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ECON 201 Final Exam AnswersQuestion 1 of 29 5.0/ 5.0 Points One defining characteristic of pure monopoly is that:A.The monopolist is a price takerB.The monopolist uses advertisingC.The monopolist produces a product with no close substitutesD.There is relatively easy entry into the industry, but exit is difficultQuestion 2 of 29 5.0/ 5.0 Points Which is a barrier to entry?A.Close substitutesB.Diseconomies of scale C.Government licensing D.Price-taking behaviorQuestion 3 of 29 5.0/ 5.0 Points Other things equal, which reduces competition in an industry?A.Patent lawsB.Freedom of entry for new firmsC.An increase in the number of producers D.An increase in the number of buyersQuestion 4 of 29 5.0/ 5.0 Points The representative firm in a purely competitive industry:A.Will always earn a profit in the short runB.May earn either an economic profit or a loss in the long run C.Will always earn an economic profit in the long runD.Will earn an economic profit of zero in the long runQuestion 5 of 29 5.0/ 5.0 Points An example of a monopolistically competitive industry would be:A.SteelB.SoybeansC.ElectricityD.Retail clothingQuestion 6 of 29 5.0/ 5.0 Points Firms in an industry will not earn long-run economic profits if:A.Fixed costs are zeroB.The number of firms in the industry is fixedC.There is free entry and exit of firms in the industryD.Production costs for a given level of output are minimizedQuestion 7 of 29 5.0/ 5.0 Points Marginal product is:A.the increase in total output attributable to the employment of one more worker. B.the increase in total revenue attributable to the employment of one more worker. C.the increase in total cost attributable to the employment of one more worker.D.total product divided by the number of workers employed.Question 8 of 29 5.0/ 5.0 Points The law of diminishing returns indicates that:A.as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point. B.because of economies and diseconomies of scale a competitive firm’s long-run average total cost curve will be U-shaped. C.the demand for goods produced by purely competitive industries is downsloping.D.beyond some point the extra utility derived from additional units of a product will yield the consumer smaller and smaller extra amounts of satisfaction.Question 9 of 29 5.0/ 5.0 Points Which of the following is most likely to be a variable cost?A.fuel and power paymentsB.interest on business loansC.rental payments on IBM equipment D.real estate taxesQuestion 10 of 29 5.0/ 5.0 Points If average total cost is declining, then:A.marginal cost must be greater than average total cost.B.the average fixed cost curve must lie above the average variable cost curve. C.marginal cost must be less than average total cost.D.total cost must also be declining.Question 11 of 29 5.0/ 5.0 Points The selling of stock is debt financing for a corporation.A. TrueB. FalseQuestion 12 of 29 5.0/ 5.0 Points Average fixed costs diminish continuously as output increases.A. TrueB. FalseQuestion 13 of 29 5.0/ 5.0 Points Patents and copyrights were established by the government to reduce oligopoly and monopoly power.A. TrueB. FalseQuestion 14 of 29 5.0/ 5.0 Points Prices in oligopolistic industries are predicted to fluctuate widely and frequently compared to other market structures.A. TrueB. FalseQuestion 15 of 29 5.0/ 5.0 Points The positive view of advertising suggests that it contributes to economic efficiency in the economy.A. TrueB. FalseQuestion 16 of 29 5.0/ 5.0 Points Price fixing is illegal under Section 1 of the Sherman Act.A. TrueB. FalseQuestion 17 of 29 5.0/ 5.0 Points Rent-seeking behavior refers to activities designed to transfer income or wealth to a particular firm or resource supplier at someone else’s or society’s expense.A. TrueB. FalseQuestion 18 of 29 5.0/ 5.0 Points A purely competitive firm is a price maker, but a monopolist is a price taker.A. TrueB. FalsePart 2 of 4 – Short-Run Costs 15.0/ 20.0 PointsQuestion 19 of 29 5.0/ 5.0 Points (Exhibit: Short-Run Costs) At the given price, the most profitable level of output occurs at quantity:A.NB.PC.SD.TQuestion 20 of 29 5.0/ 5.0 Points (Exhibit: Short-Run Costs) If the price declines, the minimum quantity of output supplied in the short run is quantity:A.O.B.Q.C.R.D.S.Question 21 of 29 0.0/ 5.0 Points (Exhibit: Short-Run Costs) If the price declines, production will continue in the short run, even though the firm incurs a loss, between quantities:A.O and Q. B.Q and R.C.R and S.D.S and T.Question 22 of 29 5.0/ 5.0 Points (Exhibit: Short-Run Costs) This firm’s supply curve begins at quantity:A.Q.B.R.C.S.D.T.Part 3 of 4 – Profit Maximization in Monopolistic Competition 25.0/ 30.0 PointsQuestion 23 of 29 5.0/ 5.0 Points (Exhibit: Profit Maximization in Monopolistic Competition) A firm in monopolistic competition will maximize profits by producing the level of output where:A.P = MCB.MR = MCC.P = MRD.price minus ATC (i.e., economic profit per unit) is the largest.Question 24 of 29 5.0/ 5.0 Points (Exhibit: Profit Maximization in Monopolistic Competition) In the short run, a firm in monopolistic competition may experience economic profits as shown in Panel (a) as the distance:A.PS.B.PS times the quantity 0M. C.PS times the quantity Q.D.PT times the quantity Q.Question 25 of 29 5.0/ 5.0 Points (Exhibit: Profit Maximization in Monopolistic Competition) If other firms see economic profits in the industry, they will enter it, and the demand curve for firms already in the industry will shift to the ________ ; in the long run, this will result in economic profit _______ and price _______ .A.right; = 0; = ATC; = minimum ATC B.right; > 0; > ATCC.left; < 0; < ATC D.left; = 0; = ATC; > minimum ATCQuestion 26 of 29 0.0/ 5.0 Points (Exhibit: Profit Maximization in Monopolistic Competition) In monopolistic competition, long-run equilibrium is characterized by:A.P > MR.B.P < MR.C.P = MR.D.profit maximization, which occurs where P = MR = MC.Question 27 of 29 5.0/ 5.0 Points (Exhibit: Profit Maximization in Monopolistic Competition) In Panel (a), if the firm raises its price above P, it will:A.lose all its customers.B.still have some customers.C.not lose any customers.D.have none of the above occur.Question 28 of 29 5.0/ 5.0 Points (Exhibit: Profit Maximization in Monopolistic Competition) In determining the price in monopolistic competition:A.the price to the firm is given by supply and demand for the industry. B.the firm is a price taker.C.the firm applies the marginal decision rule.D.A and B are true.Part 4 of 4 – Short Essay 20.0/ 20.0 PointsQuestion 29 of 29 20.0/ 20.0 Points Which of the following is (are) most likely to be produced under conditions resembling perfect competition – automobiles, beer, corn, diamonds, and eggs. Defend your answer in economic terms.$35.00 – Purchase

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