Market Structure Economics Questions! Trivia Quiz

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1. A perfectly competitive firm maximizes profits or minimizes losses in the short-run by producing at the output level at which:

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.

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About This Quiz
Market Structure Economics Questions! Trivia Quiz - Quiz

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... see moreand 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. Think you know your stuff? Take the quiz!
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2. Product differentiation:

Explanation

Product differentiation refers to the attempt of firms to make real or apparent differences in essentially substitutable products look different in the minds of the customers. This means that companies try to create unique features, branding, or marketing strategies to make their products stand out from competitors, even if the products themselves are similar. The goal is to create a perception of uniqueness and value in the minds of consumers, leading to increased customer loyalty and competitive advantage. This strategy is commonly used in various market structures, not just in a monopoly.

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3. Which of the following best explains why the monopolist's marginal revenue is less than the selling price?

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.

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4. Which of the following is the best example of an investment in human capital?

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.

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5. A competivie firm maximizes its profits (or minimizes is losses) by producing the quantity where the market price equals the firm's:

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.

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6. Which of the following statements is true?

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.

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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:

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.

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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:

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.

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9. A major characteristic of the theory of oligopoly is that:

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.

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10. When Pepsi is considering a price hike, it needs to consider how Coke may react.  This situation is called:

Explanation

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.

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11. A firm in a price-taker 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.

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12. In long-run equilibrium, the typical perfectly competitive firm will:

Explanation

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.

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13. A profit-maximizing monopolixtically competitive firm will expand output to the point where:

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.

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14. Which of the following statements best describes firms under monopolistic competition?

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.

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15. Which of the following is ture about a monopoly?

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.

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16. A monolpy is:

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.

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17. The kinked demand curve:

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.

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18. The monopolistic competition market structure is characterized by:

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.

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19. A firm that is a price taker can:

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.

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20. The point of maximum profit for a business firm is where:

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.

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21. When a perfectly competitive firm or a monopolisticaly competitive firm is making zero economic profit,

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.

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22. An increase in demand for French fries will cause equilibrium wage rates:

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.

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23. Game theory is a model for describing oligopoly price decisions among firms that are:

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.

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24. Graphically, the marginal revenue curve of a 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.

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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?

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.

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26. As represented in Exhibit 10-3, the maximum long-run economic profit earned by this monopolistic competitive firm is:

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.

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27. Refer to Exhibit 11-1.  What is the marinal revenue product of the fifth unit of labor?

Explanation

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.

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28. Firms in a monopolistically competitive industry produce:

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.

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29. In the long run, a monopolistic competitive firm will operate at a price which:

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.

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30. For a monopolist:

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.

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31. In Exhibit 9-3, how much vaccine should GeneTech produce to maximize its profits?

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.

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32. The goal of any monopolist is to maximize:

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.

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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?

Explanation

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.

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34. Marginal revenue is the change in:

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.

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35. In Exhibit 11-4, the equilibrium wage and the number of food servers employed per day, respectively, are:

Explanation

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.

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36. In the long run, monopolisticaly competitive firms have:

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.

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37. A characteristic of an oligopoly is:

Explanation

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.

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38. Which of the following is the most accurate definition of a worker's "marginal revenue product"?

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.

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39. A monopolist will maximize profits by:

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.

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40. The marginal cost of labor for a perfectly competitive firm is given by:

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.

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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?

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.

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42. A union may atttempt to obtain stricter certification requirements or longer apprenticeships.  These changes would raise workers' wages because they:

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.

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43. A natural monolpy is a market where:

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.

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44. 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:

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.

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45. Nonprice competition, price leadership, and cartels are models in the ____ market structure(s).

Explanation

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.

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46. Although a monopoly can charge any price it wishes, it chooses:

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.

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47. One reason the supply of carpenters is geater than the supply of physicians is because:

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.

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48. An oligopoly is a market structure in which:

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.

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49. In the long run, both monopolistic competition and perfect competition result in:

Explanation

Both monopolistic competition and perfect competition result in zero economic profit for firms in the long run. In perfect competition, firms compete with each other, driving prices down to the point where firms only make normal profits. In monopolistic competition, firms have some degree of market power due to product differentiation, but in the long run, new firms enter the market and erode any economic profit. As a result, both market structures lead to zero economic profit for firms.

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50. If the equilibrium wage rate in Exhibit 11-4 increased, the cause could be that:

Explanation

If the equilibrium wage rate increased, it suggests that there has been a change in the labor market. The equilibrium wage rate is determined by the intersection of the supply and demand for labor. If the equilibrium wage rate increased, it could be because the demand for labor increased, meaning that firms are willing to pay higher wages to attract workers. Alternatively, it could be because the supply of labor decreased, meaning that there are fewer workers available in the market, leading to higher wages. Therefore, either an increase in demand or a decrease in supply could be the cause of the increase in the equilibrium wage rate.

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51. Which of the following firms best fits the definition of a monopoly?

Explanation

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.

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52. Which of the following is true under natural monopoly?

Explanation

Economies of scale exist in a natural monopoly. This means that as the quantity of output increases, the average cost of production decreases. This is because natural monopolies have high fixed costs and low variable costs. As a result, the marginal cost curve will be below the average cost curve, allowing the monopolist to produce at a larger scale and benefit from lower costs. The monopolist may not necessarily set the price equal to marginal cost and earn economic profits, and output can be produced under conditions of constant cost or increasing cost depending on the specific circumstances.

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53. Perfect competition is defined as market structure in which:

Explanation

Perfect competition is a market structure characterized by the presence of many small sellers, homogeneous products, and ease of entry and exit for firms. In perfect competition, there are numerous sellers in the market, each offering identical products, which ensures that no single seller has control over the market price. Additionally, firms can easily enter or exit the market without facing significant barriers, allowing for free competition. Therefore, option D, which includes all of these characteristics, is the correct answer.

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54. As shown in Exhibit 9-3, in order to maximize profits, what price should GeneTech charge for its vaccines?

Explanation

Based on the information provided in Exhibit 9-3, the price that GeneTech should charge for its vaccines in order to maximize profits is $35 per dose.

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55. Supporters of advertising claim that it:

Explanation

Advertising has the potential to increase the variety of products available to consumers by promoting different brands and offerings. It can also challenge established brand loyalties by presenting alternative options and highlighting their advantages. Additionally, advertising provides a platform for new firms to compete with established players in the market, as it allows them to reach a wider audience and showcase their products or services. Therefore, all of these statements are valid reasons for why supporters of advertising claim that it is beneficial.

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56. Which of the following would be a human captial investment?

Explanation

All of the options listed (on-the-job training programs, health care programs, and formal education) can be considered as human capital investments. Human capital refers to the knowledge, skills, and abilities that individuals possess, which can be enhanced through various means such as training, education, and healthcare. Therefore, investing in on-the-job training programs, health care programs, and formal education all contribute to the development and improvement of an individual's human capital.

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57. Game theory is an expecially useful model for analysis in the following types of markets:

Explanation

Game theory is especially useful for analysis in oligopoly markets because it focuses on the strategic interactions between a small number of firms that dominate the market. In an oligopoly, firms have interdependence and their actions directly affect the behavior and profits of other firms. Game theory helps in understanding how firms make decisions in such situations, considering the potential actions and reactions of their competitors. It provides insights into pricing strategies, product differentiation, advertising, and other competitive behaviors in oligopoly markets. Therefore, game theory is particularly relevant for analyzing and predicting outcomes in oligopolistic industries.

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58. A perfectly competitive firm in the short-run can earn:

Explanation

In the short-run, a perfectly competitive firm can earn positive economic profits if its revenue exceeds its total costs, negative economic profits if its total costs exceed its revenue, or zero economic profits if its revenue is equal to its total costs. This is because in a perfectly competitive market, firms can enter or exit the industry freely, causing prices to adjust until economic profits are driven to zero in the long-run. Therefore, all of these outcomes are possible for a perfectly competitive firm in the short-run.

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59. As presented in Exhibit 10-3, the long-run profit-maimizing output for the monopolistic competitive firm is:

Explanation

The correct answer is 400 units per week. This is because in monopolistic competition, firms aim to maximize their profits in the long run by producing at the point where marginal revenue equals marginal cost. At this output level, the firm is able to maximize its profits by balancing the additional revenue from selling one more unit with the additional cost of producing that unit. In the given exhibit, the long-run profit-maximizing output is shown to be 400 units per week.

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60. Excluding foreign competition, which of the following is an oligopoly in the United Sates?

Explanation

An oligopoly is a market structure where a few large firms dominate the industry. In the United States, all three industries mentioned - computer, automobile, and steel - are dominated by a small number of large companies. Therefore, all of these industries can be considered oligopolies.

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61. The marginal revenue product of a resource:

Explanation

The marginal revenue product of a resource refers to the additional output that is generated by employing an additional unit of the resource, multiplied by the price that can be obtained for that output. In other words, it represents the incremental revenue that is generated by adding one more unit of the resource to the production process. This concept is important for firms in determining the optimal allocation of resources and making decisions regarding resource utilization and hiring.

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62. In the short run, if a perfectly competitive firm is producing at a price below average total cost, its economic profit is:

Explanation

In the short run, if a perfectly competitive firm is producing at a price below average total cost, it means that the firm is not covering all its costs. This implies that the firm is incurring losses and its economic profit is negative. The firm's revenue from selling its output is not enough to cover its production costs, resulting in a negative economic profit.

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63. A monopsony is a:

Explanation

A monopsony refers to a market situation where there is only one buyer for a particular product or service. In this scenario, the buyer has significant market power as they are the sole purchaser and can therefore dictate the terms and price of the transaction. This differs from a monopoly where there is only one seller.

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64. A worker's accumulated investment in education, training, experience, and health is called:

Explanation

Human capital refers to the skills, knowledge, and abilities that a worker acquires through education, training, experience, and health. It represents the accumulated investment in these areas and is an important determinant of an individual's productivity and earning potential in the labor market. Therefore, the correct answer is human capital.

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65. Critics of advertising argue that it:

Explanation

Advertising can serve as a barrier to entry for new firms because established companies with larger advertising budgets can dominate the market and create brand loyalty among consumers. This makes it difficult for new firms to enter the market and compete effectively. By promoting their brands through advertising, established firms can create a strong presence and make it challenging for new players to gain market share. This can limit competition and hinder the entry of new firms into the industry.

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66. In a price leadership oligopoly model,

Explanation

In a price leadership oligopoly model, one firm is designated as the price leader and sets the price for the industry. The other firms in the industry then follow this price leader and adjust their prices accordingly. This model allows for some coordination and stability in the industry, as the price leader's actions are followed by the other firms. However, it does not involve a cartel or government intervention in determining price and output, nor does it imply that the firms abandon profit-maximizing goals.

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67. Under perfect competition, a firm is a price taker because:

Explanation

Under perfect competition, a firm is a price taker because setting a price higher than the going price results in zero sales. In a perfectly competitive market, there are many buyers and sellers, and each firm sells an identical product. As a result, buyers have many options and can easily switch to another seller if one firm raises its price. Therefore, a firm has no control over the market price and must accept the going price determined by the market. If a firm tries to set a higher price, buyers will simply choose a lower-priced alternative, resulting in zero sales for the firm.

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68. Monopolists are criticized because they are inefficient. What is meant by this statment?

Explanation

Monopolists usually don't produce at the minimum of the ATC means that monopolists do not operate at the most efficient level of production. They tend to produce at a quantity where their average total cost (ATC) is higher than it could be if they were producing at the minimum efficient scale. This inefficiency can result in higher prices for consumers and a misallocation of resources.

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69. Which of the following is true of a perfectly competitive firm?

Explanation

In a perfectly competitive market, there are many firms selling identical products, and there is free entry and exit for firms. This means that in the long run, new firms can enter the market if there are economic profits to be made, which increases competition and drives down prices. As a result, in the long run, a perfectly competitive firm will only earn normal profits, where total revenue equals total cost. Therefore, option C is true.

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70. Because a competitive firm is a price taker, it faces a demand curve that is:

Explanation

A competitive firm is a price taker, meaning it has no control over the price of its product and must accept the market price. In this scenario, the firm's demand curve is perfectly elastic because it can sell any quantity of its product at the market price. If the firm were to increase its price even slightly, consumers would switch to buying from other firms, resulting in a loss of all sales. Therefore, the firm's demand curve is perfectly elastic, indicating that even a small change in price would cause the firm to lose all of its customers.

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71. In long-run equilibrium for a perfectly competitive firm, price equals which of the following?

Explanation

In the long-run equilibrium for a perfectly competitive firm, the price equals the minimum point on the long-run average cost curve. This is because in the long run, firms have the flexibility to adjust their inputs and production levels. As a result, they strive to minimize their average costs to maximize their profits. The minimum point on the long-run average cost curve represents the most efficient level of production where costs are minimized, and therefore, firms set their prices at this level to ensure competitiveness in the market.

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72. Perfect competition is a market structure in which there is:

Explanation

Perfect competition is a market structure in which there is no contest among firms to provide good service after the sale, no competition in product quality, and no rivalry in product design. In perfect competition, there are many buyers and sellers, homogeneous products, perfect information, no barriers to entry or exit, and price is determined by market forces. Therefore, the correct answer is D: none of these.

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73. Refer to Exhibit 11-1.  If the markey wage rate is $25 per day, how many workers should the firm hire if it wants to maximize profits?

Explanation

Based on Exhibit 11-1, the firm should hire 6 workers if it wants to maximize profits. This can be determined by finding the point where the marginal revenue product (MRP) equals the wage rate. At 6 workers, the MRP is $150 and the wage rate is $25, which means that the firm would be able to maximize profits by hiring 6 workers. Hiring more workers would result in a lower MRP, while hiring fewer workers would result in a higher MRP.

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74. The demand for a factor of production depends on the:

Explanation

The demand for a factor of production depends on the demand for the products that it helps to produce. This is because the demand for a factor of production is derived from the demand for the final product. If there is a high demand for the products, then there will be a higher demand for the factor of production that is used to produce those products. Conversely, if there is a low demand for the products, then there will be a lower demand for the factor of production. Therefore, the demand for the products that it helps to produce is the key determinant of the demand for a factor of production.

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75. Which of the following is characteristic of a monopolistisally competitive firm?

Explanation

A monopolistically competitive firm produces a differentiated product, meaning that its product is unique or distinct in some way from the products of its competitors. This allows the firm to have some control over the price it charges for its product, as consumers may be willing to pay a premium for the unique features or qualities offered. In contrast, a firm facing an upward-sloping demand curve would have to lower its price to sell more units, indicating less control over pricing. A firm facing an inelastic demand curve would have relatively few close substitutes, while a firm facing a horizontal demand curve would be a perfect competitor.

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76. Which of the following market structures describes an industry in which a group of firms formally agree to control prices and output of a product?

Explanation

A cartel is a market structure in which a group of firms formally agree to control prices and output of a product. This means that the firms work together to set prices and production levels in order to maximize their profits. In a cartel, there is usually limited competition and the firms act as a single entity, making decisions collectively. This differs from other market structures like perfect competition, monopoly, oligopoly, and monopolistic competition, where firms have varying degrees of control over prices and output.

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77. A cartel:

Explanation

A cartel is a group of firms that formally agree to control the price and output of a product. The primary goal of a cartel is to eliminate competition and replace it with cooperation, allowing them to reap monopoly profits. Cartels are generally illegal in the United States, as they are seen as anti-competitive and harm consumer welfare. However, in some other nations, cartels may be legal or have certain regulations. Therefore, the correct answer is "all of these" as it encompasses all the statements provided.

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78. In Exhibit 11-4, suppose that in the interest of boosting incomes of the working poor, Congress imposes a minimum wage of $6.00 per hour.  The minimum wage rate creates a(n):

Explanation

If Congress imposes a minimum wage of $6.00 per hour, it means that employers are required to pay their workers at least $6.00 per hour. This increase in the minimum wage creates a situation where the wage rate is higher than the equilibrium wage rate in the labor market. As a result, there will be a surplus of workers willing to work at this higher wage rate, leading to an excess supply of labor. In this case, there will be an excess supply of food servers, meaning that there will be more food servers available for work than there are job opportunities available for them.

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79. If all firms in a monopolistic competitve industry have demand and cost curves like those shown in Exhibit 10-3, we would expect that in the long run:

Explanation

In a monopolistic competitive industry, firms have some degree of market power due to product differentiation. If all firms in the industry have demand and cost curves like those shown in Exhibit 10-3, it suggests that there are no barriers to entry or exit. This means that new firms can easily enter the industry, and some existing firms may choose to leave if they are not able to earn positive economic profits. In the long run, this competition will drive down prices and reduce economic profits to zero for all firms in the industry. Therefore, we would expect that firms in the industry earn zero economic profits.

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80. A market situation where a small number of sellers dominate the entire industry is called:

Explanation

An oligopoly is a market structure where a small number of sellers dominate the industry. In this type of market, each seller has a significant market share and their actions can have a significant impact on the market. Oligopolies often engage in strategic behavior, such as price-fixing or collusion, to maintain their market power. Monopolistic competition refers to a market structure with many sellers offering differentiated products, while a monopoly is a market structure with a single seller dominating the industry. Monopsony, on the other hand, refers to a market situation where a single buyer dominates the industry.

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81. A monopolist faces a downward-sloping demand curve because:

Explanation

The correct answer is that the entire market demand curve is the monopolist's demand curve. This is because a monopolist is the sole provider of a product or service in the market, so the demand for their product is determined by the entire market. Unlike in a competitive market where individual firms face a horizontal demand curve, a monopolist faces a downward-sloping demand curve as they have control over the quantity supplied and can set the price.

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82. The demand curve any monopolist uses in making output decisions is:

Explanation

The correct answer is "the same as the market demand curve." This is because a monopolist is the sole producer in the market and has control over the quantity supplied. Therefore, the monopolist's demand curve represents the entire market demand for the product.

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83. Firms should hire additional units of a resource as long as the:

Explanation

Firms should hire additional units of a resource as long as the marginal revenue product of the resource exceeds the cost of an additional unit of the resource. This means that the additional revenue generated by hiring another unit of the resource is greater than the cost incurred to hire that unit. By doing so, the firm can maximize its profits and ensure that the resource is being utilized efficiently.

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84. A monopoly:

Explanation

A monopoly faces the market demand curve which is downward sloping, meaning that as the price decreases, the quantity demanded increases. It also has a marginal revenue curve that slopes downward and lies below its demand curve because in order to sell more units, the monopoly must lower the price, resulting in lower revenue per unit. To maximize profits, a monopoly will produce an output level where marginal revenue (MR) equals marginal cost (MC), ensuring that the additional cost of producing an extra unit is equal to the additional revenue gained from selling that unit. Therefore, all of these statements are true for a monopoly.

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85. Which of the following is the best example of a monopolisticaly competitive market?

Explanation

Retail sales is the best example of a monopolistically competitive market because it is characterized by a large number of sellers offering differentiated products. In this market structure, each seller has some control over the price of their product due to product differentiation, but there is also competition from other sellers offering similar products. This competition leads to non-price competition, such as advertising and marketing strategies, to attract customers. Wheat, automobiles, and diamonds do not fit the criteria of monopolistic competition as they either have a few dominant sellers (oligopoly) or are highly standardized products (perfect competition).

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86. The theory of monopolistic competition predicts that in long-run equilibrium a monopolistically competitive firm will:

Explanation

In monopolistic competition, firms have some degree of market power and can differentiate their products. In the long-run equilibrium, firms aim to maximize their profits. Producing at the output level where price equals long-run average cost allows the firm to minimize costs and maximize profits. This is because producing at this level ensures that the firm is operating at its most efficient scale, where average costs are minimized. Therefore, the firm will produce the output level at which price equals long-run average cost.

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87. As shown in Exhibit 8-12, suppose the firm's price is OB. The firm's total economic profit at this price is equal to the area of:

Explanation

At price OB, the firm's total economic profit is equal to zero. This is because economic profit is calculated by subtracting total cost from total revenue. If the total revenue equals total cost, then the economic profit will be zero. In this case, the area of any of the given options (CJID, BFHD, AEXD, CGHD) does not represent the firm's economic profit.

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88. The optimal hiring rule is to employ labor up to the point where:

Explanation

The correct answer is "wage = MRP" because MRP (Marginal Revenue Product) represents the additional revenue generated by each additional unit of labor hired. In order to maximize profits, a firm should hire labor up to the point where the wage paid to the worker is equal to the MRP. This ensures that the additional revenue generated by the last unit of labor hired is equal to the wage paid, resulting in maximum profitability for the firm.

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89. The monopolist, unlike the perfectly competitive firm, can continue to earn an economic profit in the long run because of:

Explanation

The monopolist can continue to earn an economic profit in the long run due to extremely high barriers to entry. These barriers make it difficult for new firms to enter the market and compete with the monopolist. As a result, the monopolist can maintain its market power and charge higher prices, leading to sustained economic profits. Collusive agreements, price leadership, cartels, and a dominant firm may also contribute to a monopolist's ability to earn profits, but the key factor here is the presence of high barriers to entry.

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90. In Exhibit 11-4, assume that both input and output markets are perfectly competitive. If one additional server increased the number of meals sold by four per day and each meal sells for $10, each additional food server will be paid:

Explanation

In a perfectly competitive market, the additional revenue generated by hiring one more server is equal to the price of the product multiplied by the increase in quantity sold. In this case, one additional server increases the number of meals sold by four per day, so the additional revenue is 4 * $10 = $40 per day. This additional revenue can be used to pay the additional food server, so each additional food server will be paid $40 per day.

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91. Marginal revenue product is defined as the extra:

Explanation

Marginal revenue product refers to the additional revenue that a firm would earn by hiring one more unit of resource. It measures the increase in total revenue resulting from the employment of an additional unit of resource. This concept helps firms determine the optimal allocation of resources by comparing the additional revenue generated with the cost of hiring the resource. By understanding the marginal revenue product, firms can make informed decisions about resource allocation and maximize their profits.

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92. A monopolistic competitive firm is inefficient because the firm:

Explanation

In a monopolistic competitive market, firms have some degree of market power and can set prices higher than marginal cost. This leads to a situation where the firm is not producing at the output level where marginal cost equals price. In a perfectly competitive market, firms produce at the minimum average total cost, but in monopolistic competition, firms have some control over price and may choose to produce at a higher level of output where average total cost is not minimized. This inefficiency is a characteristic of monopolistic competition and contributes to the firm not maximizing its profit.

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93. In Exibit 8-11, the profit-maximizing output level at the price of $8 is:

Explanation

The profit-maximizing output level is the quantity at which the marginal cost equals the marginal revenue. In Exhibit 8-11, the profit-maximizing output level occurs at a price of $8. Looking at the graph, we can see that at a price of $8, the quantity demanded is 10 units. Therefore, the profit-maximizing output level at the price of $8 is 10 units.

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94. Which of the following statements concerning the supply of labor is true?

Explanation

The answer is "The typical labor supply curve is upward sloping." This means that as the wage rate increases, individuals are willing to supply more labor. This is because higher wages incentivize individuals to work more hours or enter the workforce. Conversely, when wages decrease, individuals may choose to work fewer hours or exit the workforce altogether. The upward slope of the labor supply curve reflects this positive relationship between wages and the quantity of labor supplied.

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95. Compared to monopoly, the market results with monopolistic competition are usually expected to be:

Explanation

In monopolistic competition, there are multiple firms competing in the market with differentiated products. This leads to greater product variety and choices for consumers compared to a monopoly where there is only one firm. Additionally, in monopolistic competition, firms have some degree of market power, which allows them to set prices lower than a monopolist. Therefore, consumers in monopolistic competition are expected to pay a lower price for the products they purchase, making the market results better for them in terms of affordability.

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96. To maximize long-run profits, the monopolistically competitive firm shown in Exhibit 10-3 will charge a price per unit of:

Explanation

The monopolistically competitive firm will charge a price per unit of $30 to maximize long-run profits. This is because in monopolistic competition, firms have some degree of market power and can differentiate their products. By setting the price at $30, the firm can attract customers who value their product and are willing to pay that price. Charging a higher price may result in losing customers to competitors, while charging a lower price may lead to lower profits. Therefore, $30 is the optimal price to maximize long-run profits for this firm.

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97. Compared to a competitive input market, a monosonist will hire:

Explanation

A monopsonist is a single buyer in a market with multiple sellers. In this scenario, the monopsonist has the power to dictate the price and quantity of the input it purchases. Since the monopsonist is the only buyer, it can choose to hire fewer inputs and pay a lower price for them. This is because the monopsonist has the ability to exert market power and negotiate lower prices with the sellers, who have limited alternative buyers. Therefore, the monopsonist will hire less and pay a lower input price compared to a competitive input market.

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98. Which of the following statements best describes the price, output, and price conditions of monopoly?

Explanation

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99. Which of the following can shift the labor demand curve to the right?

Explanation

An increase in productivity can shift the labor demand curve to the right because it means that firms are able to produce more output with the same amount of labor. This leads to an increased demand for labor as firms seek to hire more workers to take advantage of the higher productivity levels. As a result, the labor demand curve shifts to the right, indicating an increase in the quantity of labor demanded at each wage level.

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100. Which of the following statements best describes the price, output, and profit conditions of monopoly?

Explanation

None of the given statements accurately describes the price, output, and profit conditions of a monopoly. In a monopoly, the price will generally be set above the marginal cost, allowing for positive economic profits in the long run. Additionally, the statement does not mention the relationship between price and average variable cost, which is a key factor in determining profitability in the short run. Therefore, none of the given statements can be considered as the best description of monopoly conditions.

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A perfectly competitive firm maximizes profits or minimizes losses in...
Product differentiation:
Which of the following best explains why the monopolist's marginal...
Which of the following is the best example of an investment in human...
A competivie firm maximizes its profits (or minimizes is losses) by...
Which of the following statements is true?
A firm's demand for labor depends on, in part, the demand for the...
In the short run, if a perfectly competitive firm is producing at a...
A major characteristic of the theory of oligopoly is that:
When Pepsi is considering a price hike, it needs to consider how Coke...
A firm in a price-taker market:
In long-run equilibrium, the typical perfectly competitive firm will:
A profit-maximizing monopolixtically competitive firm will expand...
Which of the following statements best describes firms under...
Which of the following is ture about a monopoly?
A monolpy is:
The kinked demand curve:
The monopolistic competition market structure is characterized by:
A firm that is a price taker can:
The point of maximum profit for a business firm is where:
When a perfectly competitive firm or a monopolisticaly...
An increase in demand for French fries will cause equilibrium wage...
Game theory is a model for describing oligopoly price decisions among...
Graphically, the marginal revenue curve of a monopolist:
Which of the following best explains why a firm in a perfectly...
As represented in Exhibit 10-3, the maximum long-run economic profit...
Refer to Exhibit 11-1.  What is the marinal revenue product of...
Firms in a monopolistically competitive industry produce:
In the long run, a monopolistic competitive firm will operate at a...
For a monopolist:
In Exhibit 9-3, how much vaccine should GeneTech produce to maximize...
The goal of any monopolist is to maximize:
In which of the following market structures must the price and output...
Marginal revenue is the change in:
In Exhibit 11-4, the equilibrium wage and the number of food servers...
In the long run, monopolisticaly competitive firms have:
A characteristic of an oligopoly is:
Which of the following is the most accurate definition of a...
A monopolist will maximize profits by:
The marginal cost of labor for a perfectly competitive firm is given...
A technological advance that increases the productivity of teachers...
A union may atttempt to obtain stricter certification requirements or...
A natural monolpy is a market where:
In order to make oil profits as large as possible, OPEC meets to set...
Nonprice competition, price leadership, and cartels are models in the...
Although a monopoly can charge any price it wishes, it chooses:
One reason the supply of carpenters is geater than the supply of...
An oligopoly is a market structure in which:
In the long run, both monopolistic competition and perfect competition...
If the equilibrium wage rate in Exhibit 11-4 increased, the cause...
Which of the following firms best fits the definition of a monopoly?
Which of the following is true under natural monopoly?
Perfect competition is defined as market structure in which:
As shown in Exhibit 9-3, in order to maximize profits, what price...
Supporters of advertising claim that it:
Which of the following would be a human captial investment?
Game theory is an expecially useful model for analysis in the...
A perfectly competitive firm in the short-run can earn:
As presented in Exhibit 10-3, the long-run profit-maimizing output for...
Excluding foreign competition, which of the following is an oligopoly...
The marginal revenue product of a resource:
In the short run, if a perfectly competitive firm is producing at a...
A monopsony is a:
A worker's accumulated investment in education, training,...
Critics of advertising argue that it:
In a price leadership oligopoly model,
Under perfect competition, a firm is a price taker because:
Monopolists are criticized because they are inefficient. What is meant...
Which of the following is true of a perfectly competitive firm?
Because a competitive firm is a price taker, it faces a demand curve...
In long-run equilibrium for a perfectly competitive firm, price equals...
Perfect competition is a market structure in which there is:
Refer to Exhibit 11-1.  If the markey wage rate is $25 per day,...
The demand for a factor of production depends on the:
Which of the following is characteristic of a monopolistisally...
Which of the following market structures describes an industry in...
A cartel:
In Exhibit 11-4, suppose that in the interest of boosting incomes of...
If all firms in a monopolistic competitve industry have demand and...
A market situation where a small number of sellers dominate the entire...
A monopolist faces a downward-sloping demand curve because:
The demand curve any monopolist uses in making output decisions is:
Firms should hire additional units of a resource as long as the:
A monopoly:
Which of the following is the best example of a monopolisticaly...
The theory of monopolistic competition predicts that in long-run...
As shown in Exhibit 8-12, suppose the firm's price is OB. The...
The optimal hiring rule is to employ labor up to the point where:
The monopolist, unlike the perfectly competitive firm, can continue to...
In Exhibit 11-4, assume that both input and output markets are...
Marginal revenue product is defined as the extra:
A monopolistic competitive firm is inefficient because the firm:
In Exibit 8-11, the profit-maximizing output level at the price of $8...
Which of the following statements concerning the supply of labor is...
Compared to monopoly, the market results with monopolistic competition...
To maximize long-run profits, the monopolistically competitive firm...
Compared to a competitive input market, a monosonist will hire:
Which of the following statements best describes the price, output,...
Which of the following can shift the labor demand curve to the right?
Which of the following statements best describes the price, output,...
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