Market Structure Economics Questions! Trivia Quiz
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Product differentiation:
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Refers to the attempt of firms to make their products look like those of the other firms in the industry.
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Refers to teh attempt of firms to make real or aparent differences in essentially substitutable product look different in the minds of the customers.
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Refers to the advantage big firms have in research and development.
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Is a common characteristic of a perfectly competitive market structure.
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Is only employed in a monopoly market structure.
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Economics is a tough topic to learn about when you’re starting off, but when you begin to appreciate how we analyze the production, distribution, and consumption of goods and services, whether it’s on a wide or narrow scale, you’ll be able to get a much better sense of the market structure and how a country’s wealth and economy are measures. See moreThink you know your stuff? Take the quiz!
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- 2.
A perfectly competitive firm maximizes profits or minimizes losses in the short-run by producing at the output level at which:
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A: marginal revenue equals marginal cost.
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B: total revenue equals total cost.
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C: total revenue is at a maximum.
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D: none of these.
Correct Answer
A. A: marginal revenue equals marginal cost.Explanation
A perfectly competitive firm maximizes profits or minimizes losses in the short-run by producing at the output level at which marginal revenue equals marginal cost. This is because in a perfectly competitive market, the firm is a price taker and cannot influence the price of its product. Therefore, the firm should produce at the level where the additional revenue gained from producing one more unit (marginal revenue) is equal to the additional cost incurred from producing one more unit (marginal cost). By doing so, the firm can maximize its profits or minimize its losses.Rate this question:
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- 3.
Which of the following best explains why the monopolist's marginal revenue is less than the selling price?
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To sell more units, the monopolist must reduce price on all units sold.
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As the monopolist expands output, the average total cost will decline.
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The monopolist charges each consumer the highest possible price.
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When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist.
Correct Answer
A. To sell more units, the monopolist must reduce price on all units sold.Explanation
The correct answer is "To sell more units, the monopolist must reduce price on all units sold." This is because as a monopolist, there are no close substitutes for their product in the market. Therefore, in order to increase sales, they have to lower the price for all units sold. This results in a decrease in marginal revenue, which is the additional revenue generated from selling one more unit of the product.Rate this question:
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- 4.
A competivie firm maximizes its profits (or minimizes is losses) by producing the quantity where the market price equals the firm's:
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A: marginal cost.
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B: average cost.
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C: average variable cost.
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D: average fixed cost.
Correct Answer
A. A: marginal cost.Explanation
A competitive firm maximizes its profits by producing the quantity where the market price equals the firm's marginal cost. This is because the marginal cost represents the additional cost incurred by the firm to produce one more unit of output. By producing up to the point where the market price equals the marginal cost, the firm ensures that the revenue from selling the additional unit is equal to the cost of producing it. This maximizes the firm's profits as it avoids producing units that would result in higher costs than the revenue generated from selling them.Rate this question:
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- 5.
Which of the following statements is true?
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To maximize profits, a firm must maximize total revenue.
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In long-run equilibrium, a competitive firm produces at the point of minimum average total cost.
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In the short-run, a perfectly competitie firm produces where total cost is minimum.
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In the short-run, a perfectly competitive firm will close down whenever price is less than average total cost.
Correct Answer
A. In long-run equilibrium, a competitive firm produces at the point of minimum average total cost.Explanation
In the long-run equilibrium, a competitive firm produces at the point of minimum average total cost. This is because in the long run, firms have the flexibility to adjust their inputs and make changes to their production processes. As a result, they can optimize their costs and minimize average total cost by producing at the point where marginal cost equals average total cost. This allows the firm to maximize its profits by minimizing its costs while still producing the quantity demanded by the market.Rate this question:
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- 6.
Which of the following is the best example of an investment in human capital?
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On-the-job training received by an apprentice electrician.
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An increase in the number of hours worked per week by a worker in a unskilled laboring job.
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The purchase of company stock by a worker.
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Payments into a retirement pension plan by a skilled laborer.
Correct Answer
A. On-the-job training received by an apprentice electrician.Explanation
On-the-job training received by an apprentice electrician is the best example of an investment in human capital because it involves acquiring specific skills and knowledge that will enhance the apprentice's productivity and earning potential in the future. This type of training is directly related to the individual's job and industry, making it a valuable investment in their career development. The other options, such as an increase in work hours, purchasing company stock, or making payments into a retirement pension plan, do not necessarily contribute to the individual's skill development or long-term earning potential in the same way.Rate this question:
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- 7.
A firm's demand for labor depends on, in part, the demand for the firm's product. To summarize this idea, economist say that the demand for labor is:
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Derived demand.
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Marginal demand.
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Secondary demand.
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Monopsonisitic demand.
Correct Answer
A. Derived demand.Explanation
The correct answer is derived demand. This means that the demand for labor is derived from the demand for the firm's product. In other words, the firm's need for labor is determined by the level of demand for the goods or services it produces. If there is high demand for the firm's product, the firm will need more labor to meet that demand. Conversely, if there is low demand for the product, the firm will require less labor. Therefore, the demand for labor is derived from the demand for the firm's product.Rate this question:
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- 8.
In the short run, if a perfectly competitive firm is producing at a price above average total cost, its exonomic profit must be:
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A: positive.
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B: zero.
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C: negative.
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D: normal.
Correct Answer
A. A: positive.Explanation
If a perfectly competitive firm is producing at a price above average total cost in the short run, it means that the firm is earning more revenue than it is incurring in costs. This indicates that the firm is making a profit, as its revenue exceeds its expenses. Therefore, the economic profit for the firm must be positive.Rate this question:
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- 9.
A major characteristic of the theory of oligopoly is that:
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There are no real-world examples.
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The reactions of each firm depends on how the fim believes rival will react.
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In reality dew oligopolies survive more than 10 years.
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None of these.
Correct Answer
A. The reactions of each firm depends on how the fim believes rival will react.Explanation
Oligopoly is a market structure where a few large firms dominate the market. One major characteristic of oligopoly is that the reactions of each firm depend on how they believe their rivals will react. This means that firms in an oligopoly closely monitor and analyze the actions and strategies of their competitors before making their own decisions. They take into account the potential reactions of their rivals and adjust their own actions accordingly. This interdependence among firms is a key feature of oligopoly and distinguishes it from other market structures.Rate this question:
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- 10.
When Pepsi is considering a price hike, it needs to consider how Coke may react. This situation is called:
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Mutual interdependence
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Price leadership
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Collusion.
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Monopolistic competition.
Correct Answer
A. Mutual interdependenceExplanation
Mutual interdependence refers to the relationship between two or more firms in an industry where their actions and decisions are influenced by each other. In this case, Pepsi needs to consider how Coke may react to its price hike, indicating that the two companies are interdependent and their pricing strategies are influenced by each other. This term accurately describes the situation where both companies' decisions are dependent on the actions of the other, making it the correct answer.Rate this question:
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- 11.
A firm in a price-taker market:
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A: must take the price that is determined in the market.
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B: must reduce its price if it wants to sell larger quantity.
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C: must be large relative to the total market.
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D: can exert a major influence on the market price.
Correct Answer
A. A: must take the price that is determined in the market.Explanation
In a price-taker market, firms have no control over the price of their product. They have to accept the market price as determined by the forces of supply and demand. This means that they cannot set a higher price to increase their profits or a lower price to attract more customers. Instead, they must simply accept the prevailing market price and adjust their quantity of production accordingly. Therefore, option A is the correct answer as it accurately reflects the behavior of a firm in a price-taker market.Rate this question:
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- 12.
In long-run equilibrium, the typical perfectly competitive firm will:
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Earn zero economic profit
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Change plant size in the long run
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Change output in the short run
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Do any of these.
Correct Answer
A. Earn zero economic profitExplanation
In long-run equilibrium, the typical perfectly competitive firm will earn zero economic profit. This is because in a perfectly competitive market, there are no barriers to entry or exit, and firms can freely enter or exit the market. As a result, if a firm is earning positive economic profit, new firms will enter the market, increasing competition and driving down prices until economic profit becomes zero. Similarly, if a firm is earning negative economic profit, firms will exit the market, reducing competition and allowing the remaining firms to earn zero economic profit. Therefore, in the long run, firms in a perfectly competitive market will earn zero economic profit.Rate this question:
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- 13.
Which of the following is ture about a monopoly?
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A monopoly charges a higher price and produces a lower output level than if the market were competitive.
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A monopoly is guaranteed an economic profit.
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A monopoly charges the highest possible price.
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A monopoly will shut down whenever losses are incurred.
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All of these.
Correct Answer
A. A monopoly charges a higher price and produces a lower output level than if the market were competitive.Explanation
A monopoly charges a higher price and produces a lower output level than if the market were competitive because it has no competition. With no competitors, a monopoly can control the market and set prices at a level that maximizes its profits. Additionally, a monopoly has the ability to limit the quantity of goods or services it produces in order to maintain higher prices. This lack of competition and control over pricing and output levels allows a monopoly to charge higher prices and produce less output compared to a competitive market.Rate this question:
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- 14.
A profit-maximizing monopolixtically competitive firm will expand output to the point where:
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Total revenue equals total cost.
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Marginal revenue equals marginal cost.
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Price equals average total cost.
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Price equals marginal cost.
Correct Answer
A. Marginal revenue equals marginal cost.Explanation
A profit-maximizing monopolistically competitive firm will expand output to the point where marginal revenue equals marginal cost. This is because marginal revenue represents the additional revenue gained from producing one more unit, while marginal cost represents the additional cost of producing one more unit. By expanding output until these two values are equal, the firm ensures that it is maximizing its profit. If marginal revenue is greater than marginal cost, producing more units will increase profit. Conversely, if marginal revenue is less than marginal cost, producing fewer units will increase profit.Rate this question:
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- 15.
Which of the following statements best describes firms under monopolistic competition?
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There is little price or quality competition.
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The firms compete, using quality, location, advertising, and price.
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Firms do not compete using advertising.
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There is little competition between firms.
Correct Answer
A. The firms compete, using quality, location, advertising, and price.Explanation
In monopolistic competition, firms compete by differentiating their products through factors like quality, location, advertising, and price. This means that each firm tries to make their product stand out from competitors' products by offering unique features, better quality, convenient location, attractive advertising, or competitive pricing. This competition helps firms attract customers and build brand loyalty. Unlike perfect competition, monopolistic competition allows firms to have some control over price and differentiate their products to gain a competitive edge.Rate this question:
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- 16.
A monolpy is:
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A seller of a highly advertised and differentiated product in a market with lower barriers to entry in the long run.
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The only seller of a good for which there are no good substitutes in a market with high barriers to entry.
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The only buyer of a unique raw material.
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The producer of a product subsidized by the government.
Correct Answer
A. The only seller of a good for which there are no good substitutes in a market with high barriers to entry.Explanation
A monopoly is the only seller of a good for which there are no good substitutes in a market with high barriers to entry. This means that there are no other companies or sellers offering the same product, and it is difficult for new companies to enter the market and compete. The presence of high barriers to entry prevents new competitors from easily entering the market, giving the monopoly a significant amount of control and power over pricing and supply of the good.Rate this question:
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- 17.
The kinked demand curve:
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Apples when competitors match price decreases but not price increases.
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Could apply to market demand in any market structure.
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Applies when competitors match price increases but not price decreases.
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Applies to the price leadership model.
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Applies when competitiors act independently.
Correct Answer
A. Apples when competitors match price decreases but not price increases.Explanation
The kinked demand curve applies when competitors match price decreases but not price increases. This means that if one firm lowers its price, the other firms in the market will also lower their prices in order to remain competitive. However, if one firm raises its price, the other firms will not follow suit and instead maintain their prices. This creates a kink in the demand curve, as there is a sudden change in price elasticity at a certain price level.Rate this question:
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- 18.
A firm that is a price taker can:
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A: substantially change the market price of its product by changing its level of production.
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B: sell all of its output at the market price.
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C: sell some of its output at a price higher than the market price.
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D: decide what price to charge for its product.
Correct Answer
A. B: sell all of its output at the market price.Explanation
A firm that is a price taker can sell all of its output at the market price because it has no influence over the price. As a price taker, the firm must accept the prevailing market price and adjust its level of production accordingly. It cannot substantially change the market price by changing its production level, sell some of its output at a higher price than the market price, or decide what price to charge for its product.Rate this question:
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- 19.
The point of maximum profit for a business firm is where:
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A: P = AC.
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B: TR = TC.
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C: MR = AR.
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D: MR = MC.
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E: TR = MR.
Correct Answer
A. D: MR = MC.Explanation
The correct answer is D: MR = MC. This is because the point of maximum profit for a business firm occurs where marginal revenue (MR) equals marginal cost (MC). At this point, the firm is producing an optimal level of output where the additional revenue gained from producing one more unit is equal to the additional cost incurred to produce that unit. This ensures that the firm is maximizing its profit by balancing the additional revenue and cost.Rate this question:
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- 20.
The monopolistic competition market structure is characterized by:
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Few firms and similar products.
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Many firms and differentiated products.
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Many firms and a homogeneous product.
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Few firms and a homogeneous product.
Correct Answer
A. Many firms and differentiated products.Explanation
Monopolistic competition is a market structure where there are many firms and each firm produces a differentiated product. This means that each firm has some control over the price of its product due to product differentiation, but there are still many firms competing in the market. The presence of many firms ensures that there is competition, while the differentiation of products allows firms to have some market power. Therefore, the correct answer is many firms and differentiated products.Rate this question:
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- 21.
When a perfectly competitive firm or a monopolisticaly competitive firm is making zero economic profit,
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No firms will want to enter or exit.
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Some firms will want to leave.
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Some firms will want to enter.
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Market demand shifts to the left.
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The price of the output will rise in the long run.
Correct Answer
A. No firms will want to enter or exit.Explanation
When a perfectly competitive firm or a monopolistically competitive firm is making zero economic profit, it means that the firm is earning just enough revenue to cover all its costs and there is no additional profit. In this situation, there is no incentive for firms to enter the market because they would not be able to earn any additional profit. Similarly, there is no incentive for existing firms to exit the market because they are already covering their costs. Therefore, no firms will want to enter or exit the market.Rate this question:
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- 22.
An increase in demand for French fries will cause equilibrium wage rates:
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And quantities of potato workers hired to rise.
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And quantities of potato workers hired to fall.
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To rise and quantities of potato workers hired to fall.
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To fall and quantities of potato workers hired to rise.
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And quantities of potato workers hired to stay the same.
Correct Answer
A. And quantities of potato workers hired to rise.Explanation
An increase in demand for French fries will cause equilibrium wage rates and quantities of potato workers hired to rise. This is because an increase in demand for French fries leads to an increase in the production of French fries, which in turn requires more potato workers to be hired. As the demand for French fries increases, the market equilibrium wage rate will also increase to attract more workers to meet the higher demand. Therefore, both the wage rates and the quantities of potato workers hired will rise in response to the increase in demand for French fries.Rate this question:
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- 23.
Graphically, the marginal revenue curve of a monopolist:
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Will sometimes lie below the demand curve of the monopolist.
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Will always lie below the demand curve of the monopolist.
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Is the same as the demand curve of the monolpolist.
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Wll equal -1 when the elasticity of demand is unitary.
Correct Answer
A. Will always lie below the demand curve of the monopolist.Explanation
The marginal revenue curve of a monopolist will always lie below the demand curve of the monopolist. This is because the monopolist faces a downward-sloping demand curve, meaning that in order to sell more units of their product, they must lower the price. As a result, the marginal revenue earned from selling an additional unit of the product will be less than the price at which it is sold. Therefore, the marginal revenue curve will always be below the demand curve.Rate this question:
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- 24.
Game theory is a model for describing oligopoly price decisions among firms that are:
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Interdependent.
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Independent.
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Regulated.
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Merging.
Correct Answer
A. Interdependent.Explanation
Game theory is a mathematical framework used to analyze strategic interactions between multiple decision-makers. In an oligopoly, firms are interdependent because their pricing decisions directly impact the profits and market share of their competitors. Each firm must consider the potential reactions of other firms when setting prices, leading to a complex network of interconnections. Therefore, the correct answer is interdependent.Rate this question:
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- 25.
Which of the following best explains why a firm in a perfectly competitive market must take the price determined in the market?
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A: The short-run average total costs of firms that are price takers will be constant.
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B: If a price taker increased its price, consumers would buy from other suppliers.
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C: Firms in a price-taker market will have to advertise in order to increase sales.
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D: There are no good substitutes for the product supplied by a firm that is a price taker.
Correct Answer
A. B: If a price taker increased its price, consumers would buy from other suppliers.Explanation
In a perfectly competitive market, firms are price takers, meaning they have no control over the price of their product. If a price taker were to increase its price, consumers would simply buy from other suppliers who offer the same product at a lower price. This is because in a perfectly competitive market, there are many sellers offering identical products, and consumers have perfect information about prices. Therefore, the firm must take the price determined in the market to remain competitive and attract customers.Rate this question:
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- 26.
As represented in Exhibit 10-3, the maximum long-run economic profit earned by this monopolistic competitive firm is:
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Zero.
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$10 per week.
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$4,000 per week.
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$40,000 per week.
Correct Answer
A. Zero.Explanation
The correct answer is zero because in monopolistic competition, there is no long-run economic profit due to the presence of low barriers to entry. In the long run, firms can easily enter the market and offer similar products, leading to increased competition and reducing the ability to earn above-normal profits. Therefore, the firm will only be able to cover its costs and earn a normal rate of return, resulting in zero economic profit.Rate this question:
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- 27.
Refer to Exhibit 11-1. What is the marinal revenue product of the fifth unit of labor?
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$6
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$36
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$54
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$324
Correct Answer
A. $36Explanation
The marginal revenue product of the fifth unit of labor is $36. This can be determined by looking at the exhibit provided, which likely shows a table or graph illustrating the relationship between the number of units of labor and the corresponding marginal revenue product. Based on this information, it can be concluded that the fifth unit of labor generates $36 in revenue.Rate this question:
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- 28.
For a monopolist:
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Price equals average total cost.
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Price is above marginal revenue.
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Marginal revenue equals zero.
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Marginal cost equals zero.
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Average total cost equals marginal cost.
Correct Answer
A. Price is above marginal revenue.Explanation
A monopolist is a single seller in a market with no close substitutes. They have the power to set the price for their product. In order to maximize their profits, a monopolist will set their price above the marginal revenue. This is because the monopolist's marginal revenue is less than the price due to the downward sloping demand curve they face. By setting the price above marginal revenue, the monopolist can ensure that they are maximizing their profits.Rate this question:
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- 29.
In Exhibit 9-3, how much vaccine should GeneTech produce to maximize its profits?
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300 doses per hour.
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400 doses per hour.
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Between 400 and 500 doses per hour.
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500 doses per hour.
Correct Answer
A. 300 doses per hour.Explanation
The correct answer is 300 doses per hour. This can be determined by analyzing Exhibit 9-3, which likely provides information on the relationship between the production rate and GeneTech's profits. The maximum profit is achieved when the production rate is at 300 doses per hour, as producing more or less than this would result in a decrease in profits.Rate this question:
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- 30.
The goal of any monopolist is to maximize:
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Economic profits.
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Normal profits.
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Price.
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Consumer welfare.
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Output.
Correct Answer
A. Economic profits.Explanation
A monopolist aims to maximize economic profits because they have the power to set prices and control the quantity of output in the market. By maximizing economic profits, the monopolist can ensure that their revenue exceeds their costs, leading to higher profitability. This is different from normal profits, which only cover the opportunity cost of the resources used in production. Price, consumer welfare, and output are important factors, but they are not the primary goal for a monopolist, as their main focus is on maximizing their own profits.Rate this question:
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- 31.
Firms in a monopolistically competitive industry produce:
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Homogeneous goods and services.
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Differentiated products.
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Competitive goods only
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Consumption goods only.
Correct Answer
A. Differentiated products.Explanation
In a monopolistically competitive industry, firms produce differentiated products. This means that each firm's product has unique characteristics or features that distinguish it from the products of other firms in the industry. This differentiation allows firms to have some degree of control over the price and quantity of their products, giving them a certain level of market power. Differentiation can be based on factors such as branding, quality, design, or customer service, among others. This product differentiation creates competition among firms based on the perceived differences in their products, rather than solely on price.Rate this question:
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- 32.
In the long run, a monopolistic competitive firm will operate at a price which:
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Is higher than minimum long-run average cost.
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Equals minimum long-run average cost.
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Equals marginal cost.
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None of these.
Correct Answer
A. Is higher than minimum long-run average cost.Explanation
In monopolistic competition, firms have some degree of market power and can set their own prices. However, they also face competition from other firms producing similar products. In the long run, firms in monopolistic competition strive to differentiate their products to attract customers and create a perceived value. This leads to higher costs as firms invest in advertising, branding, and product development. As a result, the price charged by a monopolistic competitive firm is typically higher than the minimum long-run average cost, allowing the firm to cover its higher costs and earn profits.Rate this question:
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- 33.
In which of the following market structures must the price and output decisions of an individual firm include the possible price and output reactions of the firm's rivals?
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Monopoly
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Oligopoly
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Perfect competition.
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Cartel.
Correct Answer
A. OligopolyExplanation
In an oligopoly market structure, the price and output decisions of an individual firm must include the possible price and output reactions of the firm's rivals. This is because in an oligopoly, there are only a few large firms that dominate the market and have a significant impact on the market conditions. Therefore, each firm must consider the potential reactions of its competitors when making pricing and production decisions in order to maintain its market share and competitiveness.Rate this question:
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- 34.
Marginal revenue is the change in:
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A: total profit brought about by selling one more unit of output.
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B: Price brought about by selling one more unit of output.
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C: Total revenue brought about by selling one more unit of output.
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D: output brought about by a $1 change in product price.
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E: Average revenue brought about by selling one more unit of output.
Correct Answer
A. C: Total revenue brought about by selling one more unit of output.Explanation
The correct answer is C because marginal revenue refers to the additional revenue generated from selling one more unit of output. It measures the rate at which total revenue changes as a result of a change in output. Therefore, it is the change in total revenue brought about by selling one more unit of output.Rate this question:
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- 35.
In Exhibit 11-4, the equilibrium wage and the number of food servers employed per day, respectively, are:
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$2.00 and 5,000
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$4.00 and 10,000
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$6.00 and 15,000
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$8.00 and 20,000
Correct Answer
A. $4.00 and 10,000Explanation
In Exhibit 11-4, the equilibrium wage is $4.00 and the number of food servers employed per day is 10,000. This means that at a wage of $4.00, the demand for food servers matches the supply of food servers available in the market. At this equilibrium point, both buyers (employers) and sellers (employees) are satisfied with the wage and quantity of employment. If the wage were any higher, there would be a surplus of food servers, leading to downward pressure on wages. Conversely, if the wage were any lower, there would be a shortage of food servers, leading to upward pressure on wages.Rate this question:
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- 36.
In the long run, monopolisticaly competitive firms have:
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Excess capacity.
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Positive profits.
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Minimal average costs.
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Homogeneous production.
Correct Answer
A. Excess capacity.Explanation
Monopolistically competitive firms have excess capacity because they operate at a quantity level below the one that minimizes their average costs. This means that they are not producing at the most efficient scale, resulting in unused resources and excess capacity. This is due to the fact that firms in monopolistic competition differentiate their products and engage in non-price competition, which leads to a less efficient allocation of resources compared to perfect competition. As a result, monopolistically competitive firms have excess capacity in the long run.Rate this question:
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- 37.
A characteristic of an oligopoly is:
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Mutual interdependence in pricing decisions
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Independent pricing decisions.
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Lack of control over prices
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None of these.
Correct Answer
A. Mutual interdependence in pricing decisionsExplanation
In an oligopoly, there are only a few firms that dominate the market. These firms are aware of the actions and decisions of their competitors, which creates a situation of mutual interdependence. This means that the pricing decisions made by one firm will have an impact on the other firms in the market. As a result, firms in an oligopoly tend to consider the actions of their competitors when making pricing decisions, leading to mutual interdependence in pricing decisions.Rate this question:
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- 38.
Which of the following is the most accurate definition of a worker's "marginal revenue product"?
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The change in teh firm's profits as the result of hiring an additional worker.
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The change in teh firm's total revenue as the result of hiring an additional worker.
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The change in teh firm's output as the result of hiring an additional worker.
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The change in teh firm's cost as the result of hiring an additional worker.
Correct Answer
A. The change in teh firm's total revenue as the result of hiring an additional worker.Explanation
The correct answer is "The change in the firm's total revenue as the result of hiring an additional worker." Marginal revenue product refers to the additional revenue that a firm generates by hiring one more worker. It measures the contribution of an additional worker to the firm's total revenue. By hiring an additional worker, the firm's total revenue increases, and this increase in revenue is known as the marginal revenue product.Rate this question:
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- 39.
A monopolist will maximize profits by:
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Setting his price as high as possible.
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Setting his price at the level that will maximize per-unit profits.
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Producing the output where marginal revenue equals marginal cost.
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Producing the output where price equals marginal cost.
Correct Answer
A. Producing the output where marginal revenue equals marginal cost.Explanation
A monopolist will maximize profits by producing the output where marginal revenue equals marginal cost. This is because marginal revenue represents the additional revenue generated from selling one more unit of a product, while marginal cost represents the additional cost incurred from producing one more unit. By setting the output level where these two values are equal, the monopolist can ensure that the revenue gained from selling an additional unit is equal to the cost of producing that unit. This maximizes the monopolist's profits as it indicates the optimal level of production where the revenue gained exceeds the cost incurred.Rate this question:
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- 40.
The marginal cost of labor for a perfectly competitive firm is given by:
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The change in total revenue that results from employing an additional worker.
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The market wage rate.
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Its marginal revenue product curve.
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The demand curve for labor.
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The marginal product of labor.
Correct Answer
A. The market wage rate.Explanation
The correct answer is the market wage rate. In a perfectly competitive market, firms are price takers and must pay the prevailing market wage rate to hire additional workers. The marginal cost of labor refers to the additional cost a firm incurs when employing an extra worker, which is determined by the market wage rate. The other options, such as the change in total revenue, marginal revenue product, demand curve for labor, and marginal product of labor, are not directly related to the marginal cost of labor in a perfectly competitive firm.Rate this question:
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- 41.
A technological advance that increases the productivity of teachers can be expected to have what effects on the equilibrium labor market for teachers?
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Wages will rise, and quanitity of labor will fall.
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Wages will rise, and quanitity of labor will rise.
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Wages will fall, and quanitity of labor will fall.
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Wages will fall, and quanitity of labor will rise.
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Wages and quantity of labor will remain the same.
Correct Answer
A. Wages will rise, and quanitity of labor will rise.Explanation
A technological advance that increases the productivity of teachers means that teachers can produce more output in less time. This increased productivity will lead to higher demand for teachers, as schools can now hire fewer teachers to achieve the same level of output. With higher demand, wages for teachers will rise as schools compete to attract and retain qualified teachers. Additionally, the higher productivity may also lead to an increase in the quantity of teachers employed, as schools can afford to hire more teachers with the increased output they can generate. Therefore, both wages and quantity of labor will rise.Rate this question:
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- 42.
A natural monolpy is a market where:
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A single firm has control over a vital natural resource.
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Many smaller firms can produce the entire market output at the same per-unit cost as could one large firm.
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A single large firm can produce the entire market output at a lower per-unit cost than a group of smaller firms.
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Many smaller firms can produce the entire market output at a lower per-unit cost than could one large firm.
Correct Answer
A. A single large firm can produce the entire market output at a lower per-unit cost than a group of smaller firms.Explanation
In a natural monopoly, a single large firm can produce the entire market output at a lower per-unit cost than a group of smaller firms. This is because the large firm benefits from economies of scale, allowing it to spread its fixed costs over a larger output. As a result, the average cost per unit decreases as production increases. In contrast, smaller firms would have higher average costs due to their inability to achieve the same economies of scale. Therefore, the single large firm has a cost advantage over smaller firms in producing the entire market output.Rate this question:
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- 43.
A union may atttempt to obtain stricter certification requirements or longer apprenticeships. These changes would raise workers' wages because they:
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Create unnecessary unemployment.
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Shift in labor supply curve leftward.
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Decrease the marginal product of labor.
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Reduce management's use of featherbedding.
Correct Answer
A. Shift in labor supply curve leftward.Explanation
When a union attempts to obtain stricter certification requirements or longer apprenticeships, it creates a higher barrier for entry into the labor market. This leads to a decrease in the number of available workers, causing a leftward shift in the labor supply curve. With a reduced supply of labor, the demand for workers remains the same or may even increase, resulting in higher wages for the workers.Rate this question:
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- 44.
Although a monopoly can charge any price it wishes, it chooses:
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The highest price.
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Price equal to marginal cost.
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The price that maximizes profit.
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Competitive prices.
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A fair price.
Correct Answer
A. The price that maximizes profit.Explanation
A monopoly chooses the price that maximizes profit because it aims to maximize its own profits by setting the price at a level where the marginal cost equals the marginal revenue. This allows the monopoly to maximize the difference between total revenue and total cost, resulting in the highest possible profit. By setting the price at this level, the monopoly can exploit its market power and increase its profits compared to other pricing strategies.Rate this question:
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- 45.
Nonprice competition, price leadership, and cartels are models in the ____ market structure(s).
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Perfectly competitive
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Monopolistically competitive.
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Oligopoly
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Monopoly
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Perfectly competitive and monopolisitically competitive.
Correct Answer
A. OligopolyExplanation
Nonprice competition, price leadership, and cartels are models that are typically associated with the oligopoly market structure. In an oligopoly, there are only a few dominant firms in the market who have significant control over the prices and competition. Nonprice competition refers to the competition through means other than price, such as advertising or product differentiation. Price leadership occurs when one firm sets the price and other firms follow suit. Cartels are agreements between firms to cooperate and act as a monopoly, typically by fixing prices or limiting competition. Therefore, the correct answer is oligopoly.Rate this question:
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- 46.
In order to make oil profits as large as possible, OPEC meets to set oil production quotas for its members, OPEC is best classified as a:
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Monopoly.
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Cartel.
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Kinked demand industry.
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Price-leadership industry.
Correct Answer
A. Cartel.Explanation
OPEC, the Organization of the Petroleum Exporting Countries, is best classified as a cartel. A cartel is a group of producers or sellers who collaborate to control prices and restrict competition in order to maximize profits. OPEC meets regularly to set oil production quotas for its member countries, with the goal of influencing the global oil market and maintaining high oil prices. By coordinating production levels, OPEC aims to limit supply and create artificial scarcity, allowing its members to charge higher prices and increase their profits. Therefore, the correct answer is cartel.Rate this question:
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- 47.
An oligopoly is a market structure in which:
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One firm has 100 percent of a market.
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There are many small firms.
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There are many firms with no control over price.
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There are few firms selling either a homongeneous or differentiated product.
Correct Answer
A. There are few firms selling either a homongeneous or differentiated product.Explanation
An oligopoly is a market structure where there are few firms selling either a homogeneous or differentiated product. This means that there are only a small number of companies dominating the market, and they have the power to control prices to some extent. This is different from a monopoly where one firm has 100 percent of the market, or a perfectly competitive market where there are many small firms and no control over price. In an oligopoly, the limited number of firms gives them the ability to influence market conditions and compete with each other.Rate this question:
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- 48.
One reason the supply of carpenters is geater than the supply of physicians is because:
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Carpenter demand less income.
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Physicaians do not belong to a union.
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Of differnces in human capital.
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Carpenters belong to unions.
Correct Answer
A. Of differnces in human capital.Explanation
The correct answer is "of differences in human capital." This means that the supply of carpenters is greater than the supply of physicians because there are differences in the skills, knowledge, and qualifications required for each profession. Carpenters may require less formal education and training compared to physicians, resulting in a larger pool of potential carpenters available in the labor market. This difference in human capital leads to a higher supply of carpenters relative to physicians.Rate this question:
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- 49.
Which of the following firms best fits the definition of a monopoly?
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General Motors
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Exxon Mobile
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Local electic utility
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AT&T
Correct Answer
A. Local electic utilityExplanation
A local electric utility best fits the definition of a monopoly because it is a single provider of electricity in a specific geographic area, with no or very limited competition. Monopolies have exclusive control over a product or service, allowing them to set prices and dictate terms without fear of competition. General Motors, Exxon Mobile, and AT&T are not monopolies as they operate in industries with multiple competitors.Rate this question:
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Mar 20, 2023Quiz Edited by
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Jun 26, 2012Quiz Created by
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