Reference no: EM132155390
1.) When there are many buyers and sellers of a good and the product sold is identical across firms,:
a. the demand curve for each firm's output is perfectly inelastic.
b. the industry demand curve is perfectly inelastic.
c. the demand curve for each firm's output is perfectly elastic.
d. the industry demand curve is perfectly elastic.
2.) The typical average cost curve in a competitive market is:
a. U-shaped because the firm's fixed costs are first spread over greater quantities, but then increasingly greater quantities will create production capacity constraints.
b. an upward-sloping straight line because fixed costs are constant, and variable costs are increasing with the level of output.
c. U-shaped because increasing quantities of output cause a decrease in fixed costs but an offsetting increase in variable costs.
d. downward-sloping until fixed costs are eliminated and then it becomes a horizontal line.
3.) The more and better substitutes a good has, the more elastic the demand for that good will be.
True or False?
4.) Stock market investors should ultimately focus on a company's:
a. total revenue.
b. total costs.
c. economic profit.
d. accounting profit.
5.) The short run is defined as:
a. less than one year.
b. the period before entry or exit can occur.
c. less than six months.
d. the period before any changes in a firm's output can be made.
6.) Why is it cheaper to make carpets in Dalton, Georgia, than anywhere else in the United States?
a. By historical accident, a number of carpet-related firms clustered in Dalton, so inputs are cheaper there than elsewhere.
b. The government in Dalton subsidizes carpet making.
c. Dalton has excellent carpet-making weather.
d. Dalton residents are genetically superior carpet weavers.
7.) When deciding on the profit maximizing level of output, firms compare ______ of an additional unit of output to the ______.
a. average revenue; average cost of producing the additional unit of output
b. marginal revenue; marginal cost of producing the additional unit of output
c. marginal revenue; total cost of production
d. average revenue; total cost of production
8.) In a perfectly competitive market, sellers who set their price above the market price will sell nothing.
True or False?
9.) In late November of 2010, a share of Microsoft sold for about $25 and a share of McDonald's sold for about $80. In late June of 2011, Microsoft shares were about $26 and McDonald's shares were about $85. If these two companies were the only choices available, what is your economic profit if you invest $400 in Microsoft?
a. -$25
b. $16
c. -$9
d. $9
10.) A flat firm-level demand curve means:
a. seasonal market pricing power.
b. limited market pricing power.
c. full market pricing power.
d. no market pricing power.