economics data bank
1) What is the difference between perfect competition and monopolistic competition?
A) Perfect competition has a large number of small firms while monopolistic competition
B) In monopolistic competition, firms produce identical goods, while in perfect competition,
firms produce slightly different goods.
C) Perfect competition has no barriers to entry, while monopolistic competition does.
D) In perfect competition, firms produce identical goods, while in monopolistic competition,
firms produce slightly different goods.
E) Perfect competition has barriers to entry while monopolistic competition does not.
2) In a perfectly competitive market, the type of decision a firm has to make is different in the short
run than in the long run. Which of the following is an example of a perfectly competitive firm's
A) the profit-maximizing level of output
B) whether or not to change its plant size
C) how much to spend on advertising and sales promotion
D) what price to charge buyers for the product
E) whether or not to enter or exit an industry
3) The firm's over-riding objective is to
A) maximize economic profit.
B) avoid an economic loss.
C) maximize total revenue.
D) maximize normal profit.
E) earn a normal profit.
4) The price charged by a perfectly competitive firm is
A) higher the more the firm produces.
B) different than the price charged by competing firms.
C) the same as the market price.
E) lower the more the firm produces.
5) A profit-maximizing output for a single-price monopoly is determined by the intersection of the
________ curves and the profit-maximizing price is found on the ________ curve.
A) total revenue and total cost, total revenue
B) marginal cost and marginal revenue; marginal revenue
C) demand and supply; supply
D) marginal cost and marginal revenue; demand
E) marginal cost and average total cost; demand
6) A single-price monopoly has marginal revenue and marginal cost equal to $19 at 15 units of
output where the price on the demand curve is $38. At this output, average total cost is $15.
What is the total profit earned?
A) $225 B) $570 C) $19 D) $285 E) $345
7) Rate of return regulation is designed to allow a natural monopoly to
A) underestimate its average cost.
B) earn zero normal profit.
C) earn an economic profit.
D) earn a normal profit.
E) compete with any firm entering the market.
8) Which of the following is true about monopolistic competition but false about perfect
A) Firms can earn an economic profit in the short run.
B) There are a large number of independently acting sellers.
C) There are no barriers to entry.
D) Firms compete on their product's price as well as its quality and marketing.
E) Firms cannot earn an economic profit in the long run.
9) What does monopolistic competition have in common with monopoly?
A) mutual interdependence
B) the ability to collude with respect to price
C) a large number of firms
D) a downward-sloping demand curve
E) barriers to entry
10) Firms in monopolistic competition have demand curves that are
C) downward sloping.
E) upward sloping.
11) Kevin owns a personal training gymnasium in Orlando. The above figure shows the demand
and cost curves for his firm, which competes in a monopolistically competitive market. Kevin
will train how many clients per day?
A) between 2 and 4
E) None of the above answers is correct.
12) Kevin owns a personal training gymnasium in Orlando. The above figure shows the demand
and cost curves for his firm, which competes in a monopolistically competitive market. What
price will Kevin charge per session?
A) $20 B) $80 C) $60 D) $100 E) $40
13) In monopolistic competition, the products of different sellers are
A) similar but slightly different.
B) unique without any close or perfect substitutes.
C) perfect substitutes.
E) either identical or differentiated.
14) When a monopolistically competitive firm's demand curve shifts leftward, what happens to its
marginal revenue curve?
A) It disappears.
B) Nothing, the marginal revenue curve is unchanged.
C) It shifts leftward.
D) It shifts rightward.
E) None of the above is correct because the effect on the marginal revenue curve depends on
whether the demand was initially elastic or inelastic.
15) Firms in an oligopoly
i. are independent of each others' actions.
ii. can each influence the market price.
iii. charge a price equal to marginal revenue.
A) i only
B) i and iii
C) ii only
D) iii only
E) i, ii, and iii
16) When oligopolies seek to operate as a single-price monopoly, the firms produce at the point
B) P= MR.
C) P< ATC.
D) P= MC.
17) A cartel is a collusive agreement among a number of firms that is designed to
A) expand output and lower prices but not to a predatory level.
B) expand output and lower prices to a predatory level.
C) restrict output and raise prices.
D) expand output and raise prices.
E) restrict output and lower prices to a predatory level.
18) When oligopolies operate like firms in perfect competition, the firms produce at the point where
A) price exceeds the average total cost by the greatest amount.
B) price exceeds the marginal cost by the greatest amount.
C) marginal cost equals the average total cost.
D) price is less than the marginal cost.
E) marginal cost equals the price.
19) If one firm in a duopoly increases its production by one unit beyond the monopoly output, that
firm's profit ________, the other firm's profit ________, and thetotalprofit of the duopoly
A) increases; increases; increases
B) increases; decreases; decreases
C) does not change; does not change; does not change
D) increases; does not change; increases
E) increases; decreases; does not change
20) A Nash equilibrium is defined as
A) each player taking the action that is best for all the players.
B) forming a cartel with strong penalties for cheaters.
C) earning zero economic profit in the long run.
D) relying on other game players to realize the benefit of cooperation.
E) each player taking the best possible action given the action of the other player.