Question 1

A(n)____ may offer products that are either differentiated or identical.

Accepted Answer

A) monopolistically competitive firm 
B) monopolist 
C) oligopolistic firm 
D) perfectly competitive firm 
E) monopsonist 
A) monopolistically competitive firm 
B) monopolist 
C) oligopolistic firm 
D) perfectly competitive firm 
E) monopsonist

Question 2

If barriers to entry exist in a market, then:

Accepted Answer

A) the costs of entry and exit are relatively low. 
B) there will be few close substitutes of the product in the market. 
C) firms will be incurring losses in both the short and long runs. 
D) firms will tend to have relatively less monopoly power. 
E) the existing firms will quit the market in the long run due to mounting losses. 
A) the costs of entry and exit are relatively low. 
B) there will be few close substitutes of the product in the market. 
C) firms will be incurring losses in both the short and long runs. 
D) firms will tend to have relatively less monopoly power. 
E) the existing firms will quit the market in the long run due to mounting losses.

Question 3

Scenario 22.1 Jane left her job at Siemens and started her own boutique.She used to earn $50, 000 annually at Siemens.She took a loan of $10, 000 and used $20, 000 from her personal savings to begin her venture.She agreed to repay the loan with 10% interest.Her business is bringing in $80, 000 annually.She has rent and labor expenses of $15, 000.Also assume that Jane could have used her own money i.e.$20, 000 to buy stocks in Intel which would have returned 5% to her last year.
Refer to Scenario 22.1 and calculate Jane's accounting profit.

Accepted Answer

A) $50, 000. 
B) $65, 000. 
C) $80, 000. 
D) $64, 000. 
E) $35, 000. 
A) $50, 000. 
B) $65, 000. 
C) $80, 000. 
D) $64, 000. 
E) $35, 000.

Question 4

Identify the characteristics of a monopoly firm.

Accepted Answer

A) Barred entry and homogeneous product 
B) Unique product and large number of sellers 
C) Standardized product and price taker 
D) Barred entry and price taker 
E) Barred entry and price maker 
A) Barred entry and homogeneous product 
B) Unique product and large number of sellers 
C) Standardized product and price taker 
D) Barred entry and price taker 
E) Barred entry and price maker

Question 5

The following graph shows the marginal revenue (MR)and marginal cost (MC)curves of an imperfectly competitive firm. Figure 22.2   Refer to Figure 22.2.If the current production level is 90 and the firm wishes to maximize profit, it should:

Accepted Answer

A) leave the current production level unchanged. 
B) decrease the quantity produced to 75. 
C) decrease the quantity produced to 50. 
D) decrease the quantity produced to 35. 
E) increase production until MR = MC. 
A) leave the current production level unchanged. 
B) decrease the quantity produced to 75. 
C) decrease the quantity produced to 50. 
D) decrease the quantity produced to 35. 
E) increase production until MR = MC.

Question 6

The primary goal of any business firm is to maximize social welfare.

Accepted Answer

A) True 
 B)False

Question 7

In general, the number of firms is lesser in monopolistic competition compared to oligopoly.

Accepted Answer

A) True 
 B)False

Question 8

Profit of a firm is maximized when:

Accepted Answer

A) marginal revenue is maximum. 
B) marginal revenue is greater than marginal cost. 
C) marginal revenue is equal to marginal cost. 
D) marginal cost is minimum. 
E) marginal revenue is less than marginal cost. 
A) marginal revenue is maximum. 
B) marginal revenue is greater than marginal cost. 
C) marginal revenue is equal to marginal cost. 
D) marginal cost is minimum. 
E) marginal revenue is less than marginal cost.

Question 9

Which of the following is true of marginal revenue?

Accepted Answer

A) Marginal revenue equals total revenue divided by quantity. 
B) Marginal revenue is the slope of the supply curve of a firm. 
C) Marginal revenue is the slope of the total cost curve when profit is maximized. 
D) Marginal revenue equals the change in total revenue divided by the change in the quantity. 
E) Marginal revenue equals the income earned by selling the stocks on the margin. 
A) Marginal revenue equals total revenue divided by quantity. 
B) Marginal revenue is the slope of the supply curve of a firm. 
C) Marginal revenue is the slope of the total cost curve when profit is maximized. 
D) Marginal revenue equals the change in total revenue divided by the change in the quantity. 
E) Marginal revenue equals the income earned by selling the stocks on the margin.

Question 10

A downward-sloping demand curve is faced by firms:

Accepted Answer

A) under perfect competition 
B) under perfect competition and monopoly 
C) in all market structures except monopoly 
D) in all market structures except monopolistic competition 
E) in all market structures except perfect competition 
A) under perfect competition 
B) under perfect competition and monopoly 
C) in all market structures except monopoly 
D) in all market structures except monopolistic competition 
E) in all market structures except perfect competition

Question 11

A perfectly competitive firm charges a price which is greater than its marginal cost.

Accepted Answer

A) True 
 B)False

Question 12

Accounting profit does not include:

Accepted Answer

A) explicit cost. 
B) sunk cost. 
C) fixed cost. 
D) opportunity cost. 
E) variable cost. 
A) explicit cost. 
B) sunk cost. 
C) fixed cost. 
D) opportunity cost. 
E) variable cost.

Question 13

A monopolistically competitive firm faces a relatively steeper demand curve than a perfectly competitive firm.

Accepted Answer

A) True 
 B)False

Question 14

When a firm incurs negative economic profit, it should:

Accepted Answer

A) hire more laborers to make the business activity profitable. 
B) transfer the resources from current use to other alternative uses. 
C) purchase additional raw materials to produce more output. 
D) transfer the resources from alternative uses to the current activity. 
E) continue to operate with the same resources. 
A) hire more laborers to make the business activity profitable. 
B) transfer the resources from current use to other alternative uses. 
C) purchase additional raw materials to produce more output. 
D) transfer the resources from alternative uses to the current activity. 
E) continue to operate with the same resources.

Question 15

A producer can raise profit by expanding output if:

Accepted Answer

A) marginal revenue is equal to marginal cost. 
B) marginal revenue is less than marginal cost. 
C) marginal revenue is negative. 
D) marginal cost is negative. 
E) marginal revenue is greater than marginal cost. 
A) marginal revenue is equal to marginal cost. 
B) marginal revenue is less than marginal cost. 
C) marginal revenue is negative. 
D) marginal cost is negative. 
E) marginal revenue is greater than marginal cost.

Question 16

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 $10 per unit, the firm will earn an economic profit of:

Accepted Answer

A) zero. 
B) $400. 
C) more than zero but less than $100. 
D) $100. 
E) more than $100. 
A) zero. 
B) $400. 
C) more than zero but less than $100. 
D) $100. 
E) more than $100.

Question 17

Assume that a firm is producing an output level such that marginal revenue equals marginal cost.One can correctly conclude that the firm is producing a level of output which is:

Accepted Answer

A) equal to the profit maximizing level of output. 
B) equal to revenue maximizing level of output. 
C) less than the profit maximizing level of output. 
D) zero. 
E) greater than the profit maximizing level of output. 
A) equal to the profit maximizing level of output. 
B) equal to revenue maximizing level of output. 
C) less than the profit maximizing level of output. 
D) zero. 
E) greater than the profit maximizing level of output.

Question 18

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 19

Assume that a firm's marginal revenue curve intersects the rising portion of its marginal cost curve at 500 units of output.At this output level, a profit-maximizing firm's total cost of production is $1, 000.If the price of the product is $5 per unit, the total revenue earned by the firm will be:

Accepted Answer

A) $1, 500. 
B) $250. 
C) $500. 
D) $2, 500. 
E) $1, 000. 
A) $1, 500. 
B) $250. 
C) $500. 
D) $2, 500. 
E) $1, 000.

Question 20

The greater the differentiation among products of the monopolistically competitive firms, the less price-elastic is the demand.

Accepted Answer

A) True 
 B)False

Exam 43: Profit Maximization

A(n)____ may offer products that are either differentiated or identical.

If barriers to entry exist in a market, then:

Identify the characteristics of a monopoly firm.

The following graph shows the marginal revenue (MR)and marginal cost (MC)curves of an imperfectly competitive firm. Figure 22.2 Refer to Figure 22.2.If the current production level is 90 and the firm wishes to maximize profit, it should:

The primary goal of any business firm is to maximize social welfare.

In general, the number of firms is lesser in monopolistic competition compared to oligopoly.

Profit of a firm is maximized when:

Which of the following is true of marginal revenue?

A downward-sloping demand curve is faced by firms:

A perfectly competitive firm charges a price which is greater than its marginal cost.

Accounting profit does not include:

A monopolistically competitive firm faces a relatively steeper demand curve than a perfectly competitive firm.

When a firm incurs negative economic profit, it should:

A producer can raise profit by expanding output if:

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 $10 per unit, the firm will earn an economic profit of:

Assume that a firm is producing an output level such that marginal revenue equals marginal cost.One can correctly conclude that the firm is producing a level of output which is:

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

Assume that a firm's marginal revenue curve intersects the rising portion of its marginal cost curve at 500 units of output.At this output level, a profit-maximizing firm's total cost of production is $1, 000.If the price of the product is $5 per unit, the total revenue earned by the firm will be:

The greater the differentiation among products of the monopolistically competitive firms, the less price-elastic is the demand.

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

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

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

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