Ch- 8 Test

ECON510-1900-Managerial Economics-SP11-KIM You are logged in as Dhruv Dholakiya (Logout)

UNVA-Online► ECON510-1900-SP11► Quizzes► 7th Assignment► Review of attempt 1

1 Marks: 1

Choose one answer.

a. shut down immediately.

b. try to take advantage of economies of scale.

c. try to increase its advertising and promotion.

d. continue operating in the short run.

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

CorrectMarks for this submission: 1/1.

2 Marks: 1

Choose one answer.

a. P = MC.

b. P > MR.

c. P = MR.

d. P < MR.

When a firm has the power to establish its price


3

7th Assignment

Review of attempt 1

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Started on Sunday, May 29, 2011, 07:01 PMCompleted on Sunday, May 29, 2011, 08:20 PM

Time taken 1 hour 19 minsMarks 19/40Grade 2.38 out of a maximum of 5 (48%)

of 11ECON510-1900-SP11: 7th Assignment

5/29/2011http://moodle.unva.edu/moodle/mod/quiz/review.php?attempt=61945&showall=true

Marks: 1

Choose one answer.

a. agriculture

b. information technology industry

c. aerospace industry

d. automobile industry

Which of the following markets comes closes to the model of perfect competition?


4 Marks: 1

Choose one answer.

a. Demand = price = average revenue = marginal revenue.

b. Demand = average revenue > marginal revenue.

c. Demand = marginal revenue > average revenue.

d. Demand = price > average revenue > marginal revenue.

Which of the following statements regarding a price-taking firm is correct?


5 Marks: 1

Choose one answer.

a. only the price it should charge.

b. only the quantity it should produce.

c. both the price it should charge and the quantity it should produce.

d. neither the price it should charge and the quantity it should produce as these are both determined by forces beyond the firm's control.

In its effort to maximize economic profit, a firm characterized as a price setter must determine:


6 Marks: 1

Assume there is an increase in demand in a perfectly competitive market that was initially in long-run equilibrium. Which of the following statements isfalse?

Incorrect



Choose one answer.

a. Resources from other industries will be attracted into the market.

b. Consumers have shown that they now consider the good to be more valuable.

c. In the short run, profits will be lower than normal.

d. Over time, the market supply curve will shift right.

Marks for this submission: 0/1.

7 Marks: 1

Choose one answer.

a. It will always produce the same as a perfectly competitive firm.

b. It will always earn economic profit.

c. Its demand curve is generally less elastic than in more competitive markets.

d. It will always be subject to government regulation.

e. None of the above are true.

Which of the following is true about a monopoly?

IncorrectMarks for this submission: 0/1.

8 Marks: 1

Choose one answer.

a. revenues minus opportunity cost only.

b. a zero accounting profit.

c. revenues minus accounting and opportunity costs.

d. revenues minus accounting costs only.

A normal profit is


9 Marks: 1

Choose one answer.

a. that a monopoly maximizes its profit when marginal revenue is greater than marginal cost.

b. that the competitive firm's demand curve is horizontal, while that of the monopoly is downward sloping.

The main difference between the price-quantity graph of a perfectly competitive firm and a monopoly is



c. that a monopoly always earns an economic profit while a competitive company always earns only normal profit.

d. that a monopoly does not incur increasing marginal cost.


10 Marks: 1

Choose one answer.

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

b. whether or not the product is standardized

c. whether or not firms are price takers

d. All of the above are equally important.

Which of the following characteristics is most important in differentiating between perfect competition and all other types of markets?


11 Marks: 1

Choose one answer.

a. greater than MR but equal to MC and minimum ATC.

b. greater than MC and minimum ATC, but equal to MR.

c. greater than MR and MC, but equal to minimum ATC.

d. equal to MR, MC and minimum to ATC.

In long-run equilibrium a perfectly competitive firm will operate where the price is


12 Marks: 1

Choose one answer.

a. marginal revenue equals the market price.

b. marginal revenue is less than the market price.

c. marginal revenue is equal to, less than, or greater than market price depending on the level of output.

d. marginal revenue is greater than the market price.

In the case of the perfectly competitive firm:

Incorrect




13 Marks: 1

Choose one answer.

a. $0.

b. the difference between its total fixed cost and the amount by which total revenue exceeds total variable costs.

c. its total variable costs.

d. its total fixed costs.

By continuing to operate when price is greater than average variable cost but less than average total cost, a firm limits its losses to:


14 Marks: 1

Choose one answer.

a. an increase in price and total output in industry X.

b. a decrease in price and total output in industry X.

c. an increase in price and a decrease in total output in industry X.

d. a decrease in price and an increase in total output in industry X.

Industry X, which is perfectly competitive, is in long-run equilibrium. Assume a new law is passed that requires employers in industry X to provide health insurance to previously uninsured employees. As a result of this new requirement we would expect to observe:


15 Marks: 1

Choose one answer.

a. a decrease in both price and the profit-maximizing quantity of output.

b. an increase in price and decrease in profit-maximizing quantity of output.

c. an increase in both price and the profit-maximizing quantity of output.

Assume there is an increase in the number of consumers in the market for a good sold by perfectly competitive firms that are initially producing the profit-maximizing level of output. For the individual firm, this would result in:



d. a decrease in price and increase in the profit-maximizing quantity of output.


16 Marks: 1

Choose one answer.

a. will be equal to price.

b. will be greater than price.

c. will be less than price.

d. will be greater than total revenues.

Which of the following correctly completes this statement? The monopolist's marginal revenue


17 Marks: 1

Choose one answer.

a. this would indicate that the firm's revenue exceeded its accounting cost.

b. this would indicate that the firm was at least earning a profit equal to its opportunity cost.

c. this would indicate that the firm's revenue exceeded both its accounting and opportunity cost.

d. normally firms are supposed to earn zero profit.

In economic analysis, any amount of profit earned above zero is considered "above normal" because


18 Marks: 1

Choose one answer.

a. produce zero units (i.e., shut down)

b. produce 5 units and continue operating

c. produce 6 units and continue operating

d. Cannot be determined from the above information

Assume a perfectly competitive firm's short-run cost is TC = 100 + 160Q + 3Q2. If the market price is $196, what should it do?




19 Marks: 1

Choose one answer.

a. The firm should continue to operate in the short run to minimize losses, but shut down if things don't improve over the long run.

b. The firm should shut down right now.

c. The firm is earning zero economic profit and should continue to operate.

d. The firm should increase its explicit costs to reduce its tax burden.

Assume that at the current market price, a perfectly competitive firm's profit-maximizing level of output yields total revenues that are just equal to total costs. Which of the following statements applies to this firm?


20 Marks: 10

Answer: ===> What is the Marginal Product (MP) when X = 8

MP = dQ / dX = 72 + 30x - 3x ^ 2 (if X=8) MP = 120

===> What is the Average Product (AP) when X = 6

MP = dQ / dX = 72 + 30x - 3x ^ 2 (if X=6) MP =

Given the Production Function: Q = 72X + 15X2 - X3, where Q = Output and X = Input a. What is the Marginal Product (MP) when X = 8?

b. What is the Average Product (AP) when X = 6?

c. At what value of X will Q be at its maximum?

d. At what value of X will Diminishing Returns set in?

21 Marks: 1

A monopolist sells 100 units at $10 per unit and 90 units at $15 per unit. The marginal revenue from the tenth unit is



Choose one answer.

a. $1000.

b. $100.

c. $350.

d. $1350.


22 Marks: 1

Choose one answer.

a. the outputs of the firms in a perfectly competitive market are all the same.

b. price is always low enough that the choice of supplier doesn't matter.

c. the consumers have no choice regarding who they buy from.

d. all of the above.

Consumers don't care which supplier they buy from in a perfectly competitive market because:


23 Marks: 1

Choose one answer.

a. resource immobility.

b. new firms cannot enter to take advantage of the profits.

c. competition does not erode profits the way it would under perfect competition.

d. it is possible for a firm in this situation to charge any price it wants and thus preclude anyone else from entering.

If there are barriers to entry into a market, it is possible for the existing firm(s) to earn positive economic profits. All of the following explain this except:


24 Marks: 1

Assume that as the firms in a perfectly competitive industry expand output, the prices of productive inputs increase. All else constant, this would cause the individual firms' marginal cost curves to ________ and the market supply curve to become ________.



Choose one answer.

a. shift up; steeper

b. shift up; flatter

c. shift down; steeper

d. shift down; flatter


25 Marks: 1

Choose one answer.

a. Products are highly differentiated.

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

c. Barriers to entry are high

d. None of the above

Which is a required characteristic of a perfectly competitive industry?


26 Marks: 1

Choose one answer.

a. Resources will be reallocated out of the wheat industry into more productive uses.

b. Farmers will run economic losses indefinitely, if they are rational.

c. Price and quantity produced will both increase in the long run.

d. The supply of wheat will fall to near zero and the U.S. will become dependent on foreign suppliers of food.

If farmers operating in the competitive wheat industry are incurring losses, and are not kept in business with government subsidies, which of the following will result?


27 Marks: 1

Choose one answer.

a. P = MR

b. P < MR

Which of the following is true for a monopoly?



c. P = MC

d. P > MR


28 Marks: 1

Choose one answer.

a. perfectly inelastic at the quantity determined by market forces.

b. perfectly elastic at the price the firm chooses to charge.

c. perfectly elastic at the price determined by market forces.

d. perfectly inelastic at the quantity the firm chooses to produce.

Demand facing an individual, perfectly competitive firm is


29 Marks: 1

Choose one answer.

a. keep producing as total costs are being recovered.

b. keep producing as variable costs are being met.

c. shut down as fixed costs are not being covered.

d. keep producing as profits are $50,000.

Mars Inc. produces 100,000 boxes of Snickers bars which sell for $4 a box. If variable costs are $3 per box, and it has $150,000 fixed operating costs, in the short run, it should


30 Marks: 1

Choose one answer.

a. Increase its level of production.

b. Decrease its level of production.

c. Exit the market altogether.

d. Shut down.

Which of the following is not an option for the perfectly competitive firm in the short run?

Incorrect




31 Marks: 1

Choose one answer.

a. Economic profit is the difference between total revenue and implicit costs.

b. Economic profit is generally greater than accounting profit.

c. Economic profit is the difference between total revenue and explicit costs.

d. Economic profit is the difference between total revenue and the full opportunity cost of all the resources used in production.

Which of the following statements is correct?


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ECON510-1900-SP11



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