Question 1

Marginal revenue of nth unit of output is:

Accepted Answer

A) total revenue of (n+1)th unit minus total revenue of nth unit. 
B) total revenue of nth unit minus total revenue of (n-1)th unit. 
C) total revenue of (n+1)th unit minus total revenue of (n-1)th unit. 
D) the sum of total revenue of (n+1)th unit and nth unit. 
E) the sum of total revenue of (n+1)th unit and (n-1)th unit. 
A) total revenue of (n+1)th unit minus total revenue of nth unit. 
B) total revenue of nth unit minus total revenue of (n-1)th unit. 
C) total revenue of (n+1)th unit minus total revenue of (n-1)th unit. 
D) the sum of total revenue of (n+1)th unit and nth unit. 
E) the sum of total revenue of (n+1)th unit and (n-1)th unit.

Question 2

An industry which has no barriers to entry, no product promotion strategy, a standardized product, and a very large number of firms operating within it, is said to have:

Accepted Answer

A) a monopoly market structure. 
B) perfect competition. 
C) monopsonistic competition. 
D) monopolistic competition. 
E) an oligopoly market structure. 
A) a monopoly market structure. 
B) perfect competition. 
C) monopsonistic competition. 
D) monopolistic competition. 
E) an oligopoly market structure.

Question 3

The ordering of market structures from most market power to least market power (where market power is the ability to set its own price)is:

Accepted Answer

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

Question 4

Which of the following is not true of monopolistic competition?

Accepted Answer

A) There are a large number of buyers and sellers. 
B) The firms produce differentiated products. 
C) There exists free entry and exit of firms. 
D) Each of the firms faces a horizontal demand curve. 
E) Each of the firms act as a minimonopoly in the market. 
A) There are a large number of buyers and sellers. 
B) The firms produce differentiated products. 
C) There exists free entry and exit of firms. 
D) Each of the firms faces a horizontal demand curve. 
E) Each of the firms act as a minimonopoly in the market.

Question 5

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   Refer to Figure 8.1.At price P1 the firm sells quantity Q1, and total revenue is shown by:

Accepted Answer

A) the rectangle ABCD. 
B) the rectangle ABEF. 
C) the rectangle FECD. 
D) the distance AB. 
E) the distance BC. 
A) the rectangle ABCD. 
B) the rectangle ABEF. 
C) the rectangle FECD. 
D) the distance AB. 
E) the distance BC.

Question 6

A monopolist faces the market demand curve.

Accepted Answer

A) True 
 B)False

Question 7

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 8

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 9

The following figure shows the cost and revenue structures of a firm.MC represents the marginal cost curve, AC represents the average cost curve, AR represents the average revenue curve, and MR represents the marginal revenue curve.P* is the equilibrium price and Q* is the equilibrium output. Figure 8.5   Refer to Figure 8.5.Identify the market structure in which the firm operates:

Accepted Answer

A) Perfect competition 
B) Monopolistic competition 
C) Monopoly 
D) Oligopoly 
E) Duopoly 
A) Perfect competition 
B) Monopolistic competition 
C) Monopoly 
D) Oligopoly 
E) Duopoly

Question 10

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 8.3.The profit maximizing level of output is:

Accepted Answer

A) 80 units. 
B) 70 units. 
C) 60 units. 
D) 50 units. 
E) 40 units. 
A) 80 units. 
B) 70 units. 
C) 60 units. 
D) 50 units. 
E) 40 units.

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
In Figure 8.3, what is the total cost of producing 140 units of the output?

Accepted Answer

A) $40 
B) $55 
C) $300 
D) $5, 600 
E) $7, 700 
A) $40 
B) $55 
C) $300 
D) $5, 600 
E) $7, 700

Question 12

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 13

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 14

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

Accepted Answer

A) True 
 B)False

Question 15

Nancy owns and operates a drug store that generates total revenues worth $30 million in a particular year.Her accounting costs for the year are $25 million.She could have earned $3 million in this year if she had worked as a consultant for a pharmaceutical firm.Further, she could have earned 5 percent interest on $40 million of her own money that she invests in the business this year.Nancy's accounting profit in this year is _____ and her economic profit is _____.

Accepted Answer

A) $5 million;zero 
B) $5 million;$3 million 
C) $5 million;$8 million 
D) zero;$3 million 
E) $3 million;$43 million 
A) $5 million;zero 
B) $5 million;$3 million 
C) $5 million;$8 million 
D) zero;$3 million 
E) $3 million;$43 million

Question 16

Entry barriers exist in a perfectly competitive industry.

Accepted Answer

A) True 
 B)False

Question 17

Each firm under monopolistic competition produces a unique product which does not have a close substitute.

Accepted Answer

A) True 
 B)False

Question 18

A profit-maximizing firm will produce the level of output at which:

Accepted Answer

A) average revenue equals average cost. 
B) average revenue equals average variable cost. 
C) marginal revenue equals marginal cost. 
D) marginal cost equals average revenue. 
E) marginal revenue exceeds marginal cost by the maximum amount. 
A) average revenue equals average cost. 
B) average revenue equals average variable cost. 
C) marginal revenue equals marginal cost. 
D) marginal cost equals average revenue. 
E) marginal revenue exceeds marginal cost by the maximum amount.

Question 19

Graphically, total cost is equal to the area of the:

Accepted Answer

A) triangle formed under the demand curve. 
B) rectangle formed under the demand curve at a given price and quantity combination. 
C) rectangle formed under the average-total-cost curve at a given ATC and quantity combination. 
D) triangle formed by a line segment between the demand and average-total-cost curves. 
E) triangle formed by a line segment between the horizontal axis and the average-total-cost curves. 
A) triangle formed under the demand curve. 
B) rectangle formed under the demand curve at a given price and quantity combination. 
C) rectangle formed under the average-total-cost curve at a given ATC and quantity combination. 
D) triangle formed by a line segment between the demand and average-total-cost curves. 
E) triangle formed by a line segment between the horizontal axis and the average-total-cost curves.

Question 20

The daily vegetable market is an example of oligopoly.

Accepted Answer

A) True 
 B)False

Exam 12: Profit Maximization

Marginal revenue of nth unit of output is:

An industry which has no barriers to entry, no product promotion strategy, a standardized product, and a very large number of firms operating within it, is said to have:

The ordering of market structures from most market power to least market power (where market power is the ability to set its own price)is:

Which of the following is not true of monopolistic competition?

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 Refer to Figure 8.1.At price P1 the firm sells quantity Q1, and total revenue is shown by:

A monopolist faces the market demand curve.

Accounting profit of a business firm is also called:

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

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 8.3.The profit maximizing level of output is:

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, what is the total cost of producing 140 units of the output?

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

Which of the following is true of marginal revenue?

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

Entry barriers exist in a perfectly competitive industry.

Each firm under monopolistic competition produces a unique product which does not have a close substitute.

A profit-maximizing firm will produce the level of output at which:

Graphically, total cost is equal to the area of the:

The daily vegetable market is an example of oligopoly.

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

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

Profit Maximization

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

Marginal revenue of n^th unit of output is:

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 Refer to Figure 8.1.At price P₁ the firm sells quantity Q₁, and total revenue is shown by: