Question 1

The soft drink (colas in particular)industry can be best modeled using the model of

Accepted Answer

A) monopolistic competition. 
B) perfect competition. 
C) oligopoly. 
D) monopoly. 
A) monopolistic competition. 
B) perfect competition. 
C) oligopoly. 
D) monopoly.

Question 2

If MR>MC then when an additional unit is sold the firm's

Accepted Answer

A) profit will be positive. 
B) profit will be negative. 
C) profit will increase. 
D) profit will decrease. 
A) profit will be positive. 
B) profit will be negative. 
C) profit will increase. 
D) profit will decrease.

Question 3

-In Figure 5.1, what output would a perfect competitor produce?

Accepted Answer

A) Q1 
B) Q2 
C) Q3 
D) Q4 
A) Q1 
B) Q2 
C) Q3 
D) Q4

Question 4

In Figure 5.8, if the supply curve moves from S2 to S5

Accepted Answer

A) The firm will make a smaller economic profit than they used to 
B) The firm will go from making an economic profit to a normal profit 
C) The firm will go from making an economic profit to a loss but one that is not big enough to make it want to shutdown. 
D) The firm will go from making an economic profit to a loss that is big enough to make it want to shutdown. 
A) The firm will make a smaller economic profit than they used to 
B) The firm will go from making an economic profit to a normal profit 
C) The firm will go from making an economic profit to a loss but one that is not big enough to make it want to shutdown. 
D) The firm will go from making an economic profit to a loss that is big enough to make it want to shutdown.

Question 5

There are fifteen airlines that will take you from New York to L.A. The best model to analyze this market is

Accepted Answer

A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly. 
A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly.

Question 6

In the production of corn, millions of farmers world-wide are ____ and so there is ____ on economic profits to go to zero.

Accepted Answer

A) Oligopolists; no pressure 
B) Perfect competitors; pressure 
C) Monopolists; no pressure 
D) Oligopolists; pressure 
A) Oligopolists; no pressure 
B) Perfect competitors; pressure 
C) Monopolists; no pressure 
D) Oligopolists; pressure

Question 7

The breakfast cereals industry can be best modeled using the model of

Accepted Answer

A) monopolistic competition. 
B) perfect competition. 
C) oligopoly. 
D) monopoly. 
A) monopolistic competition. 
B) perfect competition. 
C) oligopoly. 
D) monopoly.

Question 8

Suppose a farmer earns a larger profit than the "normal profit" by producing a special type of milk that becomes popular

Accepted Answer

A) the farm's owners are likely to withdraw from the industry in order to retire early. 
B) other farmers are likely to produce the same milk, pushing up the prevailing market price. 
C) other farmers are likely to produce the same milk, pushing down the prevailing market price. 
D) the firm will continue to earn its "normal profits" far into the future. 
A) the farm's owners are likely to withdraw from the industry in order to retire early. 
B) other farmers are likely to produce the same milk, pushing up the prevailing market price. 
C) other farmers are likely to produce the same milk, pushing down the prevailing market price. 
D) the firm will continue to earn its "normal profits" far into the future.

Question 9

-In Figure 5.5, what profit would the monopolist earn?

Accepted Answer

A) zero profit, because it would shut down. 
B) a positive profit. 
C) a loss less than its total fixed cost. 
D) a loss greater than its total fixed cost. 
A) zero profit, because it would shut down. 
B) a positive profit. 
C) a loss less than its total fixed cost. 
D) a loss greater than its total fixed cost.

Question 10

Economic theory would suggest that the profitability of an industry would be

Accepted Answer

A) directly related to the number of firms competing in the industry. 
B) inversely related to the number of firms competing in the industry. 
C) unrelated to the number of firms competing in the industry. 
D) zero in the long run, regardless of market structure. 
A) directly related to the number of firms competing in the industry. 
B) inversely related to the number of firms competing in the industry. 
C) unrelated to the number of firms competing in the industry. 
D) zero in the long run, regardless of market structure.

Question 11

In Figure 5.8, if the supply curve moves from S1 to S3

Accepted Answer

A) The firm will make a smaller economic profit than they used to 
B) The firm will go from making an economic profit to a normal profit 
C) The firm will go from making an economic profit to a loss 
D) The firm will go from making normal profits to a loss 
A) The firm will make a smaller economic profit than they used to 
B) The firm will go from making an economic profit to a normal profit 
C) The firm will go from making an economic profit to a loss 
D) The firm will go from making normal profits to a loss

Question 12

Figure 5.3
-In Figure 5.3, what output would a perfect competitor produce?

Accepted Answer

A) Q1 
B) Q2 
C) Q3 
D) 0 
A) Q1 
B) Q2 
C) Q3 
D) 0

Question 13

A reduction in the market price of the product is least likely to be required to enable

Accepted Answer

A) Microsoft to sell more copies of Windows. 
B) a single Midwestern grain farmer to sell a larger harvest of grain. 
C) Apple to sell more of its iPhones. 
D) Verizon to increase its number of cellular telephone service subscribers. 
A) Microsoft to sell more copies of Windows. 
B) a single Midwestern grain farmer to sell a larger harvest of grain. 
C) Apple to sell more of its iPhones. 
D) Verizon to increase its number of cellular telephone service subscribers.

Question 14

In Figure 5.8, if the supply curve moves from S1 to S4

Accepted Answer

A) The firm will make a smaller economic profit than they used to 
B) The firm will go from making an economic profit to a normal profit 
C) The firm will go from making an economic profit to a loss but one that is not big enough to make it want to shutdown. 
D) The firm will go from making an economic profit to a loss that is big enough to make it want to shutdown. 
A) The firm will make a smaller economic profit than they used to 
B) The firm will go from making an economic profit to a normal profit 
C) The firm will go from making an economic profit to a loss but one that is not big enough to make it want to shutdown. 
D) The firm will go from making an economic profit to a loss that is big enough to make it want to shutdown.

Question 15

There are thousands of electric companies in the country, while in a particular city there is only one. The best model to analyze this market is

Accepted Answer

A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly. 
A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly.

Question 16

Suppose you can fly from your home city to New York but only one airline provides the service. This market would be described by

Accepted Answer

A) perfect competition. 
B) healthy competition. 
C) oligopoly. 
D) monopoly. 
A) perfect competition. 
B) healthy competition. 
C) oligopoly. 
D) monopoly.

Question 17

The key difference(s)between perfect competition and monopolistic competition is

Accepted Answer

A) the products sold are slightly different in perfect competition. 
B) the products sold are slightly different in monopolistic competition. 
C) there is poor information about prices in perfect competition. 
D) there is poor information about prices in monopolistic competition. 
A) the products sold are slightly different in perfect competition. 
B) the products sold are slightly different in monopolistic competition. 
C) there is poor information about prices in perfect competition. 
D) there is poor information about prices in monopolistic competition.

Question 18

Perfect competition means that firms are

Accepted Answer

A) Price makers (firms set the price of the market) 
B) Price takers (firms must accept the price of the market) 
C) Powerful sellers 
D) Unable to make normal profits 
A) Price makers (firms set the price of the market) 
B) Price takers (firms must accept the price of the market) 
C) Powerful sellers 
D) Unable to make normal profits

Question 19

An industry which Herfindahl-Hershman Index of 4,000 would best be described as

Accepted Answer

A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly. 
A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly.

Question 20

If a competitive firm routinely earns a larger profit than the "normal profit" for its industry

Accepted Answer

A) the firm's owners are likely to withdraw from the industry in order to retire early. 
B) new firms are likely to enter the industry, pushing up the prevailing market price. 
C) new firms are likely to enter the industry, depressing the prevailing market price. 
D) the firm will continue to earn its "normal profits" far into the future. 
A) the firm's owners are likely to withdraw from the industry in order to retire early. 
B) new firms are likely to enter the industry, pushing up the prevailing market price. 
C) new firms are likely to enter the industry, depressing the prevailing market price. 
D) the firm will continue to earn its "normal profits" far into the future.

Exam 5: Perfect Competition, Monopoly, and Economic Versus Normal Profit

The soft drink (colas in particular)industry can be best modeled using the model of

If MR>MC then when an additional unit is sold the firm's

-In Figure 5.1, what output would a perfect competitor produce?

In Figure 5.8, if the supply curve moves from S2 to S5

There are fifteen airlines that will take you from New York to L.A. The best model to analyze this market is

In the production of corn, millions of farmers world-wide are ____ and so there is ____ on economic profits to go to zero.

The breakfast cereals industry can be best modeled using the model of

Suppose a farmer earns a larger profit than the "normal profit" by producing a special type of milk that becomes popular

-In Figure 5.5, what profit would the monopolist earn?

Economic theory would suggest that the profitability of an industry would be

In Figure 5.8, if the supply curve moves from S1 to S3

Figure 5.3 -In Figure 5.3, what output would a perfect competitor produce?

A reduction in the market price of the product is least likely to be required to enable

In Figure 5.8, if the supply curve moves from S1 to S4

There are thousands of electric companies in the country, while in a particular city there is only one. The best model to analyze this market is

Suppose you can fly from your home city to New York but only one airline provides the service. This market would be described by

The key difference(s)between perfect competition and monopolistic competition is

Perfect competition means that firms are

An industry which Herfindahl-Hershman Index of 4,000 would best be described as

If a competitive firm routinely earns a larger profit than the "normal profit" for its industry

Economics: the Study of Opportunity Cost

Supply and Demand

The Concept of Elasticity and Consumer and Producer Surplus

Firm Production, Cost, and Revenue

Every Macroeconomic Word You Ever Heard: Gross Domestic Product, Inflation, Unemployment, Recession, Depression

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Is Economic Stagnation the New Normal

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So You Want to Be a Lawyer: Economics and the Law

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In the production of corn, millions of farmers world-wide are and so there is on economic profits to go to zero.