Download Quiz #4 - Rutgers Economics

Econ. 102: Introductory Microeconomics
Mr. Killingsworth
Quiz #4: VERSION A
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Use a pencil to fill in your answers. DO NOT USE A PEN.
If you don't have a pencil, ask your instructor to loan you one.
Darken in the “bubbles” AND write your student ID number in the space provided on the
answer sheet.
Darken in the “bubbles” to identify the version of your exam – VERSION A.
If you make a mistake, erase the wrong answer completely and fill in the right answer.
There are FIFTEEN questions in this quiz.
key to Quiz #4: correct answers in BOLD UNDERLINED type
1. When a monopoly firm's average total cost curve continually declines, the firm is a
A.
B.
C.
D.
E.
government-created monopoly
natural monopoly
revenue monopoly
all of the above
none of the above
2. In which kind (or kinds) of market will a firm need to anticipate how any other firm in the
market will behave?
A.
B.
C.
D.
E.
an oligopolistic market
a monopolistic market
a monopolistically-competitive market
a perfectly-competitive market
all of the above
3. If a monopolist earns positive economic profit when its marginal revenue equals its marginal
cost, then…
A.
B.
C.
D.
E.
other firms are likely to enter the market
other firms are likely to leave the market
the monopolist will increase its output
the monopolist will reduce its output
none of the above
4. Which of the following situations best represents a monopoly market?
A.
B.
C.
D.
E.
Bill and Tom both operate companies that sell a very rare type of diamond. They work separately
from one another, and are the only sellers in town of this type of diamond.
Tom owns a fishing tackle shop in Miami in which he sells the top-of-the-line equipment.
Bill owns the only grocery store in a small community that is located 200 miles from the
nearest city.
Bill is the only wheat farmer in the small town of Grover’s Corners.
None of the above
5. For a monopolist, average revenue is always…
A.
B.
C.
D.
E.
equal to marginal revenue
greater than the price of its product
less than marginal cost
equal to the price of its product
none of the above
6. An oligopoly is a market in which
A.
B.
C.
D.
E.
there are only a few sellers, each offering a product that is similar or identical to the others
firms are price-takers
the actions of one seller in the market have no impact on the other sellers
all of the above
none of the above
7. A profit-maximizing monopolist will produce a level of output at which
A.
B.
C.
D.
E.
average revenue is equal to average total cost
average revenue is equal to marginal cost
marginal revenue is equal to marginal cost
total revenue is equal to total economic cost
none of the above
8. A key difference between a perfectly-competitive firm and a monopoly has to do with whether
the firm can select…
A.
B.
C.
D.
E.
the cost of production
its level of output
the price of its output
all of the above
none of the above
9. When firms in a monopolistically-competitive market earn zero economic profits, what is
likely to happen?
A.
B.
C.
D.
E.
firms are likely to leave the market
firms are likely to enter the market
firms are likely to raise prices
firms are likely to decrease production
none of the above
10. Suppose that the market for oranges is perfectly-competitive. Then suppose that all the firms
in the industry are taken over by a single monopoly producer. Then we would expect to find that
A.
B.
C.
D.
E.
price falls and output rises
output falls and price rises
deadweight loss falls
price is less than marginal revenue
none of the above
11. In a monopolistically-competitive market, the process of entry into or exit from the market
ends when, for the typical firm in the market,
A.
B.
C.
D.
E.
economic profit is zero
total revenue is equal to average total cost
average revenue exceeds marginal cost
all of the above
none of the above
(NOTE: both A and C are correct)
12. In the short run, a reduction in a monopolist's fixed costs would…
A.
B.
C.
D.
E.
reduce the profit-maximizing price and increase the profit-maximizing level of output
increase the profit-maximizing price and reduce the profit-maximizing level of output
not affect the profit-maximizing price or the profit-maximizing level of ouptut
either increase, reduce or not affect profit-maximizing price and quantity, depending on the
elasticity of demand
none of the above
13. When firms in a competitive market earn positive economic profits, an incentive exists for
A.
B.
C.
D.
E.
new firms to leave the market
new firms to enter the market
existing firms to raise prices
existing firms to decrease production
none of the above
14. Monopoly firms exert their market power by charging a price that is
A.
B.
C.
D.
E.
above average revenue
below average total cost
above marginal cost
below average revenue
none of the above
15. If a government agency regulates a monopoly firm, it can maximize total surplus while
allowing the monopolist to earn a zero economic profit by requiring that the monopolist produce a level
of output at which…
A.
B.
C.
D.
E.
marginal cost is less than price
the average total cost curve and the demand curve intersect
the marginal cost curve and the demand curve intersect
the marginal cost curve and the marginal revenue curve intersect
none of the above