Reference no: EM13824225

The owners of a corporation are known as shareholders.

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The shape of a firm's production function will change if the productivity of its variable input changes.

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The steeper the slope of the production function, the less is the marginal physical product of labor.

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Financial investors prefer to invest their funds in firms that

a. steadily earn a high profit.

b. have high levels of variable cost and low levels of fixed cost.

c. can charge prices above the equilibrium price.

d. have high levels of fixed cost and low levels of variable cost.

It is possible for a firm to have positive fixed cost and zero total cost.

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Your local farmer has many competitors, and he operates in a market structure known as perfect competition. This means that price is determined outside of the individual farmer's ability to determine his selling price.

Therefore, the farmer is

a. a price taker· and cannot affect the price of the produce sold to a·great degree·,:--·-·- ·----- --- ....-- ... ..... .......

b. never able to determine any prices he charges for anything, such as soybeans.

c. always able to price produce above the competition and earn a larger profit.

d. a price maker and can therefore charge different customers different prices.

For the perfectly competitive firm, price equals marginal revenue. The market structure of perfect competition is defined by hundreds of firms producing an essential product, with barriers to the entry of new firms.

Monopoly implies

a. low prices.

b. high costs.

c. low profits.

d. no competition.

For a monopolist

a . P > M R.

b. P = MC.

c. P = ATC.

d . P = M R.

Which of the following is true of a perfectly competitive firm and a monopoly in the long run?

a. P = ATC

b. P = MC

c. P = MR

d. MR = MC

The profit maximizing level of production

a. is not measurable for a perfectly competitive firm.

b. is where the difference between marginal revenue and marginal cost is maximized.

c. ignores the relation of total revenues and total costs.

d. is the quantity at which marginal revenue equals marginal cost.

A single supplier of a good or service for which there is no close substitute is referred to as a (n)

a. monopolistic competitor.

b. strategic competitor.

c. monopoly.

d. oligopoly.

In the short run in perfect competition, a firm will shut down when

a. marginal revenue equals marginal cost.

b. price is below average total cost.

c. price is below average variable cost.

d. economic profit is zero.

The perfect competitor

a. chooses the profit-maximizing quantity.

b. chooses the profit-maximizing price.

c. chooses a quantity that will make the most efficient use of his labor and capital resources.

d. produces what he thinks can be sold, regardless of cost.

Price leadership is a form of

a. barrier to entry.

b. tacit collusion.

c. opportunistic behavior.

d. noncooperative behavior.

The monopolistic competitor depicted below would find that which of the following is INCORRECT?

a. The profit maximizing rate of output is indicated by E, where MR intersects MC.

b. The demand curve shows that the firm faces a perfectly elastic demand.

c. The profit-maximizing rate of output is qe, and the profit maximizing price is P.

d. A downward sloping marginal revenue curve lies below the demand curve.

A monopolistically competitive firm uses advertising to

a. lower its costs.

b. differentiate its product.

c. signal its competitors that it is serious about staying in business.

d. motivate its work force.

To the extent that a firm has market power, it can force its competitors out of business.

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A monopolistically competitive firm in the long run

a. earns positive economic profits.

b. earns negative economic profits.

c. earns zero economic profits.

d. suffers economic losses.

Signaling occurs as part of

a. noncooperative behavior.

b. advertising.

c. price leadership.

d. opportunistic behavior.

Price leadership is a form of tacit collusion.

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Profitable price discrimination involves

a. charging a higher price to new customers and a low price to old ones.

b. charging a higher price to wealthier customers.

c. charging a higher price for goods that cost more to produce.

d. charging a higher price to customers with a relatively low elasticity of demand.

Monopolistic competition means

a. monopolies from several countries compete in the global market.

b. a large number of firms producing differentiated products.

c. a large number of firms producing homogeneous products.

d. few firms producing differentiated products.

By saying that firms in an oligopoly are interdependent, we mean that

a. actions by one will prompt reactions by others.

b. if one increases its profits, all others will increase profits as well.

c. all firms sell identical products.

d. if one increases its profits, all others will lose profits.

External costs can be defined as

a. the cost of providing all public goods and services.

b. the sum of all private production costs.

c. the cost of running the federal government.

d. the cost associated with private production, but partially borne by society.

Contestable markets arise when firms currently in an industry know that it would be easy for potential competitors to enter the industry.

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If your marginal tax rate is always higher than your average tax rate, then the tax system is a

a. proportional tax system.

b. regressive tax system.

c. fair tax system.

d. progressive tax system.

Which one of the following is TRUE?

a. Private goods are subject to the principle of rival consumption.

b. Public goods are those that generate positive externalities.

c. Public goods are a subset of private goods.

d. Private goods are produced for a local market; public goods are produced for a national market.

Which of the followi ng is an incidence of market failure?

a. Firms change their production plans in response to a tax.

b. The price of a good exceeds the opportunity cost of producing it.

c. The firm producing the good is earning zero economic profit.

d. Consumers change their buying habits in response to a tax.

The problem of positive externalities can be addressed by having some firms exit the industry.

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In a progressive tax system, the marginal tax rate increases as income increases.

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The first case prosecuted under the Sherman Act was the antitrust case against Microsoft.

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A tax system is which the marginal tax rate falls as more income is earned is

a. proportional.

b. progressive.

c. flat-rate.

d. regressive.

Cases prosecuted under the Sherman Antitrust Act are intended to correct market failure arising from negative externalities.

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A firm's marginal revenue product of labor curve is also

a. its labor demand curve.

b. its total revenue line.

c. its long-run input cost function.

d. its marginal cost curve.

If workers in an industry become less productive due to low employee morale, we would expect the

a. demand for workers to decrease.

b. wages in the industry to increase.

c. supply of workers to increase.

d. demand for workers to increase.

If labor productivity increases,

a. the supply of labor will increase.

b. the supply of labor will decrease.

c. workers will earn wages higher than their marginal revenue product.

d. the demand for labor will increase.

When MFC = MRP, a firm in a competitive market will

a. hire more workers.

b. stop hiring.

c. layoff workers.

d. earn additional profits.

The fact that the labor supply curve slopes upward indicates that

a. workers seek to work more hours when the wage rises.

b. the income effect of a wage increases outweighs the substitution effect.

c. workers seek to work more hours when the wage decreases.

d. firms want to hire more workers when the wage rises.

The supply of labor to the health care industry will decrease when

a. working conditions for health care workers improve through legislated mandates.

b. minimum wages are legislated for health care workers.

c. workers receive better employment opportunities in other industries.

d. there is an increased demand for health care.

If unions succeed at restricting the supply of labor in any one area of the economy, wages in that sector will increase.

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Suppose a perfectly competitive firm faces a labor market in which the going wage rate is $480 per week. If the last worker hired has a marginal physical product of 12 units of output per week, what is the selling price of the firm's output?

a. $40 per unit

b. $480 per unit

c. $240 per unit

d. $12 per unit

An increase in the selling price of a product

a. increases the supply of labor to the industry.

b. increases the productivity of labor.

c. raises the firm's demand for labor.

d. decreases the supply of labor to the industry.

The upward slope of the labor supply curve suggests that the income effect of a wage increase outweighs the substitution effect.

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