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标题: Economics 【Reading 16】Sample [打印本页]
作者: dkishore1    时间: 2012-3-24 16:48     标题: [2012 L1] Economics 【Session 4 - Reading 16】Sample

Which of the following is a characteristic of perfect competition?
A)
There are no barriers to entry into the market.
B)
The products of different firms are sold at different prices.
C)
There are a few sellers.


The only true statement listed in the question is that, under perfect competition there are no barriers to entry into the market. Each of the other possible answers is not a characteristic of perfect competition. While the competitors can earn positive economic profits in the short-run, they cannot earn long term economic profits due to ease of entry and exit.
作者: dkishore1    时间: 2012-3-24 16:50

Which of the following is least likely a condition of a perfectly competitive market?
A)
Indistinguishable products.
B)
Sellers make economic profits.
C)
Firms face elastic demand curves.


The only item listed that is NOT a condition of a perfectly competitive market is that sellers make economic profits. In fact, sellers do not make economic profit after taking into account their opportunity costs.
作者: dkishore1    时间: 2012-3-24 16:50

The demand curve for a firm in a perfectly competitive market is:
A)
horizontal.
B)
upward sloping.
C)
downward sloping.


In a market of perfect competition an individual firm’s demand schedule is perfectly elastic (horizontal).
作者: dkishore1    时间: 2012-3-24 16:50

Which of the following is least likely a characteristic of perfect competition?
A)
The size of each firm is small relative to the size of the overall market.
B)
The products produced within a given market are homogenous.
C)
The demand curve for an individual firm is a vertical line.


Under perfect competition individual firms have no control over price resulting in a demand schedule that is perfectly elastic or horizontal.
作者: dkishore1    时间: 2012-3-24 16:51

A perfect competition has all of the following characteristics EXCEPT:
A)
a differentiated product.
B)
barriers to entry don't exist.
C)
a large number of independent firms.


In a perfectly competitive market all the firms produce a homogeneous product.
作者: dkishore1    时间: 2012-3-24 16:51

A firm operating as a price taker will:
A)
produce quantity where P = MR = MC.
B)
be a revenue maximizer.
C)
face an inelastic demand curve.


A firm operating as a price taker will produce quantity where MC = MR. It will maximize profit and not revenue. In the long run, it will make zero economic profits after taking into account fair return on capital.
作者: dkishore1    时间: 2012-3-24 16:52

Which of the following is least likely a barrier to entry?
A)
Resource controls.
B)
Price controls.
C)
Economies of scale.


Often barriers to entry are government licensing and legal barriers.
作者: JonnyKay    时间: 2012-3-24 16:53

Which one of the following is most likely to contribute to the presence of monopoly in an industry?
A)
Legal barriers to entry into the industry.
B)
Inefficiency attributable to bureaucratic decision-making procedures in the industry.
C)
Diseconomies of scale.


An example of an industry with legal barriers is utility firms, which are granted exclusive rights to supply electricity in certain areas.
作者: JonnyKay    时间: 2012-3-24 16:53

Consider the following statements:
Statement 1: “The sum of consumer and producer surpluses is maximized under both monopoly and perfect competition.”
Statement 2: “All else being equal, a monopolist that practices price discrimination will be more allocatively efficient than a single-price monopolist.”
With respect to these statements:
A)
both of these statements are accurate.
B)
neither of these statements is accurate.
C)
only one of these statements is accurate.


Statement 1 is incorrect because the sum of consumer and producer surpluses is maximized under perfect competition when marginal benefit and marginal cost are equal, or equivalently, where the marginal cost curve intersects the demand curve. Monopolies, however, produce a quantity that is less than the quantity where marginal cost equals marginal benefit, so the sum of producer and consumer surpluses is not maximized.
作者: JonnyKay    时间: 2012-3-24 16:54

Which of the following is least likely a barrier to entry?
A)
Few sellers.
B)
Economies of scale.
C)
Government licensing and legal barriers.


Few sellers are a characteristic, not a barrier, of a price-searcher market where there are high barriers to entry. Other barriers are patents or exclusive rights of production.
作者: JonnyKay    时间: 2012-3-24 16:54

Which of the following situations is least likely to lead to high barriers to entry and monopoly supply?
A)
Natural resources are spread among many firms.
B)
Economies of scale are present.
C)
Governmental licensing and regulations are present.


All cases except wide distribution of a natural resource facilitate a monopoly. If natural resource ownership is concentrated in one firm a monopoly would result.
作者: JonnyKay    时间: 2012-3-24 16:55

In a natural monopoly:
A)
the average total cost of production continually declines with increased output.
B)
one firm controls all natural resources.
C)
the price charged by a monopolist is determined by the intersection of the demand curve with the marginal cost curve.


A monopoly situation in which the average total cost of production continually declines with increased output is called a natural monopoly.
作者: JonnyKay    时间: 2012-3-24 16:55

Natural monopolies exist because they can produce at lower costs with greater output, which means there are economies of scale. Which of the following industries is typically a natural monopoly?
A)
Utilities.
B)
Technology.
C)
Oil.


With a natural monopoly average costs of production will be lowest when a single large firm produces the entire output demanded such as a utility.
作者: JonnyKay    时间: 2012-3-24 16:56

Which of the following is least likely a barrier to entry?
A)
Allocative Efficiency.
B)
Patents.
C)
Economies of Scale.


The other barriers to entry are government licensing and legal barriers such as utilities are given the exclusive right to supply electricity in certain areas.
作者: JonnyKay    时间: 2012-3-24 16:57

An oligopolistic firm:
A)
will consider the potential response of its rivals when making business decisions.
B)
is likely to be formed when the minimum-cost output is only a small portion of the market output.
C)
will seldom use product quality as a competitive weapon.


Oligopolists are highly dependent upon the actions of their rivals when making business decisions. Price determination in the auto industry is a good example. Automakers tend to play "follow the leader" and announce price increases in close synchronization. They are not working explicitly together, but the actions of one producer have a large impact on the others when products are differentiated, quality may be a competitive strategy.
作者: JonnyKay    时间: 2012-3-24 16:57

Firms in perfectly competitive markets and firms operating in a market characterized by monopolistic competition have several things in common. Which of the following is least likely one of them? Both:
A)
operate in markets that have low or no barriers to entry.
B)
face perfectly elastic demand curves.
C)
maximize economic profit.


The only item listed in the question that monopolistic competition and pure competition do not have in common is a perfectly elastic demand curve. Under pure competition, producers face a perfectly elastic demand curve, whereas price searchers face downward sloping demand curves.
作者: JonnyKay    时间: 2012-3-24 16:58

Characteristics of an oligopoly least likely include:
A)
interdependence among competitors.
B)
significant barriers to entry.
C)
identical products.


In an oligopoly, a small number of producers sell products that can be similar or differentiated. An oligopoly typically features significant barriers to entry including economies of scale. Pricing and output decisions by each firm directly influence the decisions of competing firms.
作者: JonnyKay    时间: 2012-3-24 16:58

A market that is characterized by monopolistic competition is least likely to feature:
A)
low barriers to entry.
B)
a small number of independent sellers.
C)
sellers that produce a differentiated product.


In monopolistic competition, there is a large, not small, number of independent sellers.
作者: JonnyKay    时间: 2012-3-24 16:59

Which of the following is most likely to be considered a characteristic of monopolistic competition?
A)
Inelastic demand curves.
B)
High barriers to entry and exit.
C)
Differentiated products.


Differentiated products are a key characteristic of monopolistic competition. Although producers have downward sloping demand curves, they are typically elastic.
作者: JonnyKay    时间: 2012-3-24 16:59

Which of the following is least likely to be considered a feature that is common to both monopolistic competition and perfect competition?
A)
Extensive advertising to differentiate products.
B)
Low or no barriers to entry.
C)
Zero economic profits in the long run.


The only item listed in the question that monopolistic competition and perfect competition do not have in common is the use of advertising to differentiate their products. Extensive advertising is a key feature of monopolistic competition.
作者: JonnyKay    时间: 2012-3-24 17:00

An oligopoly is characterized by all of the following EXCEPT:
A)
a large number of sellers.
B)
large economies of scale.
C)
significant barriers to entry.


Oligopolies consist of a small number of sellers. Their products may be either similar or differentiated.
作者: JonnyKay    时间: 2012-3-24 17:00

Which one of the following is least likely a characteristic of monopolistic competition?
A)
Low barriers to entry and exit.
B)
A single seller.
C)
Differentiated products.


There are many sellers or producers who sell differentiated products that permit firms to attract customers without reducing price; and there are low barriers to entry.
作者: JonnyKay    时间: 2012-3-24 17:01

Characteristics of monopolistic competition include all of the following EXCEPT:
A)
large numbers of independent sellers.
B)
high barriers to entry.
C)
differentiated products.


Monopolistic competition has low barriers to entry.
作者: JonnyKay    时间: 2012-3-24 17:02

An oligopolistic industry least likely has:
A)
many sellers.
B)
high barriers to entry.
C)
large economies of scale.


An oligopolistic industry has a few sellers with large economies of scale, a great deal of interdependence among firms, and high barriers to entry.
作者: JonnyKay    时间: 2012-3-24 17:03

Which of the following is least likely a characteristic of an oligopoly?
A)
Relatively small economies of scale.
B)
Products can either be similar or differentiated.
C)
There are few sellers.


Oligopolies have large economies of scale and interdependence among competitors.
作者: JonnyKay    时间: 2012-3-24 17:10

Which of the following is most likely to be considered a characteristic of an oligopolistic industry?
A)
Few barriers to entry.
B)
A great deal of interdependence among firms.
C)
Many sellers.


An oligopolistic industry has a great deal of interdependence among firms. One firm’s pricing decisions or advertising activities will affect the other firms' demand curves.
作者: JonnyKay    时间: 2012-3-24 17:11

The demand curves faced by monopolistic competitors is:
A)
not sensitive to price due to absence of close substitutes.
B)
elastic due to the availability of many close substitutes.
C)
inelastic due to the availability of many complementary goods.


The demand for products from monopolistic competitors is elastic due to the availability of many close substitutes. If a firm increases its product price, it will lose customers to firms selling substitute products.
作者: JonnyKay    时间: 2012-3-24 17:11

Monopolistic competition differs from pure monopoly in that:
A)
monopolists maximize profit; monopolistic competitors do not.
B)
barriers to entry are high under monopoly, but low under monopolistic competition.
C)
monopolistic competitors are price takers, monopolists are not.


Monopolistic competition is characterized by the low barriers to enter its competitive markets. In contrast, a monopoly exists only where there are high barriers to market entry.
作者: JonnyKay    时间: 2012-3-24 17:12

One way in which monopolistic competition can be distinguished from perfect competition is that in monopolistic competition:
A)
price is greater than marginal cost.
B)
each firm faces a perfectly elastic demand curve.
C)
marginal revenue is greater than marginal cost at the quantity produced.


In monopolistic competition, price is greater than marginal cost (i.e., firms can realize a markup). In perfect competition, P = MC. Firms in monopolistic competition are price searchers, i.e., each firm faces a downward sloping demand curve. Regardless of the market structure, all firms produce the quantity at which marginal revenue equals marginal cost.
作者: JonnyKay    时间: 2012-3-24 17:12

Which of the following is least accurate regarding product development and marketing for firms under monopolistic competition?
A)
Firms that bring new and innovative products to the market face relatively more elastic demand curves than their competitors.
B)
Relative to other types of competition, product innovation is critical to the pursuit of economic profits.
C)
Brand names can provide consumers with information regarding the quality of firm’s products.


Firms under monopolistic competition face less elastic demand curves when they introduce new and innovative products. This enables them to increase price and earn economic profits. However, close substitutes and imitations will eventually erode the economic profit from a new product. So, firms must constantly seek innovative product features that make their products relatively more desirable than their competitors.
作者: JonnyKay    时间: 2012-3-24 17:13

Under which type of market structure are the production and pricing alternatives of a firm most affected by the decisions of its competitors?
A)
Oligopoly.
B)
Monopolistic competition.
C)
Perfect competition.


An oligopoly market structure is characterized by a small number of firms producing similar or differentiated products, with a high degree of interdependence among competitors. Each firm’s optimal price and output are strongly affected by the pricing and output decisions of its competitors.
作者: JonnyKay    时间: 2012-3-24 17:13

Monopolistic competition differs from pure monopoly in that:
A)
monopolistic competitors are price takers and monopolists are not.
B)
monopolistic competitors have low barriers to entry and monopolists do not.
C)
monopolists maximize profits and monopolistic competitors do not.


Another name for monopolistic competition is a competitive price searcher market. Monopolistic competition refers to a large number of independent sellers, each produces a differentiated product, each market has a low barrier to entry, and each producer faces a downward sloping demand curve.
作者: JonnyKay    时间: 2012-3-24 17:13

Which of the following regarding monopolistic competition is most accurate?
A)
Zero barriers to entry and exit exist.
B)
Each firm produces a differentiated product.
C)
There are very few independent sellers.


Other characteristics of monopolistic competition (also known as competitive price searcher markets) are: a large number of independent sellers, low barriers to entry, and an elastic downward sloping demand curve.
作者: JonnyKay    时间: 2012-3-24 17:14

Which of the following is most accurate for a price-taker firm in long-run equilibrium when there are no barriers to entry?
A)
P = MC = ATC = MR.
B)
P = AVC = MR.
C)
TC = TR = MC.


For a price-taker firm, long-run equilibrium is where P = MC = ATC. For price taking firms, P = MC. Competition eliminates economic profits in the long run so that P = ATC.
作者: JonnyKay    时间: 2012-3-24 17:15

Assume that a perfectly competitive firm produces 10 units of a good and sells them each for a price (P) equal to $15. If the marginal cost (MC) of the 10th unit is $15 and the average total cost (ATC) is $13, economic profit for the firm is closest to:
A)
$0.
B)
$120.
C)
$20.


When MR = MC = P, economic profit equals TR – TC. In this case, TR = $150 = 10 × $15 and TC = $130 = 10 × ATC = 10 × $13. So, economic profit is $20 = $150 − $130.
作者: JonnyKay    时间: 2012-3-24 17:16

A competitive firm will tend to expand its output as long as marginal:
A)
revenue is greater than marginal cost.
B)
revenue is greater than the average cost.
C)
cost is less than average cost.


All firms will continue to expand production until marginal revenue = marginal cost.
作者: JonnyKay    时间: 2012-3-24 17:16

When a firm operates under conditions of perfect competition, marginal revenue always equals:
A)
price.
B)
total cost.
C)
average variable cost.


When a firm operates under conditions of perfect competition, marginal revenue always equals price. This is because, in perfect competition, price is constant (a horizontal line) so that marginal revenue is constant.
作者: chunty    时间: 2012-3-24 17:18

In the long-run, a firm operating under perfect competition will:
A)
produce a quantity where marginal revenue is less than marginal cost.
B)
face a vertical demand curve.
C)
generate zero economic profit.


A firm operating under conditions of perfect competition will generate zero economic profit in the long run. Firms may generate economic profits in the short run, but due to the lack of entry barriers, new competitors will enter the market and prices will adjust downward until economic profits become zero.
作者: chunty    时间: 2012-3-24 17:18

A firm operating under perfect competition will experience economic losses when which of the following conditions exists?
A)
Marginal cost is less than average total cost.
B)
Market price is less than average total cost.
C)
Marginal revenue is greater than average total cost.


Under perfect competition, a firm will experience economic losses when its selling price is less than average total cost.
作者: chunty    时间: 2012-3-24 17:19

A profit maximizing firm will expand output as long as marginal revenue is:
A)
greater than average fixed cost.
B)
less than marginal cost.
C)
greater than marginal cost.


A purely competitive firm will tend to expand its output so long as the market price (marginal revenue) is greater than marginal cost. In the short term and long term, profit is maximized when P = MC.
作者: chunty    时间: 2012-3-24 17:19

Under perfect competition, a firm will be inclined to increase output as long as which of the following conditions exists?
A)
Marginal revenue is greater than the average cost.
B)
Marginal revenue is greater than marginal cost.
C)
Marginal cost is less than average cost.


A firm will continue to expand output as long as it is possible to earn an economic profit. In other words, a firm will expand output as long as marginal revenue is greater than marginal cost.
作者: chunty    时间: 2012-3-24 17:19

A perfectly competitive firm will continue to increase output so long as which of the following conditions exists?
A)
Market price is greater than marginal cost.
B)
Marginal revenue is positive.
C)
Marginal revenue is greater than price.


A perfectly competitive firm will tend to expand its output so long as the market price is greater than marginal cost since price and marginal revenue are equal. In the short term and long term, profit is maximized when marginal cost and marginal revenue are equal (i.e., MC = MR).
作者: chunty    时间: 2012-3-24 17:19

Which of the following most accurately describes the relationship between price (P), marginal cost (MC), and marginal revenue (MR) at the profit maximizing output level for a firm in a perfectly competitive industry?
A)
P = MC = MR.
B)
P > MC < MR.
C)
P > MC = MR.


For a perfectly competitive firm, maximum profit occurs at the output level where marginal revenue equals marginal cost. And, since the demand curve faced by each firm in perfect competition is horizontal, marginal revenue is equal to price.
作者: chunty    时间: 2012-3-24 17:20

A perfectly competitive firm will not expand its output beyond the quantity where:
A)
the marginal cost is greater than marginal revenue.
B)
the market price is equal to its marginal cost.
C)
its marginal revenue is positive.


A perfectly competitive firm will tend to expand its output so long as the market price is greater than marginal cost. In the short term and long term, profit is maximized when P = MC.
作者: chunty    时间: 2012-3-24 17:20

A competitive firm will tend to expand its output as long as:
A)
the market price is greater than the marginal cost.
B)
its marginal revenue is greater than the market price.
C)
its marginal revenue is positive.


A competitive firm faces a flat demand curve. This means the price is constant and the marginal revenue line is flat. A firm will continue to produce as long as MR > MC, so the competitive firm will produce as long as P > MC. It will stop when MC = MR = P.
作者: chunty    时间: 2012-3-24 17:21

In the long run, a perfectly competitive firm will earn:
A)
small economic profits.
B)
large economic profits.
C)
zero economic profits.


Zero economic profits means the firm is earning a normal rate of return and a positive accounting profit. Since perfectly competitive firms have no barriers to entry, economic profits cannot be positive in the long run because new competitors will enter the market place driving down economic profits to zero.
作者: chunty    时间: 2012-3-24 17:21

Which of the following statements about monopolies is most accurate?
A)
Monopolists charge the highest possible price.
B)
A monopolist's optimal production quantity is at the point where marginal revenue equals marginal cost.
C)
A monopoly structure is characterized by a well-defined product for which there are no good complements.


All firms maximize profits where MR = MC. Because of a downward-sloping demand curve and high barriers to entry, monopolists can charge a price higher than MC. Like other price searchers, monopolists take price from the demand curve (at the quantity where MR=MC).
Both remaining statements are false. A monopoly structure is characterized by a well-defined product for which there are no good substitutes. Monopolists want to maximize profits, not price.
作者: chunty    时间: 2012-3-24 17:21

Which of the following is least accurate regarding the relationship between price (P), marginal revenue (MR), average total cost (ATC), and marginal cost (MC) at the profit maximizing output under monopoly?
A)
MR < ATC.
B)
P = MR.
C)
MR = MC.


To maximize profit, all firms expand output until marginal revenue equals marginal cost. Price is determined from the demand curve, which is above the marginal revenue curve since a monopoly faces a downward sloping demand curve.
作者: chunty    时间: 2012-3-24 17:21

Consider the following statements:
Statement 1: “A natural monopoly exists when economies of scale are so pronounced that all of an industry’s demand should be supplied by one firm.”
Statement 2: “Monopoly is characterized by a single seller of a distinct product for which no good substitutes exist.”
Statement 3: “Average cost pricing is a form of regulation that is intended to force monopolists to reduce output to the point where the monopolist’s average total cost curve intersects its marginal cost curve.”
Which of the following best describes the accuracy of these statements?
Statement 1 Statement 2Statement 3
A)
CorrectCorrectIncorrect
B)
CorrectIncorrectCorrect
C)
IncorrectCorrectIncorrect


Statement 3 is incorrect because average cost pricing attempts to force the monopolist to produce where the average total cost curve intersects the demand curve and to charge a price equal to ATC.
作者: chunty    时间: 2012-3-24 17:22

Which of the following is least relevant when explaining why monopoly firms can earn positive economic profits over the long term?
A)
Control over production input resources.
B)
The existence of economies of scale.
C)
The ability to use price discrimination.


High entry barriers due to economies of scale, government licensing, resource controls, and patents prevent new firms from entering the market to exploit positive economic profit opportunities.
作者: chunty    时间: 2012-3-24 17:22

What is the relationship between price and marginal revenue for a price searcher?
A)
Marginal revenue > price.
B)
Marginal revenue = price.
C)
Marginal revenue < price.


For a price searcher, demand is downward sloping, marginal revenue is less than price since price must be reduced to sell additional units of output.
作者: chunty    时间: 2012-3-24 17:23

A monopolist will continue expanding output as long as:
A)
marginal revenue is positive.
B)
economic profit is greater than zero.
C)
marginal revenue is greater than marginal cost.


The optimum behavior of all firms is to produce until the point where MR = MC. So, the monopolist can increase total profit by increasing production as long as marginal revenue is greater than marginal costs.
作者: chunty    时间: 2012-3-24 17:23

In a natural monopoly:
A)
the price charged by a monopolist is determined by the intersection of the demand curve with the marginal cost curve.
B)
the average total cost of production continually declines with increased output.
C)
one firm controls all natural resources.


A monopoly situation in which the average total cost of production continually declines with increased output is called a natural monopoly.
作者: chunty    时间: 2012-3-24 17:23

Which of the following describes the regulatory practice of setting prices at a level where the monopoly firm’s average total cost curve intersects the demand curve?
A)
Marginal cost pricing.
B)
Average cost pricing.
C)
Cost-of-service pricing.


Under average cost pricing, regulators attempt to force monopolies to reduce prices to where a firm’s average total cost curve intersects the market demand curve. This will increase output and decrease price, increase allocative efficiency, and ensure zero economic profit.
作者: chunty    时间: 2012-3-24 17:24

Which of the following is least likely to be considered a reason why regulation of monopolies is not effective?
A)
Regulation reduces the incentive for firms to reduce costs.
B)
Regulation shifts industry demand and increases prices.
C)
Regulators do not know the firm’s cost structure.


Regulation is not associated with a shift in industry demand.
作者: chunty    时间: 2012-3-24 17:24

Which of the following statements about a monopolist is least accurate?
A)
A monopolist will always be able to earn economic profit.
B)
A profit-maximizing monopolist will expand output until marginal revenue equals marginal cost.
C)
A profit-maximizing monopolist will supply less of his product than the amount consistent with the conditions of ideal static efficiency for an economy.


Monopolists maximize profit when MR = MC. If the ATC curve lies above the demand curve, monopolists will lose money.
作者: chunty    时间: 2012-3-24 17:24

When a regulatory agency requires a monopolist to use average cost pricing, the intent is to produce the quantity where the:
A)
marginal revenue curve intersects the marginal cost curve.
B)
average total cost curve intersects the marginal revenue curve.
C)
the market demand curve intersects the average total cost curve.


When a regulatory agency requires a monopolist to use average cost pricing, the intent is to price the product where the average total cost curve intersects the market demand curve. There are problems in using this method, e.g., determining exactly what the average total cost really is.
作者: chunty    时间: 2012-3-24 17:25

When a firm is earning positive economic profits in a monopolistic competitive market, what will most likely occur?
A)
Losses will occur in the short run.
B)
Price takers will be over run by price searchers.
C)
New firms will enter driving down the economic profits to zero.


New firms will enter a monopolistic competitive market with economic profits above zero and will absorb some market demand. This will shift the demand curve down to the point where price equals average total cost and there are zero economic profits.
作者: chunty    时间: 2012-3-24 17:25

Which of the following most accurately describes why firms under monopolistic competition face elastic demand for their products?
A)
The availability of many close substitutes.
B)
Allocative efficiency.
C)
High barriers to entry.


The demand for products from firms competing in monopolistic competition is relatively elastic due to the availability of close substitutes. If a firm increases its product price, it will lose customers to firms selling slightly differentiated products at lower prices.
作者: chunty    时间: 2012-3-24 17:25

If a market features differentiated products but has low barriers to entry, in long-run equilibrium the firms in the market will earn:
A)
substantial economic losses.
B)
zero economic profits.
C)
substantial economic profits.


Low barriers to entry suggest free entry and exit, which implies zero economic profits in the long run.
作者: chunty    时间: 2012-3-24 17:25

Under monopolistic competition, companies can earn positive economic profits in:
A)
the short run and in the long run.
B)
neither the short run nor the long run.
C)
the short run but not in the long run.


In a market characterized by monopolistic competition, companies can earn positive economic profits in the short run if the price of their product is greater than the average total cost of producing it. In the long run, because barriers to entry are low, economic profits will attract new entrants. Additional producers will drive the price lower until price equals average total cost, economic profit is zero, and new competitors no longer have an incentive to enter the market.
作者: chunty    时间: 2012-3-24 17:26

In the short run, price searchers maximize profits by producing output where marginal revenue (MR):
A)
equals marginal costs (MC) and charging a price based on the average total cost (ATC) curve.
B)
equals marginal costs (MC) and charging a price based on the demand curve.
C)
is greater than marginal costs (MC) and charging a price based on the demand curve.


Price searchers maximize profits by producing an amount of output where MR equals MC and charging a price based on the demand curve. In the short run, profits or losses occur depending upon where the individual firm’s ATC curve is in relationship to the demand curve. In the long run, economic profits are zero due to the low barriers to entry. Important note for the test: regardless of whether a firm is a price taker, price searcher, monopoly, or oligopoly, all firms will seek to maximize profits and want to produce the ouput where marginal revenue equals marginal cost.
作者: chunty    时间: 2012-3-24 17:26

In a market characterized by monopolistic competition, which of the following statements about advertising costs is least accurate?
A)
The average total cost attributable to advertising will increase as output increases.
B)
Many firms spend a significant portion of their advertising budget on brand name promotion.
C)
Firms’ advertising costs tend to be greater than those for firms in perfect competition.


The increase in average total cost attributable to advertising decreases as output increases because a fixed cost is being averaged over a larger quantity. Advertising expenses are relatively high for firms in monopolistic competition. This is not only because firms need to inform consumers about the unique features of their products, but also to create or increase a perception of differences between products that are actually quite similar. Many firms spend a significant portion of their advertising budget on brand name promotion.
作者: chunty    时间: 2012-3-24 17:26

Which of the following is least accurate with regard to advertising for firms operating under monopolistic competition?
A)
Advertising may decrease average total cost.
B)
Advertising expenses are high relative to perfect competition and monopoly.
C)
The increase to average total costs associated with advertising increases as output increases.


Advertising expenses are high for firms in monopolistic competition. Not only because firms need to inform consumers about the unique features of a firm’s products, but also to create or increase a perception of differences between products that are actually quite similar. Advertising costs increase average total costs, but the increase to average total cost attributable to advertising decreases as output increases because more fixed advertising dollars are being averaged over a larger quantity. If advertising increases output (sales) significantly, it can actually decrease a firm’s average total cost if there are economies of scale.
作者: chunty    时间: 2012-3-24 17:27

Which of the following statements is least accurate with regard to the efficiency of monopolistic competition?
A)
The expense of advertising and promotion may not be justified by their benefit to consumers.
B)
Consumers benefit from brand name promotion and advertising.
C)
Monopolistic competition is at least as efficient as perfect competition.


The efficiency of monopolistic competition is unclear. Consumers may make better purchasing decisions due to the information content of brand name promotion and advertising. However, there are those that argue that the increased cost of advertising and sales is not justified by the benefits of these activities and represent inefficient use of resources.
作者: chunty    时间: 2012-3-24 17:27

The short-run supply curve for a price taker firm is the portion of the marginal cost (MC) curve:
A)
above the average variable cost (AVC) curve.
B)
below the average variable cost (AVC) curve.
C)
above the average total cost (ATC) curve.


The short-run supply curve for a firm is its MC curve above the AVC curve. Price takers will produce where price (P) equals MC. At prices below the AVC curve the firm will not be able to remain in operation. Above the ATC curve the firm is making economic profits and will continue to expand production along the MC curve.
作者: chunty    时间: 2012-3-24 17:27

The short-run supply curve for a firm in a perfectly competitive market is equal to the firm's:
A)
MC curve.
B)
AVC curve.
C)
ATC curve.


The short-run supply curve for a firm in a perfectly competitive market is equal to the firm's MC curve. A price taker will maximize profits when it produces the output level where P = MC. As price rises, its point of intersection with the MC curve indicates optimal production.
作者: hinsafdar    时间: 2012-3-25 10:54

Which of the following is the most likely result of a technological improvement in a perfectly competitive industry?
A)
The costs for individual firms increase.
B)
The industry supply curve shifts to the right.
C)
Individual firms’ supply curves shift to the left.


When individual firms implement technological change, their costs decline and their supply (cost) curve shifts to the right. At the lower costs, firms are willing to supply a given quantity at a reduced price. The lower cost structure for the individual firms shifts the industry supply curve to the right.
作者: hinsafdar    时间: 2012-3-25 10:55

Concentration measures are most likely to be used to:
A)
measure elasticity of demand facing an industry.
B)
analyze barriers to entry into an industry.
C)
identify the market structure of an industry.


Concentration measures are used to identify the market structure of an industry (perfect competition, monopolistic competition, oligopoly, or monopoly). Concentration measures do not directly indicate an industry’s barriers to entry or elasticity of demand.
作者: hinsafdar    时间: 2012-3-25 10:55

The most effective way to assess the impact of a potential merger on the market structure of an industry is to:
A)
calculate the n-firm concentration ratio.
B)
analyze barriers to entry.
C)
calculate the Hirfindahl-Hirschman Index.


The Hirfindahl-Hirschman Index is more sensitive to mergers than the n-firm concentration ratio. Although barriers to entry for an industry are important in assessing market structure, they are not necessarily related to the impact of a merger.
作者: hinsafdar    时间: 2012-3-25 10:56

A firm has the following characteristics:
The firm is best described as existing in a(n):
A)
price searcher market.
B)
monopolistic market structure.
C)
purely competitive market.


The firm being described is a price taker firm in a purely competitive market. These firms must sell their product at the going market price, there are no barriers to entry, and there are a large number of firms that produce a homogeneous product.
作者: hinsafdar    时间: 2012-3-25 10:56

An economic market characterized by a large number of independent firms all producing identical products is best described as:
A)
monopolistic competition.
B)
monopoly.
C)
perfect competition.


In a perfectly competitive economic market, there are many independent firms, each seller is small relative to the total market, and there are no barriers to entry or exit.
作者: hinsafdar    时间: 2012-3-25 10:56

Which of the following most accurately describes the competitive structure that is characterized by a firm that operates with the lowest average total cost and has the capacity to produce all of an industry’s output?
A)
Natural monopoly.
B)
Competitive monopoly.
C)
Oligopoly.


A natural monopoly is characterized by a single firm within the industry that has sufficient capacity to meet the entire demand of an industry because at that scale the lowest average total cost is achieved.
作者: hinsafdar    时间: 2012-3-25 10:57

Which of the following most accurately describes a market structure that has one seller of a specific, well-defined product that has no good substitutes?
A)
Monopoly.
B)
Perfect competition.
C)
Oligopoly.


A monopoly is characterized by one seller, a specific and well-defined product for which there is no good substitutes, and high barriers to entry.
作者: hinsafdar    时间: 2012-3-25 10:57

Which one of the following structures is characterized by free entry and exit, a differentiated product, and price searcher behavior?
A)
Monopolistic competition.
B)
Oligopoly.
C)
Pure competition.


Monopolistic competition is another name for competitive price-searcher markets. There are a large number of independent sellers, each produces a differentiated product, each market has a low barrier to entry, and each producer faces a downward sloping demand curve.
作者: hinsafdar    时间: 2012-3-25 10:57


Assume that the market for paper supplies and the market for toothpicks have the following characteristics:

The Market for Paper Supplies is comprised of:

The Market for Toothpicks is comprised of:

The Papyrus Company operates in the market for paper supplies and Wudden Floss operates in the toothpick market. The sales managers for both companies want to know how a change in price will affect the quantity sold.

Which of the following choices best completes the following sentence? If both firms increase prices, the quantity sold by Papyrus Company will:

A)
increase, and the quantity sold by Wudden Floss will decrease.
B)
decrease, and so will the quantity sold by Wudden Floss.
C)
decrease, and Wudden Floss will sell nothing.


Papyrus Company is an example of a price searcher engaged in monopolistic competition (low barriers to entry). Thus, the company faces a downward sloping demand curve and highly elastic demand. An increase in price will result in fewer units sold. Wudden Floss is an example of a price taker operating in a purely competitive market. Thus, the firm faces a horizontal demand curve and perfectly elastic demand. An increase in price will result in no units sold. In a purely competitive market, the firm must take the market price.
作者: hinsafdar    时间: 2012-3-25 10:58

The type of economic market that features a large number of competitors offering differentiated products is best characterized as:
A)
perfect competition.
B)
monopolistic competition.
C)
oligopoly.

Monopolistic competition is used to describe markets where there are a large number of competitors producing differentiated products.
In perfect competition all firms produce identical products. In an oligopoly there is a small number of firms.
作者: terpsichorefan    时间: 2013-3-7 18:55

thanks for your sharing. how generous u are.
作者: mimiaifeng    时间: 2013-10-8 22:51

回复 6# dkishore1

价格接受者公司应该面对弹性需求曲线吧？？完全竞争市场。
作者: mimiaifeng    时间: 2013-10-8 23:12

回复 6# dkishore1


    价格接受者面对的是完全弹性曲线。所以答案C是错的。要选A. 没问题了。题目答案是正确的。



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