Question 1

Graphically, total revenue is represented by 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) line segment between the demand and average-total-cost curves at any level of output. 
E) the line segment between the horizontal axis and the average-total-cost curves at any level of output. 
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) line segment between the demand and average-total-cost curves at any level of output. 
E) the line segment between the horizontal axis and the average-total-cost curves at any level of output.

Question 2

Under oligopoly market structure, the rival firms take complete independent decisions.

Accepted Answer

A) True 
 B)False

Question 3

Entry of new firms to the industry lowers the economic profit of the existing firms.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Scenario 8.1 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 8.1.Compute Jane's economic profit.

Accepted Answer

A) $13, 000 
B) $14, 000 
C) $20, 000 
D) $15, 000 
E) $10, 000 
A) $13, 000 
B) $14, 000 
C) $20, 000 
D) $15, 000 
E) $10, 000

Question 6

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 7

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

Accepted Answer

A) True 
 B)False

Question 8

A monopolist faces the least price elastic demand curve because:

Accepted Answer

A) the consumers have only one place to buy the good. 
B) the monopolist produces a standardized product. 
C) the monopolist undertakes a huge expenditure to produce the product. 
D) the monopolist supplies an insignificant portion of the market. 
E) the monopolist produces an absolutely necessary good having close substitutes. 
A) the consumers have only one place to buy the good. 
B) the monopolist produces a standardized product. 
C) the monopolist undertakes a huge expenditure to produce the product. 
D) the monopolist supplies an insignificant portion of the market. 
E) the monopolist produces an absolutely necessary good having close substitutes.

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Why does a monopolist face the market demand curve?

Accepted Answer

A) Presence of a large number of substitutes 
B) Presence of large number of buyers in the market 
C) Barred entry of any new firm in the market 
D) Produces a homogeneous product 
E) Consumers have perfect knowledge of the market 
A) Presence of a large number of substitutes 
B) Presence of large number of buyers in the market 
C) Barred entry of any new firm in the market 
D) Produces a homogeneous product 
E) Consumers have perfect knowledge of the market

Question 11

Goodspeed Automobiles manufactures 100 disc brake cylinders.At this output level, its marginal revenue is equal to its marginal cost.If the revenue per unit of output is $500 and the per unit cost is $350, its profit is:

Accepted Answer

A) $20, 000. 
B) $15, 000. 
C) $45, 000. 
D) $25, 000. 
E) $10, 000. 
A) $20, 000. 
B) $15, 000. 
C) $45, 000. 
D) $25, 000. 
E) $10, 000.

Question 12

The table given below shows the total revenue and total cost of producing a commodity. Table 8.1
  In Table 8.1, the marginal revenue from the sixth unit of output is:

Accepted Answer

A) $1, 700. 
B) $1, 600. 
C) $1, 500. 
D) $1, 300. 
E) $1, 200. 
A) $1, 700. 
B) $1, 600. 
C) $1, 500. 
D) $1, 300. 
E) $1, 200.

Question 13

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 14

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   In Table 8.1, in order to maximize profits, the firm should increase output until the ____ unit of output.

Accepted Answer

A) fifth 
B) sixth 
C) seventh 
D) eighth 
E) ninth 
A) fifth 
B) sixth 
C) seventh 
D) eighth 
E) ninth

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

When economic profit is greater than zero, accounting profit is called normal profit.

Accepted Answer

A) True 
 B)False

Question 17

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 18

Which of the following is true of marginal cost?

Accepted Answer

A) Marginal cost is the cost per unit of output produced. 
B) Marginal cost is the change in total cost divided by the change in total output. 
C) Marginal cost curve is negatively sloped at the profit-maximizing level of output. 
D) Marginal cost is equal to total cost divided by the quantity of output. 
E) Marginal cost initially increases with an increase in output but subsequently declines. 
A) Marginal cost is the cost per unit of output produced. 
B) Marginal cost is the change in total cost divided by the change in total output. 
C) Marginal cost curve is negatively sloped at the profit-maximizing level of output. 
D) Marginal cost is equal to total cost divided by the quantity of output. 
E) Marginal cost initially increases with an increase in output but subsequently declines.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Graphically, profit per unit of output can be found by:

Accepted Answer

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

Exam 12: Profit Maximization

Graphically, total revenue is represented by the:

Under oligopoly market structure, the rival firms take complete independent decisions.

Entry of new firms to the industry lowers the economic profit of the existing firms.

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

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.

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

A monopolist faces the least price elastic demand curve because:

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

Why does a monopolist face the market demand curve?

Goodspeed Automobiles manufactures 100 disc brake cylinders.At this output level, its marginal revenue is equal to its marginal cost.If the revenue per unit of output is $500 and the per unit cost is $350, its profit is:

The table given below shows the total revenue and total cost of producing a commodity. Table 8.1 In Table 8.1, the marginal revenue from the sixth unit of output is:

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 In Table 8.1, in order to maximize profits, the firm should increase output until the ____ unit of output.

A producer can raise profit by expanding output if:

When economic profit is greater than zero, accounting profit is called normal profit.

If barriers to entry exist in a market, then:

Which of the following is true of marginal cost?

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

Graphically, profit per unit of output can be found by:

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

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