Macro & Micro economics test

Project description
answer the questions

ECON
2002
test #2
–
Market Structures
NAME: ___________________________
Choose the most correct answer.
R
ecord your answers here:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
1.
The difference between pure competition in the short
run and pure competition in the long run is that in the
short run, the firm can only change
the ___
_________
to decide to _________________, but in the long run
the firm can decid
e to _________________.
a.
Price, shut down, stop producing.
b.
Qty it produces, stop producing, enter / exit
the market.
c.
Price, produce more, produce less.
d.
Cost structure, stop producing, shut down.
2.
In pure competition, a demand shock (sudden
increase in deman
d) will result in:
a.
Permanent increase in profits.
b.
Temporary increase in profits.
c.
Firms exiting the market.
d.
Temporary losses.
3.
Explain how / why:
4.
In pure competition, the supply curve for a constant
cost firm is _________________ and an
increasing
cost firm is _________________.
a.
Flat / horizontal, flat / horizontal.
b.
Flat / horizontal, upsloping.
c.
Upsloping, down sloping.
d.
Down sloping, down sloping.
5.
An up sloping cost curve means that:
a.
Costs are constant.
b.
Costs are rising as production
quantities
increase.
c.
Costs are decreasing as production
quantities increase.
d.
No relationship between costs and the firm’s
supply curve.
6.
Firms in pure competition are:
a.
Price makers
b.
Price takers
c.
Price shakers
d.
Price breakers
7.
True / False: Monopolistic
competition is the most
economically efficient market model:
a.
True
b.
False
8.
Explain why / why not:
9.
A pure monopoly exists when:
a.
There are many sellers.
b.
There is one seller.
c.
There are few sellers.
d.
You own hotels on Park Place and
Boardwalk.
10.
List and describe
the four most prominent barriers to
entry in a monopoly and use them explain why
monopolies can be good for society. Cite one
example of a desirable monopoly.
11.
Monopolies are:
a.
Price takers
b.
Price makers
c.
Price shakers
d.
Price breakers
12.
In a monopoly or monopo
listic competition, the MR
curve lies below the D curve because:
a.
The demand curve is a straight line
b.
The gain in revenue from an extra unit of
output is less than the price charged for
the
last
unit of output.
c.
The demand curve is inelastic.
d.
The demand curve i
s elastic.
13.
When the price
falls below the AVC for a firm in a
Monopolistic Competition, the firm should:
a.
Produce more
b.
Produce nothing
c.
Produce less
d.
No impact between price and production
quantity.
14.
True / False: A single commodity can only have one
market
model throughout its entire value chain / sales
channel.
a.
True
b.
False
15.
Use the value chain for gasoline to justify your answer
to question 14.
16.
The Herfindahl Index is used to:
a.
Compare allocative inefficiencies in different
markets.
b.
Compare the level of competition in different
markets.
c.
Compare economies of scale in different
markets.
d.
Measure the relative humidity.
17.
Monopolistic Competition is _____________
productive and allocative efficient.
a.
Both
b.
Neither
c.
Independent of
18.
Rank the ma
rket structures from greatest number of
substitutes to fewest:
a.
Option A
i.
Oligopoly
ii.
Monopoly
iii.
Monopolistic Competition
iv.
Pure Competition
b.
Option B
i.
Pure Competition
ii.
Monopolistic Competition
iii.
Oligopoly
iv.
Monopoly
c.
Option C
i.
Monopoly
ii.
Oligopoly
iii.
Monopolistic Competition
iv.
Pure Competition
d.
Option D
i.
Pure Competition
ii.
Monopolistic Competition
iii.
Monopoly
iv.
Oligopoly
19.
Which market structure has the most heavily
advertised, most differentiated products:
a.
Pure Competition
b.
Monopolistic Competition
c.
Oligopoly
d.
Monopoly
20.
In a monopolistic
competition, firms maximize profit
when their:
a.
ATC = MC
b.
MR = MC
c.
MC = P
d.
MR = P
21.
In a monopolistic competition, the losses of efficiency
are offset by:
a.
Entertainment quality of their advertising
b.
Product variety
c.
Low cost
d.
Superior efficiency
22.
Oligopoly is best
described as:
a.
One large producer
b.
A few large producers
c.
Many small producers
d.
Thousands of large producers
23.
The term “mutual interdependence” refers to:
a.
The amount of freedom in the home country
b.
The relationship between a firm’s profits and
competitor
firms’ prices.
c.
Barriers to entry
d.
The way systems of products work together.
24.
The same ____________ that apply to __________
apply to oligopoly.
a.
Cost structure ; pure competition
b.
Barriers to entry; monopoly
c.
Number of substitutes; monopolistic
competition
d.
He
rfindahl index; pure competition
25.
Explain the difference between the
breakeven
point
and the
shutdown
point. Why wouldn’t
I
shut down if I
fall below the
breakeven
point?
Use the following information for questions 26
–
30.
26.
Should the firm produce?
27.
What is the
optimum
quantity
?
28.
What is the total revenue
at the optimum quantity
?
29.
What is the firm
’
s total cost
at the optimum
?
30.
Examine
the Price / Marginal Revenue information
provided? What market structures might explain this?
If this firm were in perfect competition, what would we
expect their price to be?
Qty
FC
AVC
TC
ATC
MC
P
MR
50
$ 200,000
$ 650.00
$ 232,500
$ 4,650.00
$ 4,750.00
100
$ 200,000
$ 650.00
$ 265,000
$ 2,650.00
$ 650.00
$ 4,000.00
$ 3,250.00
200
$ 200,000
$ 600.00
$ 320,000
$ 1,600.00
$ 550.00
$ 3,250.00
$ 2,500.00
300
$ 200,000
$ 550.00
$ 365,000
$ 1,216.67
$ 450.00
$ 2,500.00
$ 1,000.00
400
$ 200,000
$ 650.00
$ 460,000
$ 1,150.00
$ 950.00
$ 1,750.00
$ (500.00)
500
$ 200,000
$ 750.00
$ 575,000
$ 1,150.00
$ 1,150.00
$ 1,000.00
$(2,000.00)
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