You are a manager in a perfectly competitive market

Question

Question 1

A frozen food company buys a fresh food company. This takeover is an example of:

vertical integration

horizontal integration

cointegration

conglomerate integration

Question 2

Which of the following is true?

A monopolist produces on the inelastic portion of its demand

A monopolist always earns an economic profit

The more inelastic the demand, the closer marginal revenue is to price

In the short run, a monopoly will shut down if P < AVC

Question 3

A firm has a marginal cost of $20 and charges a price of $40. The Lerner index for this firm is

0.20

0.50

0.33

0.75

Question 4

Which of the following is an example of monopoly?

Shoe industry in the United States

Local utility industry in a small town

Newspaper industry in New York City

Bread industry in New York City

Question 5

The recipe that defines the maximum amount of output that can be produced with K units of capital and L units of labor is the:

Production function.

Technological constraint.

Research and development schedule.

Total product

Question 6

Which of the following is NOT a measure of market structure?

Entry conditions

Four-firm concentration ratio

Herfindahl-Hirschman index

Pricing behavior

Question 7

An electronics company takes over one of its original suppliers in a merger. This is an example of:

vertical integration

horizontal integration

cointegration

conglomerate integration

Question 8

Pricing is an aspect of a firm's:

performance

structure

conduct

environment

Question 9

The feasible means of converting raw inputs such as steel, labor, and machinery into an output are summarized by:

Land.

Production.

Capital.

Technology

Question 10

When economies of scale are large, firms can reduce their average total cost by:

selling off their subsidiaries

merging into even larger firms

eliminating the bureaucratic costs

hiring professional managers

Question 11

Which of the following is not a measure of productivity?

total product.

marginal product.

average advertising.

input-output ratio

Question 12

The marginal cost curve

lies always below the average total cost curve (ATC).

lies always above the average variable cost curve (AVC).

intersects the ATC and AVC at their maximum points.

intersects the ATC and AVC at their minimum points

Question 13

Chris raises cows and produces cheese and milk because he enjoys:

economies of scale

economies of scope

cost complementarity

None of the answers is correct

Question 14

You are the manager of a firm that sells its product in a competitive market at a price of $40. Your firm's cost function is C = 60 + 4Q2, .; Its MC = 8Q. The profit-maximizing output for your firm is:

4

5

10

15

Question 15

Sunk costs are those costs that

do not vary without output.

are forever lost after they have been paid.

can be collected even after they have been paid.

do vary with output

Question 16

A perfectly competitive firm faces a:

perfectly elastic demand function

perfectly inelastic demand function

demand function with unitary elasticity

None of the answers is correct

Question 17

Which of the following kinds of market structure are NOT associated with market power?

Oligopoly

Perfect competition

Monopolistic competition

Perfect competition and monopolistic competition

Question 18

According to the "feedback critique":

the conduct of firms in an industry may affect the firm's performance

the conduct of firms in an industry may affect the market structure

market structure may affect the firm's conduct

All of the statements associated with this question are correct

Question 19

You are a manager in a perfectly competitive market. The price in your market is $14. Your total cost curve is C(Q) = 10 + 4Q + 0.5Q2. What price should you charge in the short run?

$12

$14

$16

$18

Question 20

Economies of scale exist whenever:

average total costs decline as output increases

average total costs increase as output increases

average total costs are stationary as output increases

average total costs increase as output increases and average total costs are stationary as output increases

Question 21

Which of the following statements is NOT correct about monopoly?

A monopolist generally faces a downward-sloping demand curve

Monopolists always make positive profits in the long run

A monopoly may make negative profits in the short run

There is no close substitute for a monopoly's product

Question 22

In a competitive industry with identical firms, long-run equilibrium is characterized by:

P = AC

P = MC

MR = MC

All of the statements associated with this question are correct

Question 23

Which of the following is(are) basic feature(s) of a perfectly competitive industry?

Buyers and sellers have perfect information

There are no transaction costs

There is free entry and exit in the market

All of the statements associated with this question are correct

Question 24

For the cost function C(Q) = 100 + 2Q + 3Q2 , the average fixed cost of producing 2 units of output is

100.

50.

3.

2

Question 25

The causal view of an industry is that:

market structure causes firms to behave in a certain way

market performance causes firms to have a certain structure

market performance causes firms to behave in a certain way

behavior causes firms to have a certain structure

Question 26

Fixed costs exist only in:

The long run.

Capital intensive markets. .

The short run.

Labor intensive markets

Question 27

Which of the following features is common to both perfectly competitive markets and monopolistically competitive markets?

Firms produce homogeneous goods

There is free entry

Long-run profits are zero

There is free entry and long-run profits are zero

Question 28

Which of the following are measures of industry concentration?

Four-firm concentration ratio

HHI index

Consumer surplus

Four-firm concentration ratio and HHI index

Question 29

Differentiated goods are NOT a feature of a:

perfectly competitive market

monopolistically competitive market

monopolistic market

perfectly competitive market and monopolistic market

Question 30

What is the value marginal product of labor if: P = $10, MPL = $25, and APL = 40?

$10,000.

$1,000.

$400.

$250

Question 31

Suppose the production function is given by Q = 3K + 4L. What is the average product of capital when 5 units of capital and 10 units of labor are employed?

3.

4.

11.

45

Question 32

The combinations of inputs that produce a given level of output are depicted by:

Indifference curves.

Budget lines.

Iscost curves.

Isoquants

Question 33

Producer and consumer surpluses are measures of:

industry performance

market structure

firm conduct

None of the answers are correct

Question 34

The ranking of industries by the four-firm concentration ratio usually, but not always, reveals the same pattern as ranking by HHI. When a discrepancy is found it is usually due to the following:

The four-firm concentration index contains data on only the largest four firms, while the HHI is based on data for all firms in the industry

The HHI is based on squared market shares, while the four-firm concentration ratio is not

The four-firm concentration index contains data on only the largest four firms, while the HHI is based on data for all firms in the industry and the HHI is based on squared market shares, while the four-firm concentration ratio is not.

The two indices are designed to measure two different attributes of markets

Question 35

If you wish to open a store and you do not like risk, it would be wise to sell:

only normal goods.

a mix of normal and inferior goods.

all inferior goods.

none of the statements associated with this question are correct.

Question 36

In order to minimize the cost of producing a given level of output, a firm manager should use more inputs when:

Its price rises.

Its price falls.

Its price remains the same.

The price of other inputs fall.

Question 37

What is implied when the total cost of producing Q1and Q2 together is less than the total cost of producing Q1 and Q2 separately?

Economies of scale.

Diminishing average fixed costs.

Cost complementarity.

Economies of scope.

Question 38

There is no market supply curve in:

a perfectly competitive market

a monopolistically competitive market

a monopolistic market

monopolistically competitive and monopolistic markets

Question 39

Total product begins to fall when:

Marginal product is maximized.

Average product is below zero.

Average product is negative.

Marginal product is zero.

Question 40

The absolute value of the slope of the isoquant is the:

Marginal rate of technical substitution.

Marginal product of capital.

Marginal rate of substitution.

Value marginal product of labor