Question 1

Entry causes the competitive firm's demand curve to fall.

Accepted Answer

A) True 
 B)False

Question 2

The kinked demand curve is an attempt to model strategic behavior.

Accepted Answer

A) True 
 B)False

Question 3

Product differentiation plays an important role in perfect competition.

Accepted Answer

A) True 
 B)False

Question 4

If marginal revenue exceeds marginal costs

Accepted Answer

A)  production should be increased.
B)  production should be increased and profits will grow.
C)  production should be increased and losses will decrease.
D)  all of these choices are possible.

Question 5

Exit from a market will stop when

Accepted Answer

A)  accounting losses are zero.
B)  the cost of capital is equal to the risk-free rate of return.
C)  economic losses are zero.
D)  none of these choices.

Question 6

Firms in an oligopoly

Accepted Answer

A)  act independently.
B)  engage in strategic behavior.
C)  have perfect knowledge of the behavior of others.
D)  openly collude.

Question 7

The MR=MC rule

Accepted Answer

A)  applies to price-makers only.
B)  does not vary by market structure.
C)  is only true in competitive markets.
D)  applies to price-makers that have MR=P.

Question 8

Profits are maximized when

Accepted Answer

A)  price equals marginal revenue.
B)  marginal revenue equals average total costs.
C)  marginal revenue equals marginal cost.
D)  when price equals average total costs.

Question 9

In a monopoly,

Accepted Answer

A)  marginal revenue is greater than price.
B)  marginal revenue is less than price.
C)  the demand curve is horizontal.
D)  marginal revenue and price are equal

Question 10

Maximizing shareholder value is synonymous with adding value.

Accepted Answer

A) True 
 B)False

Question 11

The phrase "price-taker" means

Accepted Answer

A)  that market price is independent of the output of a single firm.
B)  each firm faces a perfectly elastic demand curve.
C)  that price and marginal revenue are the same.
D)  all of these choices.

Question 12

In a monopoly, price is less than marginal revenue.

Accepted Answer

A) True 
 B)False

Question 13

In monopolistic competition

Accepted Answer

A)  firms can earn long-run economic profit due to product differentiation.
B)  firms are unable to earn economic profit over the long run.
C)  firms can only earn accounting profits over the long-run.
D)  firms can block entry.

Question 14

The objective of creating value is the same as

Accepted Answer

A)  maximizing shareholder value.
B)  maximizing profit.
C)  maximizing added value.
D)  all of these choices.

Question 15

Production should be expanded if marginal cost is greater than marginal revenue.

Accepted Answer

A) True 
 B)False

Question 16

Monopolistic competition is characterized by

Accepted Answer

A)  ease of entry.
B)  many sellers.
C)  product differentiation.
D)  all of these choices characterize this market.

Question 17

A firm in perfect competition perceives the demand curve to be downward sloping.

Accepted Answer

A) True 
 B)False

Question 18

Monopolies have ____ substitutes.

Accepted Answer

A)  many
B)  few
C)  no
D)  several but less than 10

Question 19

Entry continues as long as

Accepted Answer

A)  economic profits are zero.
B)  accounting profits are positive.
C)  accounting profits are positive and economic profits are negative.
D)  economic profits are positive.

Question 20

A market with easy entry could include

Accepted Answer

A)  perfect competition.
B)  monopolistic competition.
C)  an oligopoly.
D)  a.and b.are possible

Exam 14: The Mechanics of Profit Maximization

Exit from a market will stop when

Correct AnswerverifiedShow Answer

In a monopoly,

Correct AnswerverifiedShow Answer

The kinked demand curve is an attempt to model strategic behavior.

Correct AnswerverifiedShow Answer

A market with easy entry could include

Correct AnswerverifiedShow Answer

A firm in perfect competition perceives the demand curve to be downward sloping.

Correct AnswerverifiedShow Answer

The phrase "price-taker" means

Correct AnswerverifiedShow Answer

Product differentiation plays an important role in perfect competition.

Correct AnswerverifiedShow Answer

The objective of creating value is the same as

Correct AnswerverifiedShow Answer

Firms in an oligopoly

Correct AnswerverifiedShow Answer

In a monopoly, price is less than marginal revenue.

Correct AnswerverifiedShow Answer

If marginal revenue exceeds marginal costs

Correct AnswerverifiedShow Answer

In monopolistic competition

Correct AnswerverifiedShow Answer

The MR=MC rule

Correct AnswerverifiedShow Answer

Maximizing shareholder value is synonymous with adding value.

Correct AnswerverifiedShow Answer

Entry continues as long as

Correct AnswerverifiedShow Answer

Profits are maximized when

Correct AnswerverifiedShow Answer

Monopolistic competition is characterized by

Correct AnswerverifiedShow Answer

Monopolies have ____ substitutes.

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Entry causes the competitive firm's demand curve to fall.

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Production should be expanded if marginal cost is greater than marginal revenue.

Correct AnswerverifiedShow Answer

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