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# CHAPTER 9 TEST Name: __________________________ Date: _____________ 1. Individuals in a market who must take the market price as given are: A)...

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CHAPTER 9 TEST Name: __________________________ Date: _____________ 1. Individuals in a market who must take the market price as given are: A) quantity minimizers. B) quantity takers. C) price takers. D) price searchers. 2. An assumption of the model of perfect competition is: A) difficult entry and exit. B) few buyers and sellers. C) complete information. D) different goods. 3. In the short run, a perfectly competitive firm produces output and earns zero economic profit if: A) P > ATC. B) P = ATC. C) P < AVC. D) AVC > P > ATC. 4. The Case in Point on Videocassette Rentals showed that if firms can't make an economic profit in the long run: A) they will leave the industry. B) there is no incentive for other firms to enter the industry, assuming that there are economic profits to be made in the short run. C) they will be content to stay in the industry making zero economic profit. D) all of the firms in the industry will leave and the industry will shut down. Page 1
Use the following to answer question 5: Total Cost for a Perfectly Competitive Firm Quantity per period Total Cost 0 \$10 1 \$16 2 \$20 3 \$22 4 \$24 5 \$25 6 \$27 7 \$30 8 \$34 9 \$39 10 \$45 5. (Exhibit: Total Cost for a Perfectly Competitive Firm) The firm will produce at a profit in the short run if the price is: A) \$2.00. B) \$2.50. C) \$3.50. D) \$4.50. 6. If a perfectly competitive firm sells 30 units of output at a price of \$10 per unit, its marginal revenue is: A) \$10. B) more than \$10. C) less than \$10. D) \$300. Page 2
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CHAPTER 10 TEST Name: __________________________ Date: _____________ 1. Which of the following is (are) true? A) Profit-maximizing behavior is based on the marginal decision rule. B) Additional units of a good should be produced as long as MR > MC. C) The profit-maximizing solution occurs where MR = MC. D) All of the above are true. Use the following to answer question 2: 2. (Exhibit: A Profit-Maximizing Monopoly Firm) This profit-maximizing monopoly firm's profit per unit is: A) \$5. B) \$13. C) \$14. D) \$20. 3. A monopoly is a market characterized by: A) a single seller. B) a product with many close substitutes. Page 1
C) a large number of small firms. D) a small number of large firms. 4. Monopoly is important to study because it: A) avoids all real-world problems and complexities. B) avoids most real-world problems and complexities. C) is a theoretical model used for analysis. D) is a realistic model of many different markets. 5. A statement that best reflects an evaluation of monopoly firms is that: A) they have a great deal of market power. B) they are economically efficient. C) consumers are given more choices, lower costs, and higher quality. D) competition should replace all monopolies. 6. A monopoly can be temporary because of: A) high barriers to entry. B) privileges granted by the government. C) economies of scale. D) technological change. 7. Explain in detail the relationships among total revenue, price, marginal revenue, and the concept of the price elasticity of demand. Include in your answer a graph of total revenue, demand, and marginal revenue and show the various elasticities along the demand curve (you may use a linear demand and marginal revenue curve). Page 2
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CHAPTER 11 TEST Name: __________________________ Date: _____________ Use the following to answer question 1: 1. (Exhibit: Monopoly Through Collusion) The exhibit illustrates the situation in an industry that consists of two firms facing identical demand curves; the demand curve for each firm is D 1 . Which of the following assumptions is part of the analysis illustrated by the model? A) The two firms sell differentiated products. B) The ATC curve of each firm lies exactly twice as high as the MC curve. C) If the two firms collude in order to maximize their combined economic profits, each firm will operate as if its demand curve is given by D 2 . D) Both firms have the same marginal revenue curve. Use the following to answer question 2: 2. (Exhibit: Profit Maximization in Monopolistic Competition) In Panel (b), the long-run equilibrium will result in: A) economic profits = 0. Page 1
B) accounting profits = 0. C) a tangency of the ATC curve with the MR curve. D) A and C. 3. If the only two firms in an industry agree to fix the price at a given level, this is an example of: A) collusion. B) satisfying. C) price extortion. D) price leadership. 4. Tacit collusion occurs if: A) smaller firms in an industry silently agree to charge the same price as the largest firm. B) two or more firms in an industry agree to fix the price at a given level. C) competition among a large number of small firms generates a stable market price. D) competition among a large number of small firms generates similar, but slightly different, prices. 5. Price discrimination is seldom done by the airlines. A) True B) False Use the following to answer question 6: Page 2
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Macroeconomics
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