second part managerial review

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Use the following information to answer questions 12-14.

In a perfectly competitive industry, the market demand is given by Qd=140,000-10,000P; the market demand is given by Qs=80,000+5,000P. The minimum point on the long-run AC curve is $4 and occurs at a quantity of 1000. Assume that each firm is identical

1

A pure monopoly
- Can raise price indefinitely.
- b) Typically is more efficient than other firms in the market.
- c) Is the only seller in an industry.
- d) Always restricts output below the competitive level.
- e) Answers c and d are both correct.
2

A monopoly earns positive economic profits in the long run due to
- a) Barriers to entry.
- b) Perfectly elastic demand.
- c) A kinked demand curve.
- d) Diseconomies of scale.
- e) Operating with an optimal plant size.
3

3. If a natural monopoly is broken up into two smaller firms,
- a) The market price will be unchanged.
- b) Industry output will increase.
- c) Production costs will increase.
- d) Industry output will decrease.
- e) Industry profits will increase.
4

4. Which of the following is most likely to result in a natural monopoly?
- a) High fixed costs and low variable and marginal costs.
- b) High fixed costs and high variable costs.
- c) Low fixed costs and high variable costs.
- d) Control of a natural resource.
- e) Answers a and d are both correct.
5

5. Compared to a perfectly competitive industry, a monopolist will generally produce
- a) A greater level of output and sell it at a lower price.
- b) A greater level of output and sell it at a higher price.
- c) A smaller level of output and sell it at a lower price.
- d) A smaller level of output and sell it at a higher price.
- e) Roughly the same level of output but sell it at a higher price.
6

6. Which of the following is true for a profit-maximizing competitive firm in the long run but untrue for a monopolist?
- a) Economic profit is zero.
- b) AC = MC when AC achieves a minimum
- c) The industry demand curve is downward sloping.
- d) P = MC.
- e) Answers a and d are both correct.
7

7. The most distinguishing characteristic of monopolistic competition is
- a) Barriers to entry.
- b) Homogeneous goods.
- c) The existence of a few, large firms.
- d) Economies of scale.
- e) Differentiated products.
8

8. In the long run, firms under monopolistic competition
- a) Earn zero economic profit.
- b) Face perfectly elastic demand curves.
- c) Standardize their products.
- d) Produce output at minimum average cost.
- e) Merge and form a few dominant firms.
9

Demand is given by QD = 100 – P and supply by QS = .5P – 20. Equilibrium price and output under perfect competition are
- a) P = $85 and Q = 15 units.
- b) P = $80 and Q = 20 units.
- c) P = $70 and Q = 30 units.
- d) P = $100 and Q = 30 units.
- e) None of the above answers is correct.
10

2. In order to maximize profits, a perfectly competitive firm continues producing until
- a) The cost of producing the last unit equals the marginal revenue.
- b) The cost of producing the last unit equals the market price.
- c) The average cost per unit is minimized.
- d) Total sales revenue is maximized.
- e) Both a) and b) are correct.
11

3. If the long-run market supply under perfect competition is upward sloping, the industry
- a) Is a constant-cost industry.
- b) Is an increasing-cost industry.
- c) Is a decreasing-cost industry.
- d) Exhibits increasing returns to scale.
- e) Is monopolistically competitive.
12

4. If a perfectly competitive firm raises its price for a good,
- a) the firm will see profits rise.
- b) the firm will see its sales fall and will be forced to lower its price.
- c) other firms will follow suit and raise their prices.
- d) buyers will continue to buy from the firm if its product is superior.
- e) the firms market share will increase.
13

5. The equilibrium market price and quantity are
- a) P=$4; Q=100,000
- b) P=$13.50; Q=5000
- c) P=$4; Q=5000
- d) P=$13.50; Q=10,000.
- e) None of the above.
14

6. The equilibrium is
- a) a long-run equilibrium because P=min AC
- b) a short-run equilibrium because firms are still earning economic profits.
- c) not a long-run equilibrium because P>min AC
- d) a short-run equilibrium because firms will enter this market and drive down the price.
- e) Both b) and d) are correct.
15

7. Assuming that all firms are identical, how many firms are in the industry?
- 100
- 1000
- 10000
- 100000
- none of the abve
16

8. Suppose demand increases and the new demand is given by Qd=150,000-5000P. What will be the new equilibrium output for each firm?
- 100
- 1000
- 1150
- 2000
- none of the above
17

If demand is inelelastic then
- sales are relatively responsive to price
- the demand curve is horizontal
- total revenue is declining as sales increase
- unit sales are insentive to change prices
- answers c and d are both correct
18

A firm concludes that it currently faces a demand curve with an eleasticity of -8. therefore the optimal markup expressed as a percent is
- 12.5%
- 25%
- 40%
- 8%
- none of the above
19

Along a linear demand curve total revenue is maximized when
- EP=1
- Ep>1
- Ep
- Ep=0
- None of the above
20

A firms total cost function is given by C=100+10Q+2q^2 at q=10
- total cost is 400 and marginal cost is 10
- marginal cost is constant
- average cost is 50
- fixed cost is 100 and marginal cost is 50
- none of the abve
21

At its current output level, a firms marginal profit is positive. Therefore it should
- decrease output until marginal profit is zero
- increase output because MR
- Increase both its output and Price
- Increase output because MR>MC
- Increase output until it is producing at full capacit
22

A firms average variable cost
- is constant at all levels of output
- always increases as output increaes
- increases at first and then decreases
- decreases first and then increases
- always decreases as output increases
23

The cost function is C=1500 +.1Q+.005Q^2 average costs are minimized at Q=
- 300000
- 150000
- 547.72
- .10
- none of the above
24

The cost function is C=1500 +.1Q+.005Q^2. The average variable cost function is
- .1q+.005Q^2
- 1500
- .1 + .01Q
- .1 + .005Q
- None of the Above

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second part managerial review

A pure monopoly

A monopoly earns positive economic profits in the long run due to

3. If a natural monopoly is broken up into two smaller firms,

4. Which of the following is most likely to result in a natural monopoly?

5. Compared to a perfectly competitive industry, a monopolist will generally produce

6. Which of the following is true for a profit-maximizing competitive firm in the long run but untrue for a monopolist?

7. The most distinguishing characteristic of monopolistic competition is

8. In the long run, firms under monopolistic competition

Demand is given by QD = 100 – P and supply by QS = .5P – 20. Equilibrium price and output under perfect competition are

2. In order to maximize profits, a perfectly competitive firm continues producing until

3. If the long-run market supply under perfect competition is upward sloping, the industry

4. If a perfectly competitive firm raises its price for a good,

5. The equilibrium market price and quantity are

6. The equilibrium is

7. Assuming that all firms are identical, how many firms are in the industry?

8. Suppose demand increases and the new demand is given by Qd=150,000-5000P. What will be the new equilibrium output for each firm?

If demand is inelelastic then

A firm concludes that it currently faces a demand curve with an eleasticity of -8. therefore the optimal markup expressed as a percent is

Along a linear demand curve total revenue is maximized when

A firms total cost function is given by C=100+10Q+2q^2 at q=10

At its current output level, a firms marginal profit is positive. Therefore it should

A firms average variable cost

The cost function is C=1500 +.1Q+.005Q^2 average costs are minimized at Q=

The cost function is C=1500 +.1Q+.005Q^2. The average variable cost function is

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