Question 1. (Points: 2) If a firm finds itself operating in Stage I, it implies that

03 Jun Question 1. (Points: 2) If a firm finds itself operating in Stage I, it implies that

Question
1.
(Points: 2)
If a firm finds itself operating in Stage I, it implies that

a. variable inputs are extremely expensive.

b. it underinvested in fixed capacity.

c. it overinvested in fixed capacity.

d. fixed inputs are extremely expensive.

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2.
(Points: 1)
Which of the following distinctions helps to explain the difference between relevant and irrelevant cost?

a. variable cost vs. incremental cost

b. sunk cost vs. fixed cost

c. historical cost vs. replacement cost

d. accounting cost vs. direct cost

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3.
(Points: 1)
The pricing of a product at each stage of production as the product moves through several stages is called

a. transfer pricing.

b. cost plus pricing.

c. penetration pricing.

d. monopolistic pricing.

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4.
(Points: 1)
All of the following are conditions which are favorable to the formation of cartels except

a. the existence of a small number of firms.

b. geographic proximity of firms.

c. homogeneity of the product.

d. easy entry into the industry.

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5.
(Points: 2)
The result for the seller of being able to practice price discrimination will be

a. lower quantity sold.

b. higher profits.

c. cost minimization.

d. lower demand elasticity.

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6.
(Points: 2)
When a firm prices its goods below the marginal cost to drive away competitors, it is referred as

a. limit pricing.

b. price skimming.

c. predatory pricing.

d. penetration pricing.

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7.
(Points: 1)
Other things remaining the same, an increase in the price of butter can be expected to

a. increase margarine sales.

b. increase butter sales.

c. decrease margarine sales.

d. None of the above

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8.
(Points: 2)
In which of these markets would the firms be facing the least elastic demand curve?

a. oligopoly

b. perfect competition

c. pure monopoly

d. monopolistic competition

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9.
(Points: 2)
Mutual interdependence occurs when

a. the actions of one firm in an industry are easily recognized and perhaps copied by others.

b. monopolists recognize that they must face eventual competition in the long run.

c. all firms in an industry are affected by the same macro economic conditions, such as a recession, inflation, interest rates, exchange rates, etc.

d. the actions of firms are independent of each other.

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10.
(Points: 1)
Mutual interdependence means that

a. all firms are price takers.

b. all firms collaborate to establish one price.

c. each firm sets its own price based on its anticipated reaction by its competitors.

d. all firms are free to enter or leave the market.

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11.
(Points: 2)
In general, there is a(n) ________ relationship between the height/strength of the barriers and the number of firms in an industry.

a. inverse

b. random

c. constant

d. direct

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12.
(Points: 1)
When a company is faced by a kinked demand curve, the marginal revenue curve

a. will be upward sloping.

b. will be horizontal.

c. will always be zero at the quantity produced.

d. will be discontinuous.

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13.
(Points: 2)
The existence of a kinked demand curve under oligopoly conditions may result in

a. competitive pricing.

b. price rigidity.

c. price flexibility.

d. None of the above

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14.
(Points: 1)
In the kinked demand curve model, the demand curve is ________ for price increases and ________ for price decreases.

a. relatively inelastic; relatively elastic

b. unit elastic; relatively elastic

c. perfectly elastic; perfectly inelastic

d. relatively elastic; relatively inelastic

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15.
(Points: 1)
The four-firm concentration ratio

a. indicates the total profitability among the top four firms in an industry.

b. indicates the presence and intensity of an oligopoly market.

c. is used by the government as a basis for anti-trust cases.

d. is an indicator of the degree of monopolistic competition.

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16.
(Points: 1)
The main difference between perfect competition and monopolistic competition is

a. the ease of exit from the market.

b. the degree of product differentiation.

c. the difference in the firm’s profits in the long run.

d. the number of sellers in the market.

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17.
(Points: 1)
If firms are earning economic profit in a monopolistically competitive market, which of the following is most likely to happen in the long run?

a. Firms will continue to earn economic profit.

b. Firms will join together to keep others from entering.

c. Some firms will leave the market.

d. New firms will enter the market, thereby eliminating the economic profit.

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18.
(Points: 1)
Which of the following represents a good example of an oligopoly?

a. a public utility

b. the agriculture industry

c. the automobile industry

d. the restaurant industry

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19.
(Points: 2)
Monopoly is characterized by

a. non-price competition not necessary.

b. market entry and exit difficult or impossible.

c. unique products.

d. All of the above

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20.
(Points: 2)
In the short run a firm should shut down if it cannot

a. cover its fixed costs.

b. make normal profits.

c. cover its variable costs.

d. make economic profits.

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21.
(Points: 2)
Which of the following characteristics is most important in differentiating between perfect competition and all other types of markets?

a. whether or not the product is standardized

b. whether or not firms are price takers

c. whether or not there is complete market information about price

d. All of the above are equally important.

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22.
(Points: 2)
Which is a required characteristic of a perfectly competitive industry?

a. Barriers to entry are high

b. There are few firms so that none can influence market price.

c. Products are highly differentiated.

d. None of the above

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23.
(Points: 2)
In the short run, which of the following would indicate that a perfectly competitive firm is producing an output for which it is receiving a normal profit?

a. P > AC

b. AVC < P < AC c. P = AVC d. P = AC Save Answer 24. (Points: 2) Assume a profit maximizing firm's short-run cost is TC = 700 + 60Q. If its demand curve is P = 300 - 15Q, what should it do in the short run? a. continue operating in the short run even though it is losing money b. continue operating because it is earning an economic profit c. shut down d. Cannot be determined from the above information Save Answer 25. (Points: 2) A perfectly competitive firm sells 15 units of output at the going market price of $10. Suppose its average fixed cost is $15 and its average variable cost is $8. Its contribution margin (i.e., contribution to fixed cost) is a. $30. b. $105. c. $150. d. Cannot be determined from the above information Save Answer 26. (Points: 1) At the point at which P=MC, suppose that a perfectly competitive firm's MC = $100, its AVC = $80 and its AC = $110. This firm should a. continue operating in the short run. b. shut down immediately. c. try to take advantage of economies of scale. d. try to increase its advertising and promotion. Save Answer 27. (Points: 2) If a perfectly competitive firm incurs an economic loss, it should a. shut down in the long run. b. shut down if this loss exceeds variable cost. c. shut down immediately. d. try to raise its price. Save Answer 28. (Points: 2) A firm that seeks to maximize its revenue is most likely to adhere to which of the following? a. MR =0 b. MR < MC c. MR =P d. MR = MC Save Answer 29. (Points: 1) The principle marginal revenue equal-marginal-cost rule for maximizing profit a. applies to new firms but not to existing firms in an industry. b. applies only for firm in perfect competition but not in monopolistic competition. c. does not apply to firms in the monopoly or oligopolistic industries. d. applies to all the firms in all industries. Save Answer 30. (Points: 2) Which of the following actions has the best potential for experiencing economies of scope? a. producing a product that has appeal to a wider segment of the market b. producing computers and software c. producing spaghetti and soft drinks d. producing cars and trucks Save Answer 31. (Points: 1) Changes in the short-run total costs result from changes in only a. total fixed costs. b. variable costs. c. fixed costs. d. zero. Save Answer 32. (Points: 1) Diseconomies of scale can be caused by a. the law of diminishing returns. b. increasing advertising and promotional costs. c. bureaucratic inefficiencies. d. All of the above Save Answer 33. (Points: 1) Which of the following is most likely a fixed cost? a. wages for unskilled labor b. property taxes c. expenditures for raw materials d. fuel cost Save Answer 34. (Points: 2) When a firm increased its output by one unit, its AC decreased. This implies that a. MC = AC. b. MC < AFC. c. MC < AC. d. the law of diminishing returns has not yet taken effect. Save Answer 35. (Points: 2) Which level indicates the point of maximum economic efficiency? a. lowest point on AVC curve b. lowest point on MC curve c. lowest point on AC curve d. None of the above Save Answer 36. (Points: 2) When a firm increased its output by unit, its AFC decreased. This is an indication that a. AVC < AFC. b. the firm is spreading out its total fixed cost. c. the law of diminishing returns has taken effect. d. MC < AFC. Save Answer 37. (Points: 2) The marginal cost will intersect the average variable cost curve a. where average variable cost curve equals price. b. when the average variable cost curve is rising. c. at the minimum point of the average variable cost curve. d. The two will never intersect. Save Answer 38. (Points: 2) Which of the following cost functions will exhibit both decreasing and increasing marginal costs? a. a quadratic cost function b. a cubic cost function c. a linear cost function d. All of the above Save Answer 39. (Points: 2) If a firm used a combination of inputs that was to the left of its isocost line, it would indicate that a. it is operating at its optimal point because it is saving money. b. it is not spending all of its budget. c. it is exceeding its budget. d. None of the above Save Answer 40. (Points: 2) A firm using two inputs, X and Y, is using them in the most efficient manner when a. Px = Py and MPx = MPy. b. MPx/MPy = Px/Py. c. MPx/Py = MPy/Px. d. MPx = MPy. Save Answer 41. (Points: 2) When the law of diminishing returns takes effect a. firms must add decreasingly more input if they are to maintain the same extra amount of output. b. firms must add increasingly more input if they are to maintain the same extra amount of output. c. more input must be added in order to increase its output. d. a firm must always try to add the same amount of input to the production process. Save Answer 42. (Points: 2) In the short run, finding the optimal amount of variable input involves which relationship? a. MP = MC b. MRP = MFC c. AP = MP d. MP = 0 Save Answer 43. (Points: 2) Which of the following indicates when Stage I ends and Stage II begins in the short-run production? a. when MP starts to diminish b. when MP = AP c. when MP = 0 d. when AP = 0 Save Answer 44. (Points: 2) ________ functions are very useful in analyzing production functions, which exhibit both increasing and decreasing marginal products. a. Quadratic b. Cobb-Douglas c. Straight-line d. Cubic Save Answer 45. (Points: 2) The "Law of Diminishing Returns" states that a. additional inputs will decrease average productivity. b. the supply of inputs is becoming scarce. c. additional inputs will reduce output. d. additional inputs will lead to less additional output. Save Answer 46. (Points: 2) In a call center, which of the following situations can be considered as a variable input in the short run? a. the size (e.g., square footage) of the call center b. the number of call center managers or supervisors c. the number of call center representatives on duty at the center d. the level of computer-telephony software being utilized Save Answer 47. (Points: 2) An isoquant indicates different combinations of a. two inputs that can be purchased for the same amount of money. b. two inputs that can produce the same amount of output. c. output that can be produced with the same amount of input. d. output that cost the same amount to produce. Save Answer 48. (Points: 2) The marginal product of the variable input a. is equal to the total product divided by the total amount of the variable input employed. b. typically falls then rises. c. is always positive. d. None of the above Save Answer