Question 1

The characteristic that distinguishes a perfectly competitive market from a monopolistically competitive market is the:

Accepted Answer

A) ease of entry. 
B) number of firms operating in the market. 
C) degree of government regulation in the activities of the firms. 
D) product differentiation. 
E) extent of market share of each firm. 
A) ease of entry. 
B) number of firms operating in the market. 
C) degree of government regulation in the activities of the firms. 
D) product differentiation. 
E) extent of market share of each firm.

Question 2

Scenario 8.2
 Consider a publicly held firm (one whose stock shares are traded on the stock exchange) that earned revenue worth $350 million and incurred land,labor,and debt costs worth $320 million.The stockholders who have invested a total of $100 million in this firm could have earned 10 percent return on other comparable investments.
-According to the information in Scenario 8.2,the cost of equity capital is:

Accepted Answer

A) $112 million. 
B) $30 million. 
C) $20 million. 
D) $120 million. 
E) $10 million. 
A) $112 million. 
B) $30 million. 
C) $20 million. 
D) $120 million. 
E) $10 million.

Question 3

In general,the two extreme cases of market structure models are represented by

Accepted Answer

A) monopolistic competition and oligopoly. 
B) oligopoly and monopoly. 
C) oligopoly and perfect competition. 
D) perfect competition and monopoly. 
E) perfect monopoly and oligopolistic competition. 
A) monopolistic competition and oligopoly. 
B) oligopoly and monopoly. 
C) oligopoly and perfect competition. 
D) perfect competition and monopoly. 
E) perfect monopoly and oligopolistic competition.

Question 4

The following graph shows the demand and cost curves of an imperfectly competitive firm.MC and ATC represent the marginal cost curve and the average cost curve respectively. Figure 8.1  
- According to Figure 8.1,what is the firm's profit when it sells quantity Q1 at price P1?

Accepted Answer

A) Rectangle ABCD 
B) Rectangle DCEF 
C) Rectangle ABEF 
D) Distance AB 
E) Distance FD 
A) Rectangle ABCD 
B) Rectangle DCEF 
C) Rectangle ABEF 
D) Distance AB 
E) Distance FD

Question 5

In monopolistic competition there are no brands,all the producers produce only identical,generic products.

Accepted Answer

A) True 
 B)False

Question 6

The table given below reports the marginal revenue and marginal cost of Holmes Detective Agency for each client. Table 8.2
 
- According to Table 8.2,what will be the total number of clients that will maximize profits for the Holmes Detective Agency?

Accepted Answer

A) 2 
B) 3 
C) 5 
D) 6 
E) 8 
A) 2 
B) 3 
C) 5 
D) 6 
E) 8

Question 7

Monopoly is a market structure in which:

Accepted Answer

A) there are significant barriers to the entry of new firms. 
B) the firms face a perfectly elastic demand curve. 
C) there are a large number of close substitutes for the good. 
D) a homogeneous product is sold. 
E) the firms are price takers. 
A) there are significant barriers to the entry of new firms. 
B) the firms face a perfectly elastic demand curve. 
C) there are a large number of close substitutes for the good. 
D) a homogeneous product is sold. 
E) the firms are price takers.

Question 8

Which of the following characteristics distinguishes oligopoly from other market structures?

Accepted Answer

A) Firms operating in an oligopoly are independent of each other. 
B) Firms operating in an oligopoly are interdependent. 
C) Oligopoly is the simplest of all the other market structures. 
D) An oligopolist does not face a downward-sloping demand curve. 
E) Entry into an oligopolistic market is easier than entry into a monopolistically competitive market. 
A) Firms operating in an oligopoly are independent of each other. 
B) Firms operating in an oligopoly are interdependent. 
C) Oligopoly is the simplest of all the other market structures. 
D) An oligopolist does not face a downward-sloping demand curve. 
E) Entry into an oligopolistic market is easier than entry into a monopolistically competitive market.

Question 9

The table given below shows the total revenue and total cost of producing a commodity. Table 8.1
 
- In Table 8.1,in order to maximize profits,the firm should produce ____ units of output.

Accepted Answer

A) five 
B) six 
C) seven 
D) eight 
E) nine 
A) five 
B) six 
C) seven 
D) eight 
E) nine

Question 10

Accounting profit of a business firm is also called:

Accepted Answer

A) royalty income. 
B) net income from equity. 
C) compensatory income. 
D) windfall gain. 
E) net operating income. 
A) royalty income. 
B) net income from equity. 
C) compensatory income. 
D) windfall gain. 
E) net operating income.

Question 11

The figure given below shows the cost curves of a firm. Figure 8.3   
ATC: Average Total Cost
AVC: Average Variable Cost
MC: Marginal Cost
-Refer to Figure 8.3.If the firm maximizes profits at 120 units of the output,calculate the firm's marginal revenue.

Accepted Answer

A) $35 
B) $40 
C) $55 
D) $4,200 
E) Cannot be determined from the information given. 
A) $35 
B) $40 
C) $55 
D) $4,200 
E) Cannot be determined from the information given.

Question 12

Assume that a firm's marginal revenue curve intersects the rising portion of the marginal cost curve at 100 units of output.At this output level,a profit-maximizing firm's total cost is $1,000.If the price of the product is $3 per unit and the firm produces at the profit-maximizing level,the firm will earn an economic profit equal to:

Accepted Answer

A) -$1,000. 
B) -$700. 
C) -$400. 
D) -$600. 
E) $200. 
A) -$1,000. 
B) -$700. 
C) -$400. 
D) -$600. 
E) $200.

Question 13

The marginal revenue curve of a firm coincides with the average revenue curve under perfect competition.

Accepted Answer

A) True 
 B)False

Question 14

The figure given below shows the revenue and cost curves of a firm.MC represents the marginal cost curve,AC the average cost curve,MR the marginal revenue curve,and AR the average revenue curve. Figure 8.4   
-Refer to Figure 8.4.The firm suffers a negative profit of:

Accepted Answer

A) 100 units. 
B) 50 units. 
C) 80 units. 
D) 150 units. 
E) 250 units. 
A) 100 units. 
B) 50 units. 
C) 80 units. 
D) 150 units. 
E) 250 units.

Question 15

The figure given below shows the cost curves of a firm. Figure 8.3   
ATC: Average Total Cost
AVC: Average Variable Cost
MC: Marginal Cost
-In Figure 8.3,if the marginal revenue of the firm is constant at $55,calculate the profit earned by the firm?

Accepted Answer

A) $35 
B) $40 
C) $600 
D) $4,800 
E) $0 
A) $35 
B) $40 
C) $600 
D) $4,800 
E) $0

Question 16

Accounting profit is always equal to or greater than economic profit.

Accepted Answer

A) True 
 B)False

Question 17

The daily vegetable market is an example of oligopoly.

Accepted Answer

A) True 
 B)False

Question 18

The demand curve faced by a perfectly competitive firm is:

Accepted Answer

A) perfectly inelastic. 
B) relatively elastic. 
C) unit elastic. 
D) perfectly elastic. 
E) relatively inelastic. 
A) perfectly inelastic. 
B) relatively elastic. 
C) unit elastic. 
D) perfectly elastic. 
E) relatively inelastic.

Question 19

In economic theory,we assume that the goal of the firm is to:

Accepted Answer

A) maximize sales revenue. 
B) maximize market share. 
C) maximize the benefits it provides to its customers. 
D) maximize the profit. 
E) maximize the sales volume. 
A) maximize sales revenue. 
B) maximize market share. 
C) maximize the benefits it provides to its customers. 
D) maximize the profit. 
E) maximize the sales volume.

Question 20

The following table shows the annual income statement of Max Computers. Table 8.3
  
-Refer to Table 8.3.The economic profit of Max Computers is:

Accepted Answer

A) $1,000 million. 
B) -$4,000 million. 
C) $10,000 million. 
D) -$5,000 million. 
E) $5,000 million. 
A) $1,000 million. 
B) -$4,000 million. 
C) $10,000 million. 
D) -$5,000 million. 
E) $5,000 million.

The characteristic that distinguishes a perfectly competitive market from a monopolistically competitive market is the:

In general,the two extreme cases of market structure models are represented by

The following graph shows the demand and cost curves of an imperfectly competitive firm.MC and ATC represent the marginal cost curve and the average cost curve respectively. Figure 8.1 - According to Figure 8.1,what is the firm's profit when it sells quantity Q₁ at price P₁?

In monopolistic competition there are no brands,all the producers produce only identical,generic products.

The table given below reports the marginal revenue and marginal cost of Holmes Detective Agency for each client. Table 8.2 - According to Table 8.2,what will be the total number of clients that will maximize profits for the Holmes Detective Agency?

Monopoly is a market structure in which:

Which of the following characteristics distinguishes oligopoly from other market structures?

The table given below shows the total revenue and total cost of producing a commodity. Table 8.1 - In Table 8.1,in order to maximize profits,the firm should produce ____ units of output.

Accounting profit of a business firm is also called:

The figure given below shows the cost curves of a firm. Figure 8.3 ATC: Average Total Cost AVC: Average Variable Cost MC: Marginal Cost -Refer to Figure 8.3.If the firm maximizes profits at 120 units of the output,calculate the firm's marginal revenue.

The marginal revenue curve of a firm coincides with the average revenue curve under perfect competition.

The figure given below shows the revenue and cost curves of a firm.MC represents the marginal cost curve,AC the average cost curve,MR the marginal revenue curve,and AR the average revenue curve. Figure 8.4 -Refer to Figure 8.4.The firm suffers a negative profit of:

The figure given below shows the cost curves of a firm. Figure 8.3 ATC: Average Total Cost AVC: Average Variable Cost MC: Marginal Cost -In Figure 8.3,if the marginal revenue of the firm is constant at $55,calculate the profit earned by the firm?

Accounting profit is always equal to or greater than economic profit.

The daily vegetable market is an example of oligopoly.

The demand curve faced by a perfectly competitive firm is:

In economic theory,we assume that the goal of the firm is to:

The following table shows the annual income statement of Max Computers. Table 8.3 -Refer to Table 8.3.The economic profit of Max Computers is:

Economics: The World Around You

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

Consumer Choice

Supply: The Costs of Doing Business

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

Exam 8: Profit Maximization

The characteristic that distinguishes a perfectly competitive market from a monopolistically competitive market is the:

In general,the two extreme cases of market structure models are represented by

The following graph shows the demand and cost curves of an imperfectly competitive firm.MC and ATC represent the marginal cost curve and the average cost curve respectively. Figure 8.1 - According to Figure 8.1,what is the firm's profit when it sells quantity Q1 at price P1?

In monopolistic competition there are no brands,all the producers produce only identical,generic products.

The table given below reports the marginal revenue and marginal cost of Holmes Detective Agency for each client. Table 8.2 - According to Table 8.2,what will be the total number of clients that will maximize profits for the Holmes Detective Agency?

Monopoly is a market structure in which:

Which of the following characteristics distinguishes oligopoly from other market structures?

The table given below shows the total revenue and total cost of producing a commodity. Table 8.1 - In Table 8.1,in order to maximize profits,the firm should produce ____ units of output.

Accounting profit of a business firm is also called:

The figure given below shows the cost curves of a firm. Figure 8.3 ATC: Average Total Cost AVC: Average Variable Cost MC: Marginal Cost -Refer to Figure 8.3.If the firm maximizes profits at 120 units of the output,calculate the firm's marginal revenue.

The marginal revenue curve of a firm coincides with the average revenue curve under perfect competition.

The figure given below shows the revenue and cost curves of a firm.MC represents the marginal cost curve,AC the average cost curve,MR the marginal revenue curve,and AR the average revenue curve. Figure 8.4 -Refer to Figure 8.4.The firm suffers a negative profit of:

The figure given below shows the cost curves of a firm. Figure 8.3 ATC: Average Total Cost AVC: Average Variable Cost MC: Marginal Cost -In Figure 8.3,if the marginal revenue of the firm is constant at $55,calculate the profit earned by the firm?

Accounting profit is always equal to or greater than economic profit.

The daily vegetable market is an example of oligopoly.

The demand curve faced by a perfectly competitive firm is:

In economic theory,we assume that the goal of the firm is to:

The following table shows the annual income statement of Max Computers. Table 8.3 -Refer to Table 8.3.The economic profit of Max Computers is:

Economics: The World Around You

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

Consumer Choice

Supply: The Costs of Doing Business

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters

The following graph shows the demand and cost curves of an imperfectly competitive firm.MC and ATC represent the marginal cost curve and the average cost curve respectively. Figure 8.1 - According to Figure 8.1,what is the firm's profit when it sells quantity Q₁ at price P₁?