Refer to the diagram for a monopolistically competitive

student id: 22403842 exam:

060205RR - Product Markets

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Questions 1 to 20:Select the best answer to each question. Note that a question and its answers may be split across a page break, so be sure that you have seen the entire question and all the answers before choosing an answer.

1.Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. The profitmaximizing output for this firm will be

A. 210.

B. 100.

C. 180.

D. 160.

2.What term is used to describe the opportunity costs of using already owned resources for the firm's own product rather than selling those resources to an outside entity?

A. Explicit cost

B. Full cost

C. Economic cost

D. Implicit cost

3.What type of market structure has only one seller of a product or service?

A. Oligopoly

B. Monopolistic competition

C. Monopoly

D. Pure competition

4.Curve (3) in the diagram above is a purely competitive firm's

A.total cost curve.

B. marginal revenue curve.

C. total economic profit curve.

D. total revenue curve.

5.Which of the following is a characteristic of a pure monopoly economic system?

A. Price taker

B. Many sellers

C. Free entry

D. Blocked entry

6.If production is occurring where marginal cost exceeds price, the purely competitive firm will

A. maximize profit, but resources will be over-allocated to the product.

B. maximize profit, but resources will be under-allocated to the product.

C. fail to maximize profit and resources will be over-allocated to the product.

D. fail to maximize profit and resources will be under-allocated to the product.

7.Why are economic profits not possible in the long run in a purely competitive market?

A. Profitable markets drive prices too high and consumers stop buying.

B. New firms will enter the market and drive prices down.

C. More firms will leave a profitable market, driving prices down.

D. Each firm is too small to make a profit.

8.In the diagram above, the range of diminishing marginal returns is

A.Q - Q .

1 3

B. 0 - Q1.

C. 0 - Q .

2

D. Q1- Q2.

9.A mortgage payment due every month for a farm is an example of what type of cost?

A. Land cost

B. Fixed cost

C. Marginal cost

D. Variable cost

10.Which of the following statements is correct?

A. Purely competitive firms, monopolistically competitive firms, and pure monopolies all earn zero economic profits in the long run.

B. Purely competitive firms, monopolistically competitive firms, and pure monopolies all earn positive economic profits in the long run.

C. In the long run, purely competitive firms and monopolistically competitive firms earn zero economic profits, while pure monopolies may or may not earn economic profits.

D. Monopolistically competitive firms earn zero economic profits in both the short run and the long run.

11.Focusing on the ability of a firm to get in or out of an industry entirely would focus on what type of economic time frame?

A. Entry run

B. Production run

C. Long run

D. Short run

12.Which of the following might be considered an obstacle to the formation of cartels?

A. Government anti-trust laws

B. Low prices

C. Maximization of revenue

D. High prices

13.Which of the following is a method to measure the concentration of certain industries?

A. Klinefelter ratio

B. Herfindahl index

C. Monopolistic measure

D. Competitive ratio

14.A computer program's ability to be used by a large number of consumers for a small cost for each additional consumer is known as

A. exclusive consumption.

B. multiple effect.

C. simultaneous consumption.

D. network effect.

15.Which of the following would be a reason for an oligopoly to form?

A. Many small firms

B. High prices in an industry

C. High cost of entry into the industry

D. Differentiated products

16.What type of market structure has standardized products with many firms in the industry?

A. Oligopoly

B. Pure competition

C. Monopolistic competition

D. Monopoly

17.Economists like purely competitive markets because they result in

A. productive and allocative efficiency.

B. allocative efficiency only.

C. productive efficiency only.

D. economic efficiency only.

18.How does accounting profit differ from economic profit?

A. Accounting profit does not count revenues.

B. Economic profit subtracts only implicit costs from revenue.

C. Economic profit subtracts both implicit and explicit costs from revenue.

D. Accounting profit subtracts only implicit costs from revenue.

19.The short run is characterized by

A. zero fixed costs.

B. plenty of time for firms to either enter or leave the industry.

C. increasing but not diminishing returns.

D. fixed plant capacity.

20.A non-discriminating profit-maximizing monopolist

A. will never produce in the output range where demand is elastic.

B. will never produce in the output range where marginal revenue is positive.

C. may produce where demand is either elastic or inelastic, depending on the level of production costs.

D. will never produce in the output range where demand is inelastic.

End of exam