Mary purchased a stuffed animal toy for $5. After a few weeks, someone offered her $100 for the toy. Mary refused. One can conclude that Mary’s consumer surplus from the toy is A) less than $5. B) at least $95. C) at least $100. D) $105. ANSWER B
Date: September 9th, 2020
Long-run economic profit does not exist for fixed factors like land because A) bidding drives up the price of the factor until no economic profit exists. B) there is no market for such factors. C) these factors have L-shaped isoquants. D) these factors will earn economic profits. ANSWER A
Date: September 9th, 2020
A firm that generates zero economic profit usually has A) negative business profit. B) zero business profit. C) positive business profit. D) business profit equal to half the total revenue. ANSWER C
Date: September 9th, 2020
Does a competitive long-run equilibrium require cost-minimization? A) Yes, if firms fail to be as efficient as their competitors, they are driven out of the market. B) No, in the long run, firms make zero profits. C) Yes, if they didn’t, even less efficient firms would enter the industry. D) No, because competition ensures their […]
Date: September 9th, 2020
Suppose a farmer in a perfectly competitive agricultural industry rents land that is uniquely productive in the production of a certain crop. In the long run, A) the owner of the land receives economic rent while the farmer earns zero economic profit. B) the owner of the land earns zero economic profit while the farmer […]
Date: September 9th, 2020
In the two-period dynamic monopoly, if the monopolist succeeds in selling a sufficiently high quantity in the first period, A) the second-period demand curve will lie close to the price axis. B) the second-period demand curve will become horizontal. C) the second-period demand curve will become unit elastic. D) the second-period demand curve will shift […]
Date: September 9th, 2020
Suppose market demand is Q = 1000 – 4p. If all firms have LRAC = 50 – 5q + q2, how many identical firms will there be when this industry is in long-run equilibrium? What will be an ideal response? ANSWER The long-run market supply curve is horizontal at the minimum LRAC. LRAC is […]
Date: September 9th, 2020
In the long run, competitive firms MUST be profit maximizers because if they do not maximize profits, A) they will not survive. B) they will not be price takers. C) they will attract entry. D) the profits that they do earn will only cover variable costs. ANSWER A
Date: September 9th, 2020
Firms that sell highly customized items such as motorcycles charge higher mark-ups than firms selling similar, but homogeneous products. An explanation for their market power is the A) bandwagon effect. B) greater value effect. C) snob effect. D) behavioral effect. ANSWER C
Date: September 9th, 2020
Firms are ________ with an economic profit of zero, they will ________ in the industry since they ________ be better off in another industry. A) satisfied; stay; won’t B) unsatisfied; leave; will C) satisfied; leave; will D) unsatisfied; stay; won’t ANSWER A
Date: September 9th, 2020
