____1.Which
of the following statements is false?
|
a.
|
The
perfectly competitive firm's demand curve is horizontal at the market price.
|
|
b.
|
The
theory of perfect competition is completely and accurately descriptive
of most real-world firms.
|
|
c.
|
If
Firm X does not strictly meet all the assumptions of the theory of perfect
competition, but behaves as if it does, then the theory of perfect competition
is relevant to it.
|
|
d.
|
In
perfect competition, the market price is established at the intersection
of the market demand and market supply curves.
|
____2.The
perfectly competitive firm will shut down in the short run if price is
|
a.
|
less
than average variable cost.
|
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b.
|
greater
than average variable cost but less than average total cost.
|
|
c.
|
greater
than average total cost.
|
|
d.
|
equal
to average total cost.
|
|
e.
|
a
and b
|
____3.A
firm operating in a perfectly competitive market finds itself producing
at an output level for which marginal revenue is lower than marginal cost.
In order to maximize profits (or minimize losses), the firm should
|
a.
|
increase
the level of output.
|
|
b.
|
decrease
the level of output.
|
|
c.
|
shut
down operations.
|
|
d.
|
lower
its prices.
|
|
e.
|
raise
its prices.
|
____4.A
price searcher is
|
a.
|
a
person who actively seeks out the best price for a product that he or she
wishes to buy.
|
|
b.
|
a
firm that seeks out buyers who are willing to pay the price that the seller
is asking for the product.
|
|
c.
|
a
firm that has the ability to control to some degree the price of the product
it sells.
|
|
d.
|
actually
any firm or consumer, because each market "player" searches for the best
price at which it can sell or buy.
|
____5.Suppose
Johnny, seven years old, is selling lemonade and he sells each of his buyers
the refreshment for the maximum price that each is willing to pay. Johnny
is practicing
|
a.
|
perfect
competition.
|
|
b.
|
perfect
price discrimination.
|
|
c.
|
second-degree
price discrimination.
|
|
d.
|
third-degree
price discrimination.
|
____6."Rent
seeking" is socially wasteful because
|
a.
|
resources
devoted to transferring rents are not used to produce goods.
|
|
b.
|
wage
income is converted into profit income.
|
|
c.
|
it
results in higher prices than would exist without monopoly.
|
|
d.
|
it
discourages innovation and risk taking.
|
____7.A
perfectly price-discriminating monopolist is one who
|
a.
|
splits
all buyers into two mutually exclusive groups.
|
|
b.
|
refuses
to sell to certain groups of consumers.
|
|
c.
|
charges
a different price for every unit sold.
|
|
d.
|
a
and b
|
|
e.
|
a
and c
|
Exhibit
10-6
____8.Refer
to Exhibit 10-6. The price and quantity of a single-price monopolist producing
X are P0 and qB, respectively. The marginal revenue
curve is represented by
|
a.
|
A.
|
|
b.
|
B.
|
|
c.
|
C.
|
|
d.
|
D.
|
____9.Rent
seeking is said to be socially wasteful because
|
a.
|
the
rent seekers compete too fiercely with each other.
|
|
b.
|
resources
that are used to seek rents don't end up helping anyone in society.
|
|
c.
|
the
rent seekers usually end up spending too much to get what they want.
|
|
d.
|
resources
that are used to seek rents can't be used to produce goods and services.
|
|
e.
|
none
of the above
|
____10.Does
the monopolistic competitor exhibit resource-allocative efficiency?
|
a.
|
No,
because at its chosen quantity of output, price equals marginal cost.
|
|
b.
|
Yes,
because at its chosen quantity of output, price equals marginal cost.
|
|
c.
|
No,
because at its chosen quantity of output, price is greater than marginal
cost.
|
|
d.
|
Yes,
because at its chosen quantity of output, price is less than marginal cost.
|
____11.The
key behavioral assumption of the cartel theory is that oligopolists in
an industry
|
a.
|
try
to maximize sales instead of profits.
|
|
b.
|
act
as if they are perfect competitors.
|
|
c.
|
act
in a manner consistent with there being only one firm in the industry.
|
|
d.
|
try
to create a demand for their products by way of advertising.
|
|
e.
|
none
of the above
|
____12.The
demand curve facing a firm in monopolistic competition is downward sloping,
because the firm
|
a.
|
sells
a differentiated product.
|
|
b.
|
is
the entire industry by itself.
|
|
c.
|
is
small relative to the market.
|
|
d.
|
b
and c
|
|
e.
|
none
of the above
|
____13.The
profit-maximizing monopolistic competitor produces where
|
a.
|
price
equals marginal cost and marginal revenue.
|
|
b.
|
marginal
cost equals marginal revenue, but not price.
|
|
c.
|
price
equals marginal revenue, but not marginal cost.
|
|
d.
|
price
equals marginal cost, but not marginal revenue.
|
____14.A
monopolistic competitor that seeks to maximize profits or minimize losses
will produce the quantity of output at which
|
a.
|
its
per-unit costs are the lowest.
|
|
b.
|
MR
= MC, and charge the highest per-unit price for it.
|
|
c.
|
MC
= ATC, and charge the highest per-unit price for it.
|
|
d.
|
P
= MC, and charge the highest per-unit price for it.
|
|
e.
|
none
of the above
|
____15.The
Sherman Act of 1890
|
a.
|
made
conspiracy in the restraint of trade illegal.
|
|
b.
|
made
price discrimination, exclusive dealing, tying contracts, and the acquisition
of competing companies' stock illegal when they "substantially lessen competition
or tend to create a monopoly."
|
|
c.
|
declared
"unfair methods of competition in commerce" illegal.
|
|
d.
|
attempted
to decrease the failure rate of small businesses by protecting them from
the competition of large and growing chain stores.
|
|
e.
|
banned
anticompetitive mergers that occurred as a result of one company acquiring
the physical assets of another company.
|
True/False
Indicate
whether the sentence or statement is true or false.
____16.If
MC > MR, then the firm should increase production to increase its profits.
____17.In
a perfectly competitive market, the market demand curve is perfectly elastic.
____18.In
a perfectly competitive market, there is free entry and barriers to exit.
____19.Legal
barriers to entry include patents, government licenses and economies of
scale.
____20.If
a firm has no variable costs, the profit-maximizing price is also the revenue-maximizing
price.
____21.The
monopolist's demand curve is perfectly inelastic.
____22.The
Clayton Act of 1914 makes price discrimination, exclusive dealers, tying
contracts, and the acquisition of competing companies' stock illegal when
their effects "substantially lessen competition or tend to create a monopoly."
____23.The
Wheeler-Lea Act of 1938 was designed to close the merger loophole that
remained in the Clayton Act.
____24.A
firm defending itself in an antitrust suit would prefer to have the market
it operates in defined broadly, rather than narrowly.
____25.The
type of proposed merger that generally concerns the federal government
the most is a horizontal merger.
Chap
22-25
Answer
Section
MULTIPLE
CHOICE
1.ANS:B
2.ANS:A
3.ANS:B
4.ANS:C
5.ANS:B
6.ANS:A
7.ANS:C
8.ANS:A
9.ANS:D
10.ANS:C
11.ANS:C
12.ANS:A
13.ANS:B
14.ANS:B
15.ANS:A
TRUE/FALSE
16.ANS:F
17.ANS:F
18.ANS:F
19.ANS:F
20.ANS:T
21.ANS:F
22.ANS:T
23.ANS:F
24.ANS:T
25.ANS:T