Multiple Choice Questions

Mutual interdependence would tend to limit control over price in which market model?
  • oligopoly
  • P > ATC
  • Pure competition
  • pure monopoly
Local electric or gas utility companies mostly operate in which market structure?
  • total cost is $270
  • Pure competition
  • P > ATC
  • pure monopoly
Normal profit is
  • may initially increase, then diminish, and ultimately become negative.
  • the return to the entrepreneur when economic profits are zero.
  • change in total cost that results from producing one more unit of output
  • the change in total output attributable to the employment of one more worker.
A purely competitive seller is
  • it will realize a loss equal to its total fixed costs.
  • Pure competition
  • upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve.
  • price taker
Fixed cost is
  • a money payment made for resources not owned by the firm itself.
  • change in total cost that results from producing one more unit of output
  • any cost which does not change when the firm changes its output
  • the return to the entrepreneur when economic profits are zero.
The MR = MC rule applies
  • each additional unit of output adds exactly its price to total revenue.
  • the change in total output attributable to the employment of one more worker.
  • to firms in all types of industries
  • firms produce a homogeneous product
In which two market models would advertising be used most often?
  • monopolistic competition and oligopoly
  • monopolistic competition
  • explicit and implicit costs from total revenue.
  • Pure monopoly
A purely competitive firm's short-run supply curve is
  • it will realize a loss equal to its total fixed costs.
  • explicit and implicit costs from total revenue.
  • upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve.
  • price taker
The fast-food restaurant industry in a large city would be an example of which market model?
  • P > ATC
  • monopolistic competition and oligopoly
  • monopolistic competition
  • total cost is $270
Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation
  • monopolistic competition and oligopoly
  • $200,000 and its economic profits were $0.
  • is realizing an economic profit of $40.
  • marginal revenue and marginal cost
Which market model assumes the least number of firms in an industry?
  • Pure competition
  • pure monopoly
  • firms produce a homogeneous product
  • product differentiation
Accounting profits equal total revenue minus
  • total explicit costs.
  • total cost is $270
  • greater than economic profits because the former do not take implicit costs into account.
  • explicit and implicit costs from total revenue.
In which market model would there be a unique product for which there are no close substitutes?
  • oligopoly
  • Pure competition
  • Pure monopoly
  • monopolistic competition and oligopoly
Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were
  • explicit and implicit costs from total revenue.
  • $200,000 and its economic profits were $0.
  • firms produce a homogeneous product
  • total cost is $270
Accounting profits are typically
  • total explicit costs.
  • the change in total output attributable to the employment of one more worker.
  • explicit and implicit costs from total revenue.
  • greater than economic profits because the former do not take implicit costs into account.
Which of the following is a reason why individual firms under pure competition would not find it gainful to advertise their product?
  • marginal revenue and marginal cost
  • The demand curve for a purely competitive firm is perfectly elastic, but the demand curve for a purely competitive industry is downsloping.
  • Use of savings to pay operating expenses instead of generating interest income
  • firms produce a homogeneous product
Suppose you find that the price of your product is less than minimum AVC. You should
  • close down because, by producing, your losses will exceed your total fixed costs.
  • Use of savings to pay operating expenses instead of generating interest income
  • the former refer to nonexpenditure costs and the latter to monetary payments.
  • in the long run all resources are variable, while in the short run at least one resource is fixed.
In which market model are the conditions of entry into the market easiest?
  • total cost is $270
  • Pure competition
  • Pure monopoly
  • monopolistic competition and oligopoly
Economic profits are calculated by subtracting
  • upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve.
  • explicit and implicit costs from total revenue.
  • greater than economic profits because the former do not take implicit costs into account.
  • total explicit costs.
Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?
  • the former refer to nonexpenditure costs and the latter to monetary payments.
  • Use of savings to pay operating expenses instead of generating interest income
  • in the long run all resources are variable, while in the short run at least one resource is fixed.
  • close down because, by producing, your losses will exceed your total fixed costs.
In the short run, a purely competitive firm will always make an economic profit if
  • oligopoly
  • P > ATC
  • monopolistic competition
  • Pure monopoly
A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating
  • monopolistic competition and oligopoly
  • firms produce a homogeneous product
  • is realizing an economic profit of $40.
  • marginal revenue and marginal cost
An explicit cost is
  • the return to the entrepreneur when economic profits are zero.
  • any cost which does not change when the firm changes its output
  • change in total cost that results from producing one more unit of output
  • a money payment made for resources not owned by the firm itself.
To economists, the main difference between the short run and the long run is that
  • The demand curve for a purely competitive firm is perfectly elastic, but the demand curve for a purely competitive industry is downsloping.
  • in the long run all resources are variable, while in the short run at least one resource is fixed.
  • Use of savings to pay operating expenses instead of generating interest income
  • close down because, by producing, your losses will exceed your total fixed costs.
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Multiple Choice Questions
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