QUIZ 6A
Barriers to entering an industry:
1. Economists use the term imperfect
competition to describe:
A) all industries which produce standardized
products.
B) any industry in which there is no non-price
competition.
C) a pure monopoly only.
D) those markets which are not purely
competitive.
2. An industry comprised of a very large
number of sellers producing a standardized
product is known as:
A) monopolistic competition
B) oligopoly
C) pure monopoly
D) pure competition
3. The demand schedule or curve confronted
by the individual purely competitive firm is:
A) relatively elastic, that is, the elasticity
coefficient is greater than unity.
B) perfectly elastic.
C) relatively inelastic, that is, the elasticity
coefficient is less than unity.
D) perfectly inelastic.
4. If a monopolist's marginal revenue is $3.00
and its marginal cost is $4.50, it will increase
its profits by:
A) reducing output and raising price.
B) reducing both output and price.
C) increasing both price and output.
D)raising price while keeping output unchanged.
Answer: A
5. For a purely competitive firm total
revenue:
A) is price times quantity sold.
B) increases by a constant absolute amount as
output expands.
C) graphs as a straight upsloping line from the
origin.
D) has all of the above characteristics.
6. Firms seek to maximize:
A) per unit profit.
B) total revenue.
C) total profit.
D) market share.
7.
A) are justified because they result in allocative
efficiency.
B) are justified because they result in productive
efficiency.
C) are the basis for monopoly.
D) apply only to purely monopolistic industries.
8. Large minimum efficient scale of plant
combined with limited market demand may
lead to:
A) natural monopoly.
B) patent monopoly
C) government franchise monopoly.
D) shared monopoly.
9. A monopolistic firm has a sales schedule
such that it can sell 10 prefabricated garages
per week at $10,000 each, but if it restricts its
output to 9 per week it can sell these at
$11,000 each. The marginal revenue of the
tenth unit of sales per week is:
A) -$1,000. B) $9,000. C) $10,000. D) $1,000.
The following table applies to a purely
competitive industry composed of 100 identical
firms.
10. Refer to the above table. At the
equilibrium price, each of the 100 firms in
this industry will produce:
A) 600,000 units of output.
B) 60,000 units of output.
C) 6,000 units of output
D) 600 units of output.
11. Refer to the above table. For each of the
100 firms in this industry, marginal revenue
and total revenue will be:
A) $4 And $400, respectively.
B) $3 And $30,000, respectively.
C) $4 And $20,000, respectively.
D) $3 And $18,000, respectively.
12. Refer to the above table. If each of the
100 firms in the industry is maximizing its
profit, each must have a marginal cost of:
A) $5.
B) $4.
C) $3.
D) $2.
13. A constant-cost industry is one in which:
A) a higher price per unit will not result in an
increased output.
B) if 100 units can be produced for $100, then
150 can be produced for $150, 200 for $200,
and so forth.
C) the demand curve and therefore the unit price
and quantity sold seldom change.
D) the total cost of producing 200 or 300 units is
no greater than the cost of producing 100 units.
14. Refer to the above diagrams, which
pertain to a purely competitive firm
producing output q and the industry in which
it operates. Which of the following is
correct?
A) The diagrams portray neither long-run nor
short-run equilibrium.
B) The diagrams portray both long-run and
short-run equilibrium.
C) The diagrams portray short-run equilibrium,
but not long-run equilibrium.
D) The diagrams portray long-run equilibrium,
but not short-run equilibrium.
15. Refer to the above diagrams, which
pertain to a purely competitive firm
producing output q and the industry in which
it operates. In the long run we should expect:
A) firms to enter the industry, market supply to
rise, and product price to fall.
B) firms to leave the industry, market supply to
rise, and product price to fall.
C) firms to leave the industry, market supply to
fall, and product price to rise.
D) no change in the number of firms in this
industry.
16. The MR = MC rule:
A) applies only to pure competition.
B) applies only to pure monopoly.
C) does not apply to pure monopoly because
price exceeds marginal revenue.
D) applies both to pure monopoly and pure
competition.
17. In the long run a pure monopolist will
maximize profits by producing that output at
which marginal cost is equal to:
A) average total cost.
B) marginal revenue.
C) average variable cost.
D) average cost.
18. An important economic problem
associated with pure monopoly is that, at the
profit maximizing outputs, resources are:
A) overallocated because price exceeds
marginal cost.
B) overallocated because marginal cost exceeds
price.
C) underallocated because price exceeds
marginal cost.
D) underallocated because marginal cost
exceeds price.
19. A purely competitive firm's short-run
supply curve is:
A) the upward sloping portion of its marginal
cost curve.
B) the upward sloping portion of its average
variable cost curve.
C) its marginal cost curve above average
variable cost.
D) its average total cost curve.
20. Assume a purely competitive firm is
selling 200 units of output at $3 each. At this
output its total fixed cost is $100 and its total
variable cost is $350. This firm:
A) is maximizing its profit.
B) is making a profit, but not necessarily the
maximum profit.
C) is incurring losses.
D) should shut down in the short run.