1) A market is defined as perfectly contestable if ?
a. entry to it is costly but exit from it is costless
b. entry to it and exit from it are both costless
c. entry to it and exit from it are both costly
d. entry to ti costless but exist from it is costly
2) An industry that realizes such large economies of scale in producing its product that single-firm production of that good or service is most efficient is called ?
a. a fixed cost monopoly
b. a natural monopoly
c. a government franchise monopoly
d. a economies of scale monopoly
3) In a monopoly, marginal revenue is ?
a. lower than price for all units other than the first
b. less than price at low levels of output and greater than price at high levels of output
c. always greater than price
d. always equal to price
4) The normal rate of profit for relatively risk-free firms will be _________ the interest rate on risk-free government bonds?
a. approximately one-half
b. smaller than
c. larger than
d. approximately equal to
5) If the ABC Typing Service is earning a rate of return greater than the return necessary for the business to continue operations, then ?
a. normal profit is zero
b. total costs exceed total revenue
c. total costs exceed normal profit
d. the firm is earning are economic profit
6) In the long run ?
a. all firms must make economic profits.
b. there are no fixed factors of production
c. a firm can vary all inputs, but it cannot change the mix of inputs it uses.
d. a firm can shut down, but it cannot exit the industry
7) The short run, as economists use the phrase, is characterized by ?
a. a period where the law of diminishing returns does not hold.
b. at least one fixed factor of production and firms neither leaving nor entering the industry
c. all inputs being variable
d. no variable inputs – that is all of the factors of production are fixed
8) Relative to a competitively organized industry a monopoly ?
a. Produces less output, charges higher prices and earns economic profits.
b. Produces less output, charges lower prices and earns only a normal profit
c. produces more output, charges higher prices and earns economics profits
d. produces less output, charges lower prices and earns economic profits
9) When ________ substitutes exist, a monopolist has ________ power to raise price?
a. more; more
b. fewer; less
c. more; less
d. no; infinite
10) If you were running a firm in a perfectly competitive industry, you would be spending your time making decisions on ?
a. how much to spend on advertising?
b. how much of each input to use?
c. What price to charge
d. none of these