ECON 160 FINAL EXAM STUDY
GUIDE QUESTIONS AND DETAILED
CORRECT ANSWERS
"Fair" outcomes and "efficient" outcomes are always identical.
- correct answer- False
A common fallacy which is used to oppose trade is the idea that
_____. - correct answer- one country's gain must be
another's loss.
A country has an absolute advantage over another in the
production of widgets if _____. - correct answer- it can
produce widgets using smaller quantities of resources than can
the other country.
A firm now produces its sales-maximizing level of output. If the
firm increased its output by one unit, its marginal revenue would
become _____. - correct answer- negative
A firm operating at MC = MR must be making a profit -
correct answer- False
,A firm will shut down in the short run if _____. - correct
answer- Profit < Average Variable Cost
P<AVC
A market which firms can enter if they choose and exit without
losing money invested is _____. - correct answer-
contestable
A monopolist in the radio industry has 2 radio-making plants.
The marginal cost of radio production by Plant A is $4Q (where Q
is the number of radios produced) and the marginal cost of radio
production by Plant B is always $16. If the demand curve for
radios is downward-sloping, _____. - correct answer- the
monopolist will never produce more than 4 radios at Plant A.
A monopolist is a price maker who will lose some business if the
price is increased. - correct answer- True
A monopolist maximizes profit by producing the quantity at
which MC = MR, just like a perfect competitor. - correct
answer- True
, A monopolistic competitor can expect to earn economic profit in
the long run. - correct answer- False
A monopolistically competitive firm in the long run will _____. -
correct answer- have a demand curve tangent to its AC
A monopoly restricts output and charges a higher price than
other types of firms. - correct answer- True
A perfectly competitive firm is a "price taker" because it cannot
sell its product for more than the market price - correct
answer- True
A perfectly competitive producer has the following short-run
average cost curve and marginal cost curve: AC = 2Q + 3, MC =
4Q + 3, where costs are measured in dollars and Q represents
the firm's output in units. If the market price is $15, the profit-
maximizing producer should produce _______ units of output. -
correct answer- 3 units
A profit-maximizing monopolist _____. - correct answer-
produces an output level at which marginal utility exceeds
marginal cost.
GUIDE QUESTIONS AND DETAILED
CORRECT ANSWERS
"Fair" outcomes and "efficient" outcomes are always identical.
- correct answer- False
A common fallacy which is used to oppose trade is the idea that
_____. - correct answer- one country's gain must be
another's loss.
A country has an absolute advantage over another in the
production of widgets if _____. - correct answer- it can
produce widgets using smaller quantities of resources than can
the other country.
A firm now produces its sales-maximizing level of output. If the
firm increased its output by one unit, its marginal revenue would
become _____. - correct answer- negative
A firm operating at MC = MR must be making a profit -
correct answer- False
,A firm will shut down in the short run if _____. - correct
answer- Profit < Average Variable Cost
P<AVC
A market which firms can enter if they choose and exit without
losing money invested is _____. - correct answer-
contestable
A monopolist in the radio industry has 2 radio-making plants.
The marginal cost of radio production by Plant A is $4Q (where Q
is the number of radios produced) and the marginal cost of radio
production by Plant B is always $16. If the demand curve for
radios is downward-sloping, _____. - correct answer- the
monopolist will never produce more than 4 radios at Plant A.
A monopolist is a price maker who will lose some business if the
price is increased. - correct answer- True
A monopolist maximizes profit by producing the quantity at
which MC = MR, just like a perfect competitor. - correct
answer- True
, A monopolistic competitor can expect to earn economic profit in
the long run. - correct answer- False
A monopolistically competitive firm in the long run will _____. -
correct answer- have a demand curve tangent to its AC
A monopoly restricts output and charges a higher price than
other types of firms. - correct answer- True
A perfectly competitive firm is a "price taker" because it cannot
sell its product for more than the market price - correct
answer- True
A perfectly competitive producer has the following short-run
average cost curve and marginal cost curve: AC = 2Q + 3, MC =
4Q + 3, where costs are measured in dollars and Q represents
the firm's output in units. If the market price is $15, the profit-
maximizing producer should produce _______ units of output. -
correct answer- 3 units
A profit-maximizing monopolist _____. - correct answer-
produces an output level at which marginal utility exceeds
marginal cost.
