Suppose firms in a perfectly competitive industry are making economic profits. As a result I. new firms enter the industry. II. the market price falls. III. the economic profits of the existing firms decrease.
A) I, II and III
B) I and II
C) II and III
D) I and III
Ques. 2In comparison with a perfect competition, a single-price monopolist with the same costs creates a ________ consumer surplus and makes a ________ economic profit.
A) smaller; larger
B) smaller; smaller
C) larger; larger
D) larger; smaller
Ques. 3In the long run, monopolistically competitive firms produce where
A) excess capacity exists.
B) the markup is equal to zero.
C) the demand curve has shifted so that it intersects the minimum average total cost point.
D) average total cost is minimized.
Ques. 4Over the period from 1971 to 2012, the U.S. Gini ratio for household income ________, which means income inequality in the United States ________.
A) increased; increased
B) increased; decreased
C) decreased; increased
D) decreased; decreased
Ques. 5The above table shows Priscilla's marginal utility from the two goods she consumes, pizza and Pepsi. A slice of pizza costs 4 and a can of Pepsi 2. Suppose Priscilla has 12 to spend.
If the price of pizza decreases, Priscilla's preferences (her marginal utility schedule) for pizza A) will increase.
B) will decrease.
C) will not change.
D) may increase or decrease depending on what happens to the price of Pepsi.
Ques. 6In the movie Cast Away, Tom Hanks plays a FedEx efficiency expert stranded on a deserted island. While on the island, he divides his time between catching fish, gathering coconuts, painting, and building a raft.
Suppose that these were Mr. Hanks' only activities. Did he face an opportunity cost from pursuing any of these activities? Why or why not?
Ques. 7The tables above show the marginal costs and benefits from production of paper. The efficient level of output is ________ of paper.
A) 1,600 tons
B) 2,400 tons
C) 3,200 tons
D) 4,000 tons
Ques. 8Under Federal Trade Commission merger guidelines, an industry with a Herfindahl-Hirschman index (HHI) of 800 points is considered
A) competitive.
B) moderately concentrated.
C) concentrated.
D) a monopoly.
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