Assume the production of a particular good is characterized by significant economies of scale
“Assume the production of a particular good is characterized by significant economies of scale. In addition, three different versions of the good can be produced, and large segments of the population prefer different versions of the good. In this case, the preferred market structure for this good would be:Choose one answer.
a. perfect competition.
b. monopolistic competition.
The kinked demand curve model best reflects. Choose one answer.
a. mutual interdependence among sellers.
b. price rigidities in oligopolistic markets.
c. a game theory approach to price-output decisions.
d. All of the above
Assume at the firm’s profit-maximizing level of output P = AVC. In this case, the firm will be:Choose one answer.
a. earning a positive economic profit.
b. earning economic profit = 0.
c. breaking even.
d. incurring an economic loss.
A successful and stable cartel can be established if there are.Choose one answer.
a. a few firms producing a storable product.
b. many firms producing a perishable product.
c. many firms producing a storable product.
d. a few firms producing a perishable product.
A perfectly competitive firm will maximize profits (or minimize losses) so long as price (marginal revenue) is: Choose one answer.
a. greater than marginal cost.
b. greater than average total cost.
c. greater than average fixed cost.
d. greater than average variable cost.
In the Baumol model, the total quantity sold will usually be larger than. Choose one answer.
a. if companies were interdependent.
b. if perfect competition prevailed.
c. if total costs were minimized.
d. if profit were maximized.
An industry characterized by a small number of dominant firms that face downward-sloping demand curves is best described as:Choose one answer.
a. monopolistically competitive.
b. an oligopoly.
c. a monopoly.
d. perfectly competitive.
Which of the following distinctions helps to explain the difference between relevant and irrelevant cost?Choose one answer.
a. historical cost vs. replacement cost
b. sunk cost vs. fixed cost
c. variable cost vs. incremental cost
d. accounting cost vs. direct cost
Simulation analysis choose one answer.
a. does not permit the calculation of expected value and standard deviation.
b. permits the calculation of expected value and standard deviation.
c. does not consider probabilities.
d. is too complex to ever be used in actual business situations.
Which of the following is the best example of a monopolistically competitive market?Choose one answer.
a. The wheat market.
b. The restaurant market.
c. The electricity market.
d. The market for automobiles.
A perfectly competitive firm has the cost function: TC = 1000 + 2Q + 0.1 Q2What is the lowest price at which this firm can break even?Other things being equal, the higher the cost of capitalChoose one answer.
a. the lower the NPV of the project.
b. the higher the IRR of the project.
c. the higher the NPV of a project.
d. The cost of capital has no effect on the NPV of the project.
A real option can present management with the opportunity to. Choose one answer.
a. postpone a project.
b. abandon a project.
c. vary output.
d. All of the above.
An industry characterized by a small number of dominant firms that face downward-sloping demand curves is best described as: Choose one answer.
a. an oligopoly.
b. monopolistically competitive.
c. perfectly competitive.
d. a monopoly.
Assume the firms in a monopolistically competitive industry initially are earning positive economic profits. Which of the following will not occur over time?Choose one answer.
a. The number of substitutes available in the industry will increase.
b. New firms will enter.
c. Demand for the existing firms’ output will become more inelastic.
d. The firms’ economic profits will be reduced.The following are possible examples of price discrimination except choose one answer.
a. prices in export markets are lower than for identical products in the domestic market.
b. subscription prices for a professional journal are higher when bought by a library than when bought by an individual.
c. a product sells at a higher price at location A than at location B, because transportationcosts are higher from the factory to A.
d. senior citizens pay lower fares on public transportation than younger people at the same time.
Assume that as the firms in a perfectly competitive industry expand output, the prices of productive inputs increase. All else constant, this would cause the individual firms’ marginal cost curves to ________ and the market supply curve to become ________.Choose one answer.
a. shift up; steeper
b. shift up; flatter
c. shift down; steeper
d. shift down; flatter
In order that price discrimination can existChoose one answer.
a. different demand price elasticities must exist in different markets.
b. markets must be interdependent.
c. markets must be capable of being separated.
d. demand price elasticities must be identical in all markets.
e. Both A and C
Suppose the firms in a monopolistically competitive market are incurring economic losses. What will happen to move the market to its long-run equilibrium?Choose one answer.
a. Firms will continue to exit the market until economic losses are equal to zero.
b. The demand functions of all the firms remaining in the market will become relatively more elastic.
c. More close substitutes will appear in the market until economic profits are zero.
d. The firms that dropped out of the market will reenter once the level of economic losses is zero.
A proposed project should be accepted if the net present value isChoose one answer.
a. larger than the internal rate of return.
c. smaller than the internal rate of return.