American Military University ECON 201 / ECON201 Week 6 Quiz

ECON 201 Week 6 Quiz Question 2 of 17 An industry that contains a firm that is the only producer of a good or service for which there are no close substitutes and for which entry by potential rivals is prohibitively difficult is: • A. a duopoly. • B. a monopoly. • C. an oligopoly. • D. perfect competition. Question 3 of 17 Which of the following is true in a perfectly competitive market? • A. One unit of a good or service cannot be differentiated from any other on any basis. • B. Brand preferences exist but are very slight. • C. Barriers to entry are relatively strong. • D. Information is costly. Question 4 of 17 The assumptions of perfect competition imply that: • A. individuals in the market accept the market price as given. • B. individuals can influence the market price. • C. the price will be a fair price. • D. the price will be low. Question 5 of 17 Which of the following is true? • A. Price and average revenue are never equal. • B. Price and marginal revenue are seldom equal under conditions of perfect competition. • C. When a firm is operating under perfectly competitive market conditions, price and marginal cost will always be equal if the firm is maximizing profits. • D. Average revenue equals price times quantity. Question 6 of 17 If a firm possesses monopoly power, it means that: • A. the firm can set its own price based on its output decision. • B. the firm's demand curve is always elastic. • C. the firm is necessarily a monopoly. • D. A and C are true. Question 7 of 17 Marginal revenue: • A. is the slope of the average revenue curve. • B. equals the market price in perfect competition. • C. is the change in quantity divided by the change in total revenue. • D. is the price divided by the changes in quantity. Question 8 of 17 A natural monopoly exists whenever a single firm: • A. is owned and operated by the federal or local government. • B. is investor owned but granted the exclusive right by the government to operate in a market. • C. confronts economies of scale over the entire range of production that is relevant to its market. • D. has gained control over a strategic input of an important production process. Question 9 of 17 Which of the following is (are) true? • A. A monopoly firm is a price taker. • B. MR P if the demand curve is downward sloping. • C. MR = MC is a profit-maximizing rule for any firm. • D. All of the above are true. Question 10 of 17 Perfect competition is important to study because it: • A. is a theoretical extreme used for analysis. • B. is a realistic model of a few key markets. • C. is a realistic model of many different markets. • D. avoids all real-world problems and complexities. Part 2 of 3 - Perfectly Competitive Firm in the Short Run 40.0/ 40.0 Points Question 11 of 17 (Exhibit: A Perfectly Competitive Firm in the Short Run) The firm's total cost of producing its most profitable level of output is: • A. BS. • B. DK. • C. 0FKD. • D. 0ESB. Question 12 of 17 (Exhibit: A Perfectly Competitive Firm in the Short Run) The firm's total revenue from the sale of its most profitable level of output is: • A. 0GLD. • B. 0GHB. • C. BH. • D. DL. Question 13 of 17 (Exhibit: A Perfectly Competitive Firm in the Short Run) The firm's total economic profit at its most profitable level of output is: • A. 0GHB. • B. EFJS. • C. EGHS. • D. FGLK. Question 14 of 17 (Exhibit: A Perfectly Competitive Firm in the Short Run) The firm will shut down in the short run if the price falls below: • A. 0G. • B. 0F. • C. 0E. • D. 0P. Part 3 of 3 - Computing Monopoly Profit 30.0/ 30.0 Points Question 15 of 17 (Exhibit: Computing Monopoly Profit) The profit-maximizing price is and will generate total economic profit of . • A. P2; EF • B. P3; the rectangle P1P2FG • • D. P2; EF Question 16 of 17 (Exhibit: Computing Monopoly Profit) In order to obtain maximum profits, the monopoly should produce the output determined by point . • A. G • B. N • C. H • D. K Question 17 of 17 (Exhibit: Computing Monopoly Profit) Total economic profit at the profit-maximizing level of output is: • A. EF. • B. EF times Q. • C. price minus average total cost times the quantity where MR = MC. • D. described by B and C.