Question

Q19. Under conditions of perfect competition, if a firm is suffering a loss but AR is above AFC, the firm should always continue to operate.
a. true
b. false

Q20. Under conditions of perfect competition, if any one producer increases output,
a. market price rises
b. market price falls
c. market price does not change
d. market price changes unpredictably up or down

Q21. The output level that yields maximum profit under perfect competition is where MR equals MC.
a. true
b. false

Q22. Consumer surplus occurs whenever the consumer pays a price
a. equal to marginal revenue
b. less than the consumer is willing to pay
c. less than marginal cost
d. equal to or less than average total cost

Q23. If one firm in a perfectly competitive industry is somehow able to produce at a lower cost than competing firms in the short run,
a. the competing firms will adopt similar production techniques in the long run
b. the more efficient firm will earn higher profits than the competing firms in the long run
c. the competing firms will earn higher profits than the more efficient firm in the short run
d. the competing firms will go out of business in the long run

Q24. Producer surplus is the difference between the price the firm is willing to sell its goods and the price it actually receives.
a. true
b. false

Q25. In monopolistic competition, there is no need for advertising.
a. true
b. false

Q26. The Clayton Act prohibits price discrimination.
a. true
b. false

Q27. Monopsony is a market condition in which there is only one seller.
a. true
b. false

Q28. U.S. patents grant a lifetime monopoly on an invention.
a. true
b. false

Q29. A kinked demand curve is associated with
a. perfect competition
b. monopolistic competition
c. an oligopoly
d. public utilities

Q30. In an oligopoly, following a rival's decrease in price tends to eliminate the
a. income effect
b. substitution effect
c. multiplier effect
d. random effect

Q31. In conditions of monopolistic competition,
a. each firm charges the same price
b. there are only two producers
c. there are many firms
d. products are identical

Q32. Forms of imperfect competition include monopoly, oligopoly, and monopolistic competition.
a. true
b. false

Q33. Public utilities are often referred to as
a. supernatural monopolies
b. oligopolistic monopolies
c. natural monopolies
d. competitive monopolies

Q34. Perfect competition always provides a lower price than monopolistic competition or an oligopoly.
a. true
b. false

Q35. A firm that is a price maker can
a. limit output and raise prices
b. ignore the law of demand
c. ignore the elasticity of the demand for the product
d. both (a) and (c)

Q36. Firms in monopolistic competition sell a similar but differentiated product.
a. true
b. false

Q37. A cartel is
a. a type of formal collusion
b. a type of informal collusion
c. characterized by a kinked demand curve
d. a form of monopolistic competition

Q38. The operation of the total economy can best be demonstrated by a
a. merry-go-round
b. circular flow
c. Ferris wheel
d. roller coaster

Q39. In the circular flow, business owners receive
a. interest
b. profits
c. rent
d. wages

Q40. If planned investment exceeds planned savings, the economy always expands.
a. true
b. false

Q41. If exports exceed imports during a period of full employment (while other planned injections equal other planned leakages), the economy
a. remains stable
b. contracts
c. experiences rising prices
d. experiences falling prices

Q42. The circular flow is unaffected by changes in the money supply or interest rates.
a. true
b. false

Q43. During times of full employment, the only way a firm can obtain additional resources is to bid the resources away from other firms.
a. true
b. false

Q44. In the circular flow, services rendered by the resource owners are compensated through payments of wages, rent, interest, and profits.
a. true
b. false

Q45. The level of total output and the price level can be affected by changes in consumption.
a. true
b. false

Q46. Which of the following are injections into the circular flow of income?
a. saving, investment, exports, and taxes
b. investment, taxes, and imports
c. saving, taxes, and imports
d. investment, government spending, and exports

Q47. Planned investment may differ from actual investment.
a. true
b. false

Q48. A balanced federal budget tends to have a neutral effect on the economy.
a. true
b. false

Q49. According to the simple circular flow concept, whenever planned investment is less than planned saving
a. inventories accumulate
b. output increases
c. prices rise
d. employment increases

Q50. The total payment of resource income in the economy is equal to
a. the total value or cost of the output
b. the total value of output plus profit
c. total profit
d. the total value of output less profit