DreamMakerMedia UK

1.Which level indicates the point of maximum economic efficiency?
a.Lowest point on AC curve
b.Lowest point on AVC curve
c.Lowest point on MC curve
d.None of the above

2.When MR = MC
a.Marginal profit is maximized
b.Total profit is maximized
c.Marginal profit is positive
d.Total profit is zero

3.Which of the following is true for a monopoly?
a.P = MC
b.P = MR
c.P > MR
d.P < MR

4.A monopoly will usually produce
a.where its demand curve is inelastic
b.where its demand curve is elastic
c.where its demand curve is either elastic or inelastic
d.only when its demand curve is perfectly inelastic

5.If a perfectly competitive firm incurs an economic loss, it should
a.shut down immediately
b.try to raise its price
c.shut down in the long run
d.shut down if this loss exceeds fixed costs

6.If the unit price is $7, the variable cost per unit is $4, and the fixed cost per period is $60,000, the quantity at which the company will break even will be
a.10,000
b.15,000
c.20,000
d.25,000

7.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.shut down immediately.
b.continue operating in the short run.
c.try to take advantage of economies of scale.
d.try to increase its advertising and promotion.

8.A firm that seeks to maximize its revenue is most likely to adhere to which of the following?
a.MR = MC
b.MR = 0
c.MR = P
d.MR < MC

9.Economies of scale is indicated by
a.declining long run AVC
b.declining long run AFC
c.declining long run AC
d.None of the above

10.Mutual interdependence means that
a.all firms are price takers
b.each firm sets its own price based on its anticipated reaction by its competitors
c.all firms collaborate to establish one price
d.all firms are free to enter or leave the market

11.In the long run, the most helpful action that a monopolistically competitive firm can take to maintain its economic profit is to
a.continue its efforts to differentiate its product
b.raise its price
c.lower its price
d.do nothing, because it will inevitably experience a decline in profits

12.When a firm has the power to establish its price,
a.P = MR
b.P = MC
c.P > MR
d.P < MR

13.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 there is complete market information about price
c.Whether or not firms are price takers
d. Whether or not the firms are interdependent

14.Oligopoly may be associated with all of the following except
a.many firms
b.a standardized product
c.advertising
d.price followers

15.In which of these markets would the firms be facing the least elastic demand?
a.Perfect competition
b.Pure monopoly
c.Monopolistic competition
d.Oligopoly

16.The result for the seller of being able to practice price discrimination will be
a.higher profits
b.lower demand elasticity
c.lower quantity sold
d.cost minimization

17.Firms that make game systems like Play Station and Nintendo typically charge a price close to average cost on the game system itself, and do not change that price even when the systems are scarce or demand increases. Why might this be a profit-maximizing strategy?

1. a. Lowest point on AC curve

2. b. Total profit is maximized

3. c. P > MR

4. b. where its demand curve is elastic

5. d. shut down if this loss exceeds fixed costs

6. c. 20,000

7. b. continue operating in the short run

8. b. MR = 0

9. c. declining long run AC

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

11. d. do nothing, because it will inevitably experience a decline in profits

12. c. P > MR

13. c. Whether or not firms are price takers

14. a. many firms

15. b. Pure monopoly

16. a. higher profits

17. Because they make a lot of profit on the games, which are needed in order to use the console.