In the long run the prices charged by a firm in monopolistic competition will be
a. high enough to provide profits to the firm.
b. so low that many firms will drop out of the industry.
c. equal to marginal cost.
d. equal to average cost, including the opportunity cost of capital.
Figure 4-12
The silverware industry has been in serious decline since the 1980s. Family dining
habits are less formal so people purchase less silverware. Also, in 2006-2008, the price
of silver increased from $5 to $20 per ounce. Which graph in Figure 4-12 best
illustrates these developments?
a. 1
b. 2
c. 3
d. 4
By definition, an industry with high concentration also is highly competitive.
a. True
b. False
If the price of potatoes is reduced, consumers likely:
a. significantly more potatoes
b. significantly fewer potatoes
c. roughly the same quantity of potatoes
d. an unknown quantity of potatoes; in this situation, consumers’ actions cannot be
predicted
Which factor of production accounts for the highest percentage of the income that the
production process generates in the US?
a. Capital
b. Natural Resource
c. Land
d. Labor
The federal government has the power to investigate and to try to block
a. only voluntary mergers between firms.
b. only hostile takeovers.
c. only friendly takeovers.
d. any combining of the ownership of previously independent firms that increases
concentration.
Roughly what percentage of Americans were officially considered poor in 2012?
a. 2 percent
b. 9 percent
c. 15 percent
d. 22 percent
A tax on polluting firms
a. would shift the LRAC curve upward.
b. would shift the LRAC curve downward.
c. would have the same impact on the firm as a subsidy.
d. tends to have the perverse effect of increasing pollution.
Which of the following areas employed more workers in 2013?
a. educational and health services
b. business and professional services
c. retail trade
d. manufacturing companies
If price rises, what happens to quantity demanded for a product?
a. It increases.
b. It decreases.
c. It does not change.
d. Uncertain-economic theory has no answer to this question.
Marginal revenue is the addition to a firm’s revenue from
a. a $1 change in price.
b. a one-unit change in output.
c. the sale of inferior output.
d. a $1 reduction in marginal cost.
A consumer will go to a point on the highest attainable indifference curve.
a. True
b. False
The most efficient market structure in the long run is
a. perfect competition.
b. monopolistic competition.
c. oligopoly.
d. monopoly.
How will a decrease in price tend to affect supply?
a. Supply will increase.
b. Supply will decrease.
c. Supply will not change.
d. Uncertain.
Oligopolies are difficult to analyze because of the interdependent nature of management
decisions.
a. True
b. False
Firms entering a perfectly competitive industry will cause the price of the product to
a. fall.
b. rise.
c. remain constant.
d. become more responsive to consumer demand.
Price ceilings set a legal maximum price on a product or commodity.
a. True
b. False
Normally an increase in the supply of a good will cause
a. a shift of consumer preferences in favor of that good.
b. consumers to use more of that good and less of others.
c. a shift of consumer preferences away from that good.
d. consumers to use less of that good and more of others.
The demand curve facing Company ABC is perfectly elastic. What is its marginal
revenue?
a. Equal to the average revenue.
b. Less than the price.
c. Higher than the price.
d. Higher than the average revenue.
Lower prices are always better for society.
a. True
b. False
Economic theory posits that a resource which is finite and being depleted will rise in
price continuously, and demand will be reduced. In fact, a recent study, graphing the
price behavior of lead, zinc and copper found that until about 2007,
a. prices rose steadily, as predicted.
b. prices dropped precipitously.
c. prices remained remarkably stable.
d. prices were up and down with no discernible pattern.