Principles of Economics 1 - Microeconomics
Quiz 9          
Due by midnight, Wednesday, November 26, 2003
Mr. Vice
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Economics 1:  Quiz 9  Chapters 13 and beginning 14

Chapter 13

1.  In which market structure do firms exist in very large numbers, each firm produces an identical product, and there is freedom of entry and exit?

a.    monopoly
b.   oligopoly
c.    perfect competition
d.   monopolistic competition

2.  One requirement for an industry to be perfectly competitive is that

a.    there are no restrictions on entry into or exit from the market.
b.   there are multiple restrictions on entry into or exit from the market.
c.    there are many firms selling different products.
d.   sellers and buyers have imperfect information about prices.

3.  A monopoly occurs when

a.    each firm produces a product that is slightly different from the other firms.
b.   one firm sells a good that has no close substitutes and a barrier blocks entry for other firms.
c.    there are many firms producing the same product.
d.   a few firms control the market.

4.  A market is classified as monopolistically competitive when

a.    there is a barrier that blocks entry by other firms.
b.   a small number of firms compete.
c.    many firms produce the same product.
d.   many firms produce a slightly differentiated product.

5.  In which market structure are there a small number of firms competing?

a.    monopoly
b.   oligopoly
c.    perfect competition
d.   monopolistic competition

6.  The firmís objective is to

a.    earn a normal profit.
b.   maximize normal profit.
c.    maximize economic profit.
d.   maximize total revenue.

7.  A perfectly competitive firm can

a.    sell all of its output at the prevailing market price.
b.   sell at a higher price to customers willing to pay more.
c.    raise its price in order to increase its total revenue.
d.   None of the above answers is correct.

8.  Cynthia is an Oklahoma wheat farmer. The demand for her wheat is

a.    perfectly inelastic.
b.   inelastic but not perfectly inelastic.
c.    elastic but not perfectly elastic.
d.   perfectly elastic.

9.  Marginal revenue is

a.    the change in total revenue from producing one additional unit of output.
b.   another name for total revenue.
c.    the change in total cost from producing an additional unit of output.
d.   the economic profit from producing an additional unit of output.

10.    For a perfectly competitive firm, marginal revenue is

a.    less than the price.
b.   greater than the price.
c.    equal to the price.
d.   equal to the change in profit from selling one more unit.

11.  A firm maximizes its profit by producing the amount of output such that marginal

a.    revenue equals marginal cost.
b.   revenue exceeds marginal cost.
c.    revenue is maximized.
d.   cost is minimized.

 

12.  The above figure illustrates a perfectly competitive firm. Curve A represents the

a.    MR curve.
b.   ATC curve.
c.    MC curve.
d.   None of the above answers is correct.

13.  The above figure illustrates a perfectly competitive firm. Curve B represents the

a.    MR curve.
b.   ATC curve.
c.    MC curve.
d.   None of the above answers is correct.

14.  For a perfectly competitive firm, the shutdown point occurs when the price is just below the minimum point on the

a.    average fixed cost curve.
b.   average total cost curve.
c.    marginal cost curve.
d.   average variable cost curve.

15.  The above figure shows a perfectly competitive firm. If the market price is $15, the firm

a.    is incurring an economic loss.
b.   is earning an economic profit.
c.    is earning a normal profit.
d.   will immediately shut down.

Chapter 14

 16.  The good produced by a monopoly

a.    has perfect substitutes.
b.   has no substitutes at all.
c.    has no close substitutes.
d.   can be easily duplicated.

17.  A monopoly

a.    is protected by barriers to entry.
b.   produces a good with no close substitutes.
c.    has a downward-sloping demand curve.
d.   All of the above answers are correct.

18.  Natural barriers arise when, over the relevant range of output, there are

a.    diseconomies of scale.
b.   constant returns to scale.
c.    several firms who produce at the lowest average cost.
d.   economies of scale.

19.  Which of the following is an example of a natural monopoly?

a.    the trademark protecting Gatoraide
b.   the talents of Tom Hanks
c.    the local water company
d.   the patent on an Intel processor

20.  The U.S. Postal Service has a monopoly over first-class mail service because

a.    the government has granted this agency a public franchise.
b.   stamps are copyrighted.
c.    stamps are trademarked.
d.   stamps are patented.

Econ 1  Q9 Answers

1.  C

2.  A

3.  B

4.  D

5.  B

6.  C

7.  A

8.  D

9.  A

10. C

11. A

12. A

13. C

14. D

15. B

16. C

17.  D

18.  D

19.  C

20.  A