 |
1 | |
The marginal revenue faced by the monopolist: |
|
| | A) | Is the same as its demand curve. |
| | B) | Will be horizontal and equal to product price. |
| | C) | Lies below the firm's demand curve. |
| | D) | Is greater than price at all levels of output. |
|
2 | |
All of the following are characteristics of the pure monopolist except: |
|
| | A) | There are no close substitutes for its product. |
| | B) | Monopoly price is greater than its marginal cost of production. |
| | C) | There is relatively easy entry into the market. |
| | D) | There is only one seller in the market. |
|
3 | |
As the economist sees it, the goal of the firm is: |
|
| | A) | To promote the general social welfare. |
| | B) | To expand size and become as large as possible. |
| | C) | To maximise its profits. |
| | D) | To maximise its total revenue. |
|
4 | |
The difference between accounting cost and economic cost is: |
|
| | A) | Negligible |
| | B) | Accounting costs include the cost of hiring an accountant. |
| | C) | Economic costs include resource costs. |
| | D) | Economic costs include a return to shareholders. |
|
5 | |
Which one of the following statements is correct? |
|
| | A) | Monopoly price in the long run may be either greater than or less than long-run average cost. |
| | B) | In the long run, the monopolist may earn an economic profit or suffer a loss and still produce. |
| | C) | In the long run, monopoly price equals long-run marginal cost. |
| | D) | The monopolist may earn supernormal economic profit in the long run. |
|
6 | |
When economists study perfectly competitive markets, one of the assumptions that we make about the market is that: |
|
| | A) | Each firm in the market has some, but not complete, control over the price of its product. |
| | B) | Firms are completely free to enter or leave the market. |
| | C) | There are many producers producing similar, but not identical, products. |
| | D) | Firms in the market advertise in order to shift the demand curve for their product. |
|
7 | |
A perfectly competitive market exhibits all of the following characteristics except: |
|
| | A) | There is freedom of entry into and exit from the market. |
| | B) | Each firm can produce all that it wants and not affect the market price of the good. |
| | C) | Each firm in the market produces a product that is a perfect substitute for the products of other firms. |
| | D) | The market demand curve is perfectly elastic and thus horizontal. |
|
8 | |
Which of the following describes the relationship between price and marginal cost for the profit-maximising monopolist? |
|
| | A) | P = MC |
| | B) | P is less than MC |
| | C) | P is more than MC |
| | D) | P = 1/2 MC |
|
9 | |
In a competitive market, the demand curve for the perfectly competitive firm is determined by: |
|
| | A) | The firm's marginal cost of producing an extra unit of output. |
| | B) | The price that is established by the firm. |
| | C) | The market demand for and supply of the good. |
| | D) | The average total cost of producing a particular level of output. |
|
10 | |
When a firm in perfect competition is maximising its profits and produces that level of output where price, marginal revenue, and short costs are equal it: |
|
| | A) | Earns an economic profit, and this is greater than the return required to keep it in business. |
| | B) | Earns an economic profit that will be carried into the long run. |
| | C) | Breaks even and is in a short-run equilibrium. |
| | D) | Incurs a loss and will shut-down in the long. |
|
11 | |
The profit maximising condition (MC =MR) of a competitive firm also applies to a monopolist. |
|
| | A) | TRUE |
| | B) | FALSE |
|
12 | |
The demand curve for the pure single-firm monopolist is also the market demand curve, and it slopes downward and to the right. |
|
| | A) | TRUE |
| | B) | FALSE |
|
13 | |
At the profit maximising level of output for the monopolist, price is greater than marginal cost. |
|
| | A) | TRUE |
| | B) | FALSE |
|
14 | |
For a monopoly producer, the price established at its optimal level of output exceeds the marginal value of the resources used. |
|
| | A) | TRUE |
| | B) | FALSE |
|
15 | |
In the long run, a competitive firm will go out of business if market price falls below average total cost at all levels of output. |
|
| | A) | TRUE |
| | B) | FALSE |
|
16 | |
In monopoly the price will be _______ and the output will be lower _______ than in perfect competition. |
|
| | A) | Higher, higher, |
| | B) | Lower, lower |
| | C) | Lower, higher |
| | D) | Higher, lower |
|
17 | |
Following an increase in the productivity of labour, a profit maximising firm will be willing to __________. |
|
| | A) | Lower output |
| | B) | Raise output |
| | C) | Raise price |
| | D) | Close down |
|
18 | |
If the marginal revenue is £10 and the marginal cost is £8, the firm should __________. |
|
| | A) | Lower output |
| | B) | Raise output |
| | C) | Raise price |
| | D) | Close down |
|
19 | |
The marginal revenue for a monopolist must be __________. |
|
| | A) | Zero |
| | B) | Positive |
| | C) | Negative |
| | D) | Small |
|
20 | |
Optimally a firm would like _________ in its output market and _______ in its input market. |
|
| | A) | Monopoly, monopoly |
| | B) | Monopoly, perfect competition |
| | C) | Perfect competition, perfect competition |
| | D) | Perfect competition, monopoly |