1. Econ 101 final exam a+
ECON 101 Final Exam A+Part 1 of 1 –99.99999 PointsQuestion 1 of 204.45 PointsThe
representative firm in a purely competitive industry: A.Will always earn a profit in the short
run B.May earn either an economic profit or a loss in the long run C.Will always earn an
economic profit in the long run D.Will earn an economic profit of zero in the long
runQuestion 2 of 204.45 PointsAn example of a monopolistically competitive industry
would be: A.Steel B.Soybeans C.Electricity D.Retail clothingFeedback: See page 275 –
276.Question 3 of 204.45 PointsFirms in an industry will not earn long-run economic profits
if: A.Fixed costs are zero B.The number of firms in the industry is fixed C.There is free entry
and exit of firms in the industry D.Production costs for a given level of output are
minimizedFeedback: See page 240.Question 4 of 204.45 PointsMarginal product is: A.the
increase in total output attributable to the employment of one more worker. B.the increase
in total revenue attributable to the employment of one more worker. C.the increase in total
cost attributable to the employment of one more worker. D.total product divided by the
number of workers employed.Feedback: See page 201.Question 5 of 204.45 PointsThe law
of diminishing returns indicates that: A.as extra units of a variable resource are added to a
fixed resource, marginal product will decline beyond some point. B.because of economies
and diseconomies of scale a competitive firm’s long-run average total cost curve will be U-
shaped. C.the demand for goods produced by purely competitive industries is
downsloping. D.beyond some point the extra utility derived from additional units of a
product will yield the consumer smaller and smaller extra amounts of
satisfaction.Feedback: See page 204.Question 6 of 204.45 PointsIf average total cost is
declining, then: A.marginal cost must be greater than average total cost. B.the average fixed
cost curve must lie above the average variable cost curve. C.marginal cost must be less than
average total cost. D.total cost must also be declining.Feedback: See page 208.Question 7 of
204.45 PointsAverage fixed costs diminish continuously as output
increases. True FalseFeedback: See page 208.Question 8 of 204.45 PointsPatents and
copyrights were established by the government to reduce oligopoly and monopoly
power. True FalseFeedback: See page 246 – 247.Question 9 of 204.45 PointsA purely
competitive firm is a price maker, but a monopolist is a price taker. True FalseFeedback: See
page 226.Question 10 of 204.45 PointsThe profit-maximizing rule MC = MR is followed by
firms under: A.monopolistic competition, but not perfect competition. B.perfect
competition, but not monopolistic competition. C.either monopolistic competition or perfect
competition, depending on the costs of production. D.both monopolistic competition and
2. perfect competition.Feedback: Great job. See page 277.Question 11 of 204.35 PointsA
perfectly competitive firm will continue producing in the short run as long as it can cover
its: A.total cost. B.average total cost. C.average variable cost. D.average fixed
cost.Feedback: Great work! See bottom of page 235.Question 12 of 204.45 PointsA perfectly
competitive firm will earn a profit and will continue producing the profit-maximizing
quantity of output in the short run if price is: A.greater than marginal cost. B.less than
marginal cost. C.less than average variable cost. D.greater than average total
cost.Feedback: Great work! See page 233.Question 13 of 204.45 PointsMonopolistic
competition is an industry characterized by: A.a product with many close substitutes. B.a
horizontal demand curve. C.a small number of firms. D.barriers to entry and
exit.Feedback: Great work. See page 276.Question 14 of 204.45 PointsIf a perfectly
competitive firm increases production from 10 units to 11 units, and the market price is $20
per unit, total revenue for 10 units is: A.$10. B.$20 C.$200. D.$210.Feedback: Very good. See
page 230.Question 15 of 204.45 PointsThe demand curve facing a monopolist
is: A.horizontal, the same as that facing a perfectly competitive firm. B.downward sloping,
the same as that facing a perfectly competitive firm. C.upward sloping, the same as that
facing a perfectly competitive firm. D.downward sloping, unlike the horizontal demand
curve facing a perfectly competitive firm.Feedback: Good work. See page 259.Question 16 of
204.45 PointsSuppose that a monopolist increases production from 10 units to 11 units. If
the market price declines from $30 per unit to $29 per unit, marginal revenue for the
eleventh unit is: A.$1. B.$9. C.$19. D.$29.Feedback: Good work. See page 260.Question 17 of
204.45 PointsMost electric, gas, and water companies are examples of: A.unregulated
monopolies. B.natural monopolies. C.restricted-input monopolies. D.sunk-cost
monopolies.Feedback: Good job. See page 254.Question 18 of 204.45 PointsIf a perfectly
competitive firm is producing a quantity that generates P > MC, then profit: A.is
maximized. B.can be increased by increasing the price. C.can be increased by decreasing the
price. D.can be increased by increasing production.Feedback: Great work! See page
233.Question 19 of 2010.0 PointsEvaluate the following statement using economic
reasoning: “A monopolist can charge whatever she wants because she is the only source
available.”A monopolist can charge whatever she wants but even monopolist decrease their
prices in order to sell more of the product. This is also a great example of why marginal
revenue is under the demand curve in a monopolistic market! She can charge whatever she
wants in for a while, but the market will inevitably force the constraints of supply and
demand. Quickly after this, she will realize that she cannot charge whatever she sees
fit.Feedback: See the “Heads-Up!” section on page 263.Question 20 of 2010.0 PointsIdentify
and describe a real world example of an oligopoly. What characteristics of this market fit the
definition of an oligopoly? What role does advertising play in this market? Is this consistent
with what you’ve learned about advertising and oligopoly in this course? A great real
world example of an oligopoly is the technology/Cell phone industry. Competing companies
like Samsung, Apple, and Google, tend to rule the market. The top spot in their industry is
revolving and they are all competing for it. “An oligopoly is Situation in which a market is
dominated by a few firms, each of which recognizes that its own actions will produce a
response from its rivals and that those responses will affect it” (Principles of
3. Microeconomics, 283). Each company is in competition with each other and currently it
seems to be cell phone leak season, the most recent Pixel from Google soon the next three
companies will slowly leak or announce their new products. The galaxy S8 and the IPhone8
are the newest ones to be released. The key is that they all tend to have a new device
entering the market either one right after the other or at the same time. As the products
come to market the consumers have to choose either to brand loyalty or switch to the other
side or stay with the least expensive option. “Firms in monopoly, monopolistic
competition, and oligopoly use advertising when they expect it to increase their profits
(Principles of Microeconomics, 290). In this oligopoly advertising, does not play a major role
in this perfectly competitive market. “everyone knows that firms in each industry produce
identical products, and buyers have complete information about the alternatives available
to them in the market” (Principles of Microeconomics, 290). This is consistent with what
we’ve learned about oligopoly and advertising. “Advertising creates consumer loyalty to a
particular brand, then that loyalty may serve as a barrier to entry to other firms” (Principles
of Microeconomics, 291).Rittenberg&Tregarthen. (2012). Principles of Microeconomics
