.

89)
Foranaturalmonopoly,economi esofscale 89)
A)aswel l
asconstantretur
nst oscaleanddiseconomi esofscaleexi
stalongthelong-
runaveragecostcurveatleastuntili
tcr
ossesthemar ketdemandcur ve..B)aretot
all
y
absent.
C)anddiseconomiesofscaleexi stal
ongthelong-runaveragecostcurveatleastunt
il
i
tcrossesthemarketdemandcur ve.D)l
eadt oalegalbarri
ertoentry
.
E)exi
stalongthelong-r
unav eragecostcurveatleastunti
litcr
ossesthemar ketdemandcur
ve.

90)
Anat
uralmonopoly90)
A)occur
swhenonef i
rm control
sanat ur
alresour
ce.
B)ari
seswhenonef ir
m canmeett heenti
remarketdemandatal
owerav
eraget
otal
costt
hant
wo
ormorefir
ms.
C)ari
sesasar esul
toflegalbarr
ierstoentr
y.
D)BothanswersAandBar ecorrect.
E)BothanswersAandCar ecorrect.

91)
Anat
uralbarri
ertoentryisdefi
nedasabar ri
erthatarisesbecauseof91)
A)technologythatall
owseconomi esofscaleov ertheenti
rer el
evantrangeofout
put
.
B)patentsorli
censest hatexcl
udeothersfrom producingagoodorser vi
ce.
C)manyf i
rmsproducingthegoodandt herebyallowingchoiceforallconsumers.
D)onef ir
m owningakeynat uralr
esource.
E)anticompeti
tivepracti
cesbyaf i
rmthatkeepot herfirmsfrom producing.

92)Amonopoly92)
A)mustdet er minet hepr i
ceitwillcharge.
B)cannotpr icediscr i
mi nat
ebecausesuchapr i
cingstr
ategyi
sill
egalint
heUni
tedSt
ates.
C)facesext ensivecompet i
tionfrom fi
rmsmaki ngclosesubsti
tutes.
D)hasnocont rolov erthepr i
ceitmustchar ge.
E)Bothanswer sBandCar ecorrect.
93)Oneoftherequi r
ement sforamonopol yisthat 93)
A)productsar ehighpr iced.
B)thereisauni quepr oductwi t
hnocl osesubst i
tut
es.
C)therear esev eralclosesubstitutesfortheproduct.
D)thereisnobar riertoentry.
E)thepr oductcannotbepr oducedbysmal lf
ir
ms.
94)
94)Amonopol
yisamar ketwit
h
A)nobarri
erstoent ry
.
B)manysubstitutes.
C)onesuppli
er.
D)manysupplierseachproduci
ngani
dent
ical
product.
E)manysupplierseachproduci
ngasl
i
ghtl
ydif
ferentpr
oduct
.

21
 95)
95)Technol
ogyr
educest
heav
eragecostofpr
oduct
ion,
soi
nthel
ongr
un
i
. per
fect
lycompet
it
ivef
ir
mspr
oduceatal
owerav
eragecost
.
i
i
. themarketpriceofthegoodfall
s.
i
i
i.fi
rmswi t
holderplantsei
therexi
tthemar
ketoradoptt
henewt
echnol
ogy
.A)i
andi
i
.
B)ionly
.
C)ii
ionl
y.
D)iandiii
.
E)i,
ii
,andiii
.

96)
96)Whenaf i
rm adoptsnewt echnology,
general
l
yit
s
A)costcurvesareunaffected.
B)costcur vesshif
tdownwar d.
C)productionpermanent l
ydecreases.
D)supplycur veshi
ftslef
tward.
E)costcur vesshif
tupwar d.

97)
97)Supposeaperfectl
ycompet
it
ivemar
ketisi
nlong-r
unequi
li
bri
um wit
hapr i
ceof$12.Thenthere
i
saper manentincr
easei
ndemand.Asaresul
t,i
ntheshor
trunthemarketpri
ce___
_____andin
t
helongrunthenumberoffi
rms_____
___andthepri
cei
s______
__thepri
cewasintheshortrun.
A) falls;decreases;i
sequal t
o
B) rises; doesnotchange; l
ower
t
hanC)ri
ses; i
ncreases;hi
gherthan
D)ri
ses;
incr eases;lowerthan
E)ri
ses;
doesnotchange; isequalt
o

98)Kei
thisaper f
ectl
ycompet it
ivecarnati
ongrower.Themar ketpr
icei
s$2perdozencar
nati
ons. 98)
Kei
th'
sav er
agetotalcosttogrowcar nati
onsis$2.50perdozen.Int
hel
ongrun,Kei
thwil
lA)
conti
nuet oearnaneconomi cprof
it
.
B)raisehispri
cet omor ethan$2.50perdozencarnati
ons.
C)raisehispri
cet o$2.50perdozencar nat
ions.
D)exittheindust
ryifthepriceandhiscostsdonotchange.
E)incuraneconomi closs.

22
99)I
nthelongr un,existi
ngfi
rmsexitaper fect
lycompeti
ti
vemarket 99)
A)onlyifeconomi cprofi
tsarezero.
B)onl yiftheyincuraneconomicl oss.
C)iftheyear naposit
iveeconomicpr of
it.
D)iftheyei therearnonlyanormal prof
itori
ftheyi
ncuraneconomi
closs.
E)ifnor mal profi
tsaregreat
erthanzero.
100)
100)Supposeaper f
ect l
ycompet i
ti
v emar keti
sinshor t-runequil
ibr
ium.Fi
rmst hatar
eincur
ri
nga
_
______
_economi cl oss_ __ _
____.
A)persistent;exitt heindust r
yandshi f
tthemar ketsupplycurveri
ghtwardB)
t
empor ary;decreaset heirproductionbutdef i
nitelystayopen
C)per sist
ent;exi tthei ndustryandshiftthemar ketsupplycur
veleft
ward
D)t empor ary;exitt heindustry
E)per sist
ent;incr easet heiroutputtoincreaset heirprof
it

101)
101)Supposeaper
fectl
ycompet
it
ivemarketi
sinlong-
runequil
i
bri
um andthent
herei
sa
per
manenti
ncreaseint
hedemandforthatpr
oduct.Thenewlong-
runequi
li
bri
um wi
l
lhav
e
A)aper manentdecreaseinsupply.
B)fewerfi
rmsi nthemar ket
.
C)thesamenumberoff irmsinthemarket.
D)probabl
yadi ff
erentnumberoffirms,buti
tisnotpossi
blet
odet
ermi
nei
fther
ewi
l
lbemor
e
orfewerfir
ms.
E)mor efi
rmsinthemar ket.
102)
102)Thecr anber rymar keti sperfectl
ycompet iti
ve.Report
sthatconsumingcranber
ri
escanleadto
i
mpr ovedheal thr esultinaper manenti ncreaseinthedemandf orcr
anberri
esandanimmediate
upwardj umpi nt hepr iceofcr anberri
es.Ast i
mepasses, t
hepriceofcranber
ri
es___
____
_and
theini
tialf i
rms' economi c__ ___
__ _
.
A)ri
sesst i
llhigher ;losswi l
lbeel i
minated
B)risesst il
lhi gher; prof
itwillnotchange
C)falls;profitwi l
l notchange
D)f alls;l
osswi llbei ncreased
E)f alls;profitwillbeel i
mi nated
103)
103)I
nthelongrun,
aperfect
lycompet i
ti
vef i
rm
A)makeszeroeconomicpr of
it.
B)makesaneconomi cpr ofi
t.
C)canmakeaneconomi cprofit
,zeroeconomi
cpr
ofi
t,orincuraneconomi
closs.
D)incur
saneconomi closs.
E)canmakeei t
heraneconomi cpr of
itoranor
malpr
ofit
.

104)Juan'sSoftwareServiceCompanyi sinaper f
ect
lycompeti
ti
v emar ket.Juanhastotalf
ixedcostof104)
$25,000,
averagev ari
ablecostfor1,000servi
cecal
lsi
s$45, andmar gi
nalrevenuei
s$75.Juan's
makes1,000ser vi
cecallsamont h.Whati shi
seconomicprofit?
A)$25,000 B)$45,000 C)$75,
000 D)$5,000 E)$50,000
105)Aper f
ect
lycompet it
ivefi
rm defi
nit
elyearnsaneconomicprofiti
ntheshor trunifpr
iceis 105)A)
equaltoaveragetotalcost
.
B)greaterthanav er
aget ot
alcost.
C)greaterthanav er
agev ar
iabl
ecost.

23
 D)equaltomargi
nalcost
.
E)great
erthanmargi
nalcost
.

106)
Int
heshor
trun,aper
fectl
ycompet i
ti
vefirm106)
A)mustmakezer oeconomicprofit
.
B)mustmakeaneconomi cpr ofi
t.
C)Noneoftheaboveanswer siscorrect
.
D)mustincuraneconomicloss.
E)mightmakeaneconomi cprofit
,aneconomicl
oss,
oranor
mal
prof
it
.

107)
Theabovefi
gur eshowsaperfectl
ycompetit
ivefir
m.Ifthemarketpri
ceis$20peruni
t,t
hef
ir
m
107)A)wil
lstayopentoproduceandwi l
learnanor malprof
it
.
B)wil
ldefini
tel
yshutdownt omini
mizeitslosses.
C)wil
lstayopentoproduceandwi l
li
ncuraneconomi closs.
D)mightshutdownbutmor einfor
mat i
onisneededaboutt hefi
xedcost
.
E)wil
lstayopentoproduceandwi l
learnaneconomi cprofi
t.

24
108)Theabovef igureshowsaperfectl
ycompet i
ti
vefir
m.Ifthemarketpr
iceis$15,
the 108)
fi
rm A)isear ni
nganeconomi cprofi
t.B)i
sincurr
inganeconomicloss.
C)isear ninganormalprofi
t.
D)mi ghtshutdownbutmor einfor
mat i
onisneededabouttheAVC.
E)wi l
limmedi atel
yshutdown.

109)
109)Aper f
ect
lycompeti
ti
vefi
rmi spr
oducing50uni
tsofoutputandselli
ngatt
hemar
ketpr
iceof
$23.Thefi
rm'sav
eragetotal
costis$20.Whati
sthefir
m'stotalcost?
A)$20 B)$150C)$23 D)$1,000 E)$1,
150

110)Supposet hatmar ginalrevenuef oraper fectl

ycompet it
ivefi
rmis$20.Whent hefi
rm pr
oduces 110)
10units,i
tsmar ginalcosti s$20,i t
sav eraget otalcostis$22,andit
saver
agev ari
abl
ecostis
$17.
Thentomaxi mizeitspr ofi
tintheshor trun,thefirm
A)mustdecreasei tsoutputt oincreaseitspr ofi
t.
B)shouldshutdown.
C)musti ncreaseitsout puttoincreasei t
spr ofi
t.
D)shouldnotchangei tsproduct i
onbecausei tisal
readymaximizi
ngi
tsprofi
tandisear
ninga
normal profi
t.
E)shouldstayopenandi ncuraneconomi cl ossof$20.

111)Peter'
sPencil
si saper fectl
ycompet iti
vecompanypr oducingpencils.SupposePet eri
s 111)
producing1,
000penci lsanhour .Ifthet otal costof1,
000penci l
sis$500, themarketpri
ceper
pencili
s$2,andt hemar ginalcostis$2, thenPet er
A)hasaneconomi cprofi
tbecausemar ginalr
evenueisequal t
omar ginalcostatthi
sout
putl
evel
.
B)shoulddecr easehisout puttoi ncreasehi sprofi
t.
C)isnotmaxi mi zi
nghispr ofi
tbuti sear ninganor mal profi
tanyway .
D)shouldincreasehi soutputtoi ncreasehi spr
ofi
t .
E)ismaximi zi
nghi sprofi
tandi sear ni nganeconomi cpr of
it
.

25
112)Int heshortr
un,aperfect
lycompetit
ivefi
rm canexper
iencewhichofthe 112)
foll
owing?i. aneconomicprofi
tii
. aneconomi clossbuti
tcont
inuest
o
stayopen
i
ii.aneconomi clossequaltoi
tstotalfi
xedcostwhenitshutsdown
A)i andii
B)i,ii
,andii
i
C)i andii
i
D)onl yi
E)iiandiii
113)
113)Foraperf
ectlycompet i
ti
vecorngrowerinNebraska,t
hemar gi
nal
rev
enuecur
vei
s
A)t
hesameasi tsdemandcur ve.
B)upwar dslopi
ng.
C)downwar dsloping.
D)vert
icalattheprofitmaxi
mizingquant
it
yofpr oduct
ion.
E)U-shaped.

114)Supposeaper fectl
ycompet i
ti
vefir
m' smi ni
mum av er
agev
ariabl
ecostis$3whenitproduces 114)
50.Ift
hepriceis$2andt hefi
rm'smar ginalcostis$2,t
hef
irm should
A)cont
inuetoproduce50.
B)continuetooperate,
buttodet erminetheamountofproductionneedsmor
einformati
on
t
hanisgiven.
C)continuetoproduce,butproducel essthan50.
D)shutdown.
E)continuetoproduce,butproducemor ethan50.
115)
115)Aperf
ectl
ycompet i
ti
v efi
rm willconti
nuet
ooper ateintheshortrunwhent
hemar
ketpr
icei
s
bel
owit
saver aget otalcostifthe
A)marginal costismi nimized.
B)pri
ceisatl eastequal t
ot hemi ni
mum averagev ar
iabl
ecost.
C)pri
ceisal sol essthant hemi ni
mum averagev ar
iablecost
.
D)marginal revenueisgr eaterthanmargi
nal cost.
E)tot
alfixedcost sarelesst hantot
alr
evenue.

116)Aperf
ectl
ycompet i
ti
vefir
m willshut
downwhent
hepr
icei
sjustbel
owt
hemi
nimum poi
nton 116)
t
he
A)marginal
revenuecurve.
B)aver
agefixedcostcurve.
C)aver
agetotalcostcurve.
D)aver
agev ari
abl
ecostcurve.
E)marginal
costcurve.

26
117)Theabovefi
gureil
l
ustrat
esaperfectl
ycompeti
ti
vef i
rm.Ift
hemarketpr
icei
s$40aunit
, 117)
t
omaximizeit
sprofi
t(ormini
mizeitsloss)t
hefi
rm shouldA)pr
oducemorethan10and
l
esst
han30uni t
s.
B)producemorethan30unitsandl esst
han40uni t
s..
C)produce40units.
D)shutdown.
E)produce30units.
118)
118)Inaper f
ectlycompet it
iveindust
ry,whenaf ir
mi sproduci
ngsot hatitstot
alr
evenueequal
sit
s
t
otalcost,t
hef ir
mi s
A) defi
nitelynotmaxi mi
zingi t
spr ofi
t.
B) earningzeroeconomi cpr ofi
t,thatis,earni
nganor mal pr
ofit
.
C) i
ncur ri
nganeconomi cl oss.D)ear ninganeconomi cprofi
t.
E)Noneoft heabov eanswersiscor rectbecauset herelati
onshipbetweentot
alrev
enueand
tot
alcosthasnot hingtodowi ththef ir
m' sprofi
torloss.

119)Foraper fect
lycompet i
ti
vef i
rm, margi
nalr
evenueis 119)
A)equal t
ot hechangei nprofi
tfr
om sell
i
ngonemor eunit.
B)l
esst hant hepri
ce.
C)equal t
ot hepri
ce.
D)undef i
nedbecauset hefirm'sdemandcurveishor
izontal
.
E)greaterthantheprice.
120)Ift
hemar ketpriceofaproducti s$14andallsel
ler
sarepricetaker
s,t
henwhi
choft
hef
oll
owi
ng120)is
corr
ect
?

27
 A)Eachsel
l
ercanearnmor etot
al r
evenuebyrai
singthepr
iceheorshechar gesabove$14.
B)Thedemandcurveforeachsell
er'
sproducti
sadownwar d-sl
opingstr
aightli
ne.
C)Eachsel
l
er'
stot
alrevenueisgraphedasanupsi de-
downU-shapedcurve.
D)Thedemandcurveforeachsell
er'
sproducti
sadownwar d-sl
opingbutnotnecessar
il
yastrai
ght
l
ine.
E)Eachsel
l
er'
stot
alrevenueli
neisgraphedasanupwar d-
slopi
ngstrai
ghtli
ne.

121)
Fortheper
fectlycompet i
ti
vebr
occol
iproducer
sinCalif
orni
a,hemar
t ketdemandcur
vef
or121)
broccol
ii
s
A)ahorizontalli
ne.
B)nonexist
ent .
C)downwar dsloping.
D)thesameast hedemandcurveeachfir
mf aces.
E)upwar dslopi
ng.

28
29
AnswerKey
Test
name:S12_
103_
FINAL_
MC_
REVI
EW

30